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UWB under Sebi microscope over Esop violations

Rakesh P Sharma & K Ram Kumar

The Securities Exchange Board of India has decided to investigate possible violation of employee stock option plan guidelines by the Satara-based United Western Bank.

This move by the capital markets regulator follows close on the heels of the Reserve Bank of India asking the bank to recall the loan granted by the latter to an unregistered employees' trust floated for Esop. RBI further asked the bank to liquidate the UWB shares purchased by the same trust.

June 30 has been set as deadline for the UWB to recall the loan of over Rs 120 million granted to its UWB Employees' Equity Trust. The trust had bought over 2.4 million UWB shares representing about 8.41 per cent of the bank's paid-up capital of Rs 30 million. The shares were purchased by the trust in December 2000 to ward off induction of nominees of Sicom and a group of 14 minority shareholders.

Recently, the principal bench of the Company Law Board, Delhi, had dismissed UWB's application for freezing the voting rights of the minority shareholders. Also, the Bombay High Court had asked both the parties to maintain "status quo" on the bonus-cum-rights issue and convening of an extra-ordinary general meeting.

UWB had filed a petition under section 250 of the Companies Act, 1956, before the board for investigating the real ownership of the shares held by the 14 shareholders, who collectively hold 10.54 per cent of its share capital. It had also sought interim relief for protection of the interest of the bank through suspension of the shareholders' voting rights.

Meanwhile, the Bombay Stock Exchange is also looking into the irregularities pertaining to the bank that directly affect the shareholders interests.

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