Three of the sponsor directors (directly or through their other owned companies) of MCB Bank Limited have asked Sindh High Court to issue a permanent injunction, restraining State Bank of Pakistan from issuing any directive or orders or letters, thereunder, for non-compliance to deposit sponsor shares (subscribed or allotted/issued as right or bonus share etc) in a jumbo lot duly stamped as: "Not to be sold, transferred, pledged, mortgaged or encumbered in any manner without prior approval of SBP."

Further, the prayer while seeking damages to the tune of Rs 4.6 billion asks the court to bound SBP to consider all MCB's applications on merit including its purchase of Royal Bank of Scotland Pakistan (RBS) irrespective of the pending dispute between them and the Central Bank on sponsor shares.

The three private sector directors of MCB commonly referred as: Mansha Group, S.M. Munir Group and Tariq Rafi Group say that this suit arises out of refusal of the SBP to approve the application of MCB to acquire the entire operations of RBS (Pakistan) on merit on the pretext that it should first comply with the SBP demand - raised nine years after privatisation of MCB - which is a retrospective imposition. While annexing various correspondence between SBP and MCB; the plaint says that phrase 'sponsor director' was changed to "major shareholders" in 2008 - when Maybank (Malaysia) was acquiring stake in MCB. And, all shareholders holding more than five percent equity were required to deposit their shareholding in a blocked account with CDC.

Both Adamjee Insurance and Nishat Mill Limited submitted to SBP, that as independent entities their shareholding in MCB if plead in a blocked account would result in a sharp impairment in their value of investment through a conversion from liquid to illiquid assets.

SBP gave permission in principle to MCB to conduct due diligence on acquisition of RBS. The permission letter does state that approval in principle does not necessarily mean final approval. However, upon submission of the agreement between MCB and RBS on August 13, 2009; SBP on September 16, 2009 called for compliance of its circular 4 of 2008 instead of considering the application on merit.

The loss to MCB, estimated by its auditors, says the plaint, is to the tune of Rs 3.6 billion from the tax point of view. And, an additional loss (actual or potential) from business point of view is estimated at not less than one billion rupees to the shareholders, including the plaintiffs. The plaintiff have not file a separate injunction application with the plaint, and have made MCB Bank Limited as a proforma defendant.

Copyright Business Recorder, 2010