The top management at Infrastructure Development Finance Company, led by its managing director and CEO Nasser Munjee, has quit in protest against the government's plan to hand over IDFC to the State Bank of India.

Besides Munjee, the others who have put in their papers are A K T Chari, Anoop Seth, Y M Shivamurthy, L K Narayan, Urjit Patel and Luis Miranda. All of them are on the board of either IDFC or its group companies.

Chari is chief operating officer, Seth chief financial officer, Patel chief policy adviser, Narayan chief risk officer and Miranda chief executive officer of the India Development Fund, an IDFC group firm.

 "The top management has resigned in disagreement with the government's decision to hand over IDFC to SBI. It is not an empty threat, we have already put in our papers. The government's proposal is not in the interest of the shareholders, the staff or infrastructure financing," Munjee told Business Standard.

Munjee, however, hinted that the management would reconsider its decision if the government called off the merger. "We will be prepared to reconsider (our decision) if permitted (by the government)," he said. Munjee had earlier quit Housing Development Finance Corporation to head IDFC. He declined to talk about his next assignment.

The seven directors will be with IDFC till April 30. The present board will meet for the last time on April 20 to pass the audited accounts for 2003-04. Deepak Parekh is, however, likely to remain chairman of the company even after SBI takes over.

Sources said a committee of directors had been constituted to look into the resignations. While Parekh will head the committee, Vinod Rai, additional secretary in the finance ministry, will represent the Centre.

The other members of the committee will be SBI Chairman A K Purwar, AIG country-head Sunil Mehta and corporate lawyer Shardull Shroff. The committee is expected to submit its report at the IDFC board meeting on April 20.

It is understood that an SBI deputy managing director will head IDFC from May. A few more senior SBI executives will be sent to IDFC on deputation.

IDFC has 130 executives. With the top management putting in its papers, the mood is uncertain. The company held a meeting of all staff members on Friday to take stock of the recent development.

Stakeholders to decide, says govt

N S Sisodia, secretary (financial sector) in the finance ministry, on Friday said there was no question of merging IDFC with the State Bank of India and any decision in this regard would be taken only after consulting the stakeholders.

When contacted, Sisodia told Business Standard, "There is no move to merge IDFC with SBI." The ministry is only planning to transfer the Reserve Bank of India's 15 per cent stake in IDFC.

However, sources said, Vinod Rai, additional secretary in the finance ministry, proposed at an IDFC sub-committee meeting on Friday that IDFC be made a subsidiary of SBI. Rai, a director on the IDFC board, also promised that the institution would function the way it had done all these years, they said.

 "This, however, did not satisfy IDFC much," said a source. If the RBI's 15 per cent stake is transferred to SBI, which already holds 6 per cent in IDFC, the latter will become the single largest shareholder in the infrastructure funding entity.

According to Sisodia, the RBI, being the banking sector regulator, did not want to hold any stake in IDFC.

 "The apex bank feels if it continues to be a shareholder in IDFC it would lead to a conflict of interests," he said.

On choosing SBI for taking over the RBI's stake in IDFC, Sisodia said the bank had a strong balance sheet. "There is synergy between the two institutions," he said.

Sources said foreign investors, which held 40 per cent in the company, might sell their shares if the government merged IDFC with SBI.