Financial Daily from THE HINDU group of publications
Saturday, Feb 21, 2004
Mergers & Acquisitions
Money & Banking - Financial Institutions
`IFCI merger with PNB may miss deadline'
Sarbajeet K. Sen
New Delhi , Feb. 20
THE merger of IFCI with Punjab National Bank (PNB) is heading for time overrun. With several legal intricacies waiting to be sorted out right from the initiation till the completion of the process, the Ministry of Finance now feels that the April 1 deadline set by the Government earlier is likely to be exceeded by at least a couple of months.
Barely three weeks into drawing a roadmap for taking the process forward, officials are resigned to the fact that that a complete merger of the two entities could come about earliest by June or July this year.
The boards of PNB and IFCI had approved the merger on January 30.
Senior officials said the feeling that the deadline would be overstepped stems from the fact that a good amount of time might be required to obtain the approval of the High Court for the proposed merger.
In fact, there have been some hiccups in the initial stage itself with clarity still to emerge on the modalities to be followed for initiating the merger process on the ground. The merger is due to be completed under the Companies Act.
"We are awaiting legal opinion on whether a notification would have to be issued by the Government under the Companies Act to facilitate a merger between a bank and a financial institution," top officials of the Finance Ministry said.
PNB officials, who are also seeking legal help to unravel the route to the merger, said that initial legal feedback suggests that the Government might have to consider issuing a notification under Section 396 of the Companies Act to set the process rolling.
The section provides powers to the Central Government to issue notification for amalgamation of companies in national interest.
Finance Ministry officials, however, said that all efforts are being made from the Government's side to be ready with the basic framework for the scheme for the merger within the April 1 deadline announced by the Finance Minister, Mr Jaswant Singh.
"We want to complete the work from our side by April 1. There would be some time needed to get the approval from the High Court once the scheme is finalised and approved by the shareholders. Since both institutions are headquartered in the Capital we would need the approval of only one high court. There would be some time saved on account of this," officials said.
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