Siva's restrictions brings back TMB issue to RBI

Venkatachari Jagannathan
11 March 2004

The RBI will decide as to who actually controls the shares — the Sterling Group who are the unpaid vendors or the seven individual buyers and accordingly allow / disallow the share sale.

All these years, RBI had refused to give the green signal for the share transfer in favour of the four Sterling Group companies as it was not satisfied with the latter''s source of funds.

Last month, it may be recalled, A Subramanian of Sterling Group inked an agreement to sell the balance holding in TMB to seven individuals from the Nadar community for Rs.130 crore. The deal was structured in such a way that each individual would hold less than five per cent and thereby avoid going to RBI for its approval for the share transfer. According to regulations, any transfer of bank shares over five per cent should be sanctioned by RBI. The other details of the agreement were kept secret. (See A sterling exit for Siva)

The seven buyers have time till December 2004, to pay, while the four Sterling Group companies headed by C Sivasankaran, as an unpaid vendor, stipulated some conditions. It is these conditions that have now raised the question as to who actually exercises control over the shares — the Sterling Group or the new buyers.

The issue came out when one of the warring Nadar factions filed a case in the Madras High Court seeking a restraint on the transfer of shares by the bank''s board in favour of the seven individuals.

The court had ordered the setting up of a committee to go into the sale agreement signed between the Sterling Group and press baron, B Ramachandra Aditan, who leads the TMB retrieval movement, to see whether the seven individuals constitute a group. The concept `persons acting in concert'' is crucial in takeovers, and requires RBI''s approval for the share transfer.