Canbank May Be Hauled To Court

Investor panel to decide course of action tomorrow

Canstar unitholders are likely to file a public interest litigation against Canara Bank for failing to honour its commitment to pay them Rs 23 per unit under the scheme which was launched in 1990.

The row stems from Canara Bank's unilateral decision to pay Rs 11 per unit based on the current net asset value (NAV) of the scheme.

The Canstar unitholders are meeting under the aegis of Midas Touch Investors' Association tomorrow to decide on their future course of action.

Virendra Jain, the honorary secretary of the association, says they intend to explore the option of taking the dispute to the courts since the finance ministry and the Securities and Exchange Board of India (Sebi), the capital market regulator, have failed to come to the rescue of Canstar investors who stand to collectively lose Rs 690 crore.

 

The dispute has been simmering for sometime and, at one stage, the Canstar unitholders were pretty confident that they would get what they had been promised.

There were two reasons for such optimism: first, in a similar case, General Insurance Corporation (GIC) backed down after unilaterally revising the terms and agreed to pay the promised sum.

The difference was that in the General Insurance Corporation case the disputed sum was small - Rs 45 crore.

Second, a shareholder's public interest litigation, which was guided by the association, was admitted by the Lucknow bench of Allahabad High Court on May 9 against Parasrampuria Synthetics for having made false projections in the prospectus to their public issue.

Notices have been sent by the court to various financial institutions, banks and Sebi.

They have all been made parties in the case.

Since then, events have moved rather swiftly on the Canstar front.

On May 13, the association sent letters to the finance minister, Sebi and others stating these facts and demanding that Canstar unit holders should be paid the promised amount.

On May 17, Canara Bank wrote back to the association stating that Sebi had advised it to hold a postal ballot on the controversial issue.

The bank said the results of the ballot had been sent to Sebi.

However, the investors remain confident that Canara Bank will ultimately stand by its commitment.