S ASHOK Vs. TAMILNADU MERCANTILE BANK LIMITED

JUDGEMENT

(1.) THE above appeal is directed against the order dated 13-7-2004 made in C. P. No. 15 of 2003 on the file of the Company Law Board, additional Principal Bench, Chennai on the following substantial question of law : "whether the Company Law Board was correct in law in the various findings arrived at by it and whether the order of the Company Law board is sustainable in law""

(2.) 1 Brief facts of the case sans unnecessary details are as under : The Central Government of India, second respondent herein, in order to prevent oppression and mismanagement, invoking the power conferred under Section 408 read with Sections 397 and 398 of the Companies Act sought for appointment of majority Directors on the Board of the first respondent Bank before the Company Law Board. 2. 2 After hearing all necessary parties, the Company Law board satisfied that the Board of Directors had not been constituted in accordance with law for the first respondent Bank directed the second respondent to appoint three of Its nominees on the Board with a view to have some checks and balances on the functioning of the Board. 2. 3 Thereafter, by an order dated 14-8-2003. the Company law Board directed the first respondent Bank to convene Annual General Meetings for the year 1996-97 to 2002-2003, appointing a retired Judge of this Court, hon'ble Mr. Justice S. Ramalingam as Chairman, and gave certain directions. The operative portion of the said order dated 14-8-2003 reads as follows : "4. To ensure that the AGMs are held properly, in exercise of our powers under Section 403 of the Act, and subject to any subsisting orders in any other pending proceedings in relation to appointment of directors and/or registration of transfer of shares (the Bank may take steps to get the orders vacated) we direct as follows : i. The Bank will convene and hold the AGMs for the year 1996-97 to 2002-03 as decided by the Board of the Bank. ii. In the AGMs for the years 1996-97 to 2001-02, the meetings will transact only the statutory businesses relating to adoption of accounts, appointment of auditors and declaration of dividends. iii. As far as the AGM for 2002-03 is concerned, all the directors of the Bank other than the RBI/central Government will be deemed to have retired at the commencement of the AGM and the business in relation to the election in respect of these vacancies will also be transacted along with other statutory businesses. iv. The election of the directors shall be in accordance with the relevant provisions of the Act and the Articles. v. Eligibility to participate and vote in the meetings : it is seen from the Memo of the Bank that of the 1, 91, 445 shares, 96, 000 shares representing 33. 74% are to be first registered in the names of 4 finance companies and thereafter to be transferred in the names of individual members of public from whom the Nadar Mahajana Bank Share Investors'Forum has collected funds and that transfer instruments in respect of approximately 29000 shares have been received by the Bank. We are of the view that initially transferring in the name of 4 finance companies and then getting the same shares transferred to a number of individuals after obtaining transfer instruments is a time consuming and an avoidable exercise. Since the Nadar mahajana Bank Share Investors'Forum has already furnished a complete list of the names of those to whom these 96000 shares are to be ultimately transferred, we authorize the company to register all these shares on the basis of the list given by the Nadar Mahajana Bank Share Investors'Forum without the production of transfer instruments. In other words compliance with the provisions of section 108 of the Act is waived. Since, by these directions, the work involved in the transfer of shares would be minimal, the entire exercise of transferring these 96000 shares should be completed by 31st August. 2003. Since all these shares are being transferred directly to Individual shareholders, there would be no need to obtain acknowledgment from the RBI in respect of these 96000 shares. All the shareholders in whose names the shares are to be transferred shall be entitled to participate and vote in the proposed annual general meetings. vi. As far as 95. 418 shares constituting 33. 55% are concerned, which are to be transferred in the names of four other companies, they will also be entitled to participate and vote but the votes would be counted only if by the time of holding the AGM. acknowledgment from RBI has been received in respect of these shares

(3.) FROM the above rival contentions, the only question that arises for our consideration is whether the finding of the Company Law board that the Chairman was right in allowing the proxies of the powers of attorney holders to exercise votes and taking the votes into consideration, is right under the facts and circumstances of the case.