Kerala High Court upholds State Bank of Travancore, State Bank of India merger

Kochi: The Kerala High Court has held that since the central government has approved the merger of associated banks with the State Bank of India, it is legal. The court made the observation while dismissing a batch of petitions against the SBI-SBT merger. The ‘Save SBT Forum,’ some shareholders and customers of the SBT, moved the High Court against the merger. They argued that the decision to merge these banks was illegal. The SBI Act did not provide for acquisition of banking institution or a subsidiary bank or any other banks, they contended.

The court observed, "we are not involving ourselves in emotional issues which are apparently quite high and significant. A court is concerned only with legal issues leading to legality of the transaction or illegality therein.” Considering the arguments, the court held there was consultation amongst the two banks. Pursuant to consultation, reports were drawn up and they were placed before the board of directors of both the banks. The scheme was approved and it was placed before the central government, which sanctioned the scheme. Thus, the legal formalities were complete. There being no infraction, therefore, this court is unable to interfere in the matter," a division bench observed.

The SBI submitted that the decision was taken with majority support at its board meeting. There was no illegality or irregularity in the procedure adopted by the board of directors. The state government while supporting the petitions contended that the acquisition would adversely affect the pivotal role played by the SBT in the state and sought to declare the merger as unconstitutional.