Document Fragment View

Matching Fragments

2.6. While the main complaint of the Central Government, second respondent herein, had thus come to an end, the Company Law Board proposed to close the Company petition filed by the Central Government, viz., C.P. No. 15 of 2003, At this point of time, certain shareholders, viz., the appellants herein filed C.A. No. 46 of 2004 questioning the validity of the mode and manner of the election of the Directors and prayed to set aside the election conducted on 12.3.2004.

2.7. The main contention of the appellants herein, who were the applicants in C.A. No. 46 of 2004 was that when 67% of the shares were sold to Essar Group of Companies and said shareholders also executed power of attorneys in favour of the Essar nominees, till the said sale of snares arc acknowledged by the Reserve Bank of India, their votes could not be taken into consideration. It was also brought to the notice of the Company Law Board that the said Essar Group of Companies subsequently sold the said shares to Sterling Group, who applied to the Reserve Bank of India for acknowledgement of the purchase of shares from Essar Group of Companies, and the Reserve Bank of India rejected the purchase of shares by the Sterling Group, and the same had become final, and therefore, the nominees of the Essar Group are not entitled to exercise their proxies, as the ultimate sale in favour of the Sterling Group was rejected by the Reserve Bank of India. According to the appellants, once the Reserve Bank of India refused to acknowledge the transfer of 67% of the shares to four companies which belong to Essar group, the four companies cease to have any beneficial interest in the shares and therefore, the nominees of the Essar Group under power of attorneys are not entitled to exercise their vote under proxies, even based on the power of attorneys executed by the original shareholders. It was thus contended by the appellant that no voting in respect of these shares would be allowed accepting the proxies by the power of attorney members.

2.8.4. The elected Directors, viz., respondents 4 to 13, also brought to the notice of the Company Law Board that the Madras High Court by a judgment dated 31.12.2003 observed that in the event of Reserve Bank of India not giving acknowledgement, notice for the annual general meeting would be sent to the person in whose names these shares then stood in the Register of members. That apart, the Division Bench of the Madras High Court in its judgment dated 9.3.2004 made in W.A. No. 579 of 2004 and W.P. No. 3734 of 2004 allowed proxies being obtained from those persons in whose name the shares stood or their authorized agents and for doing so, it extended the period of lodging the proxies by a further period of 24 hours. Thus, according to the elected Directors, the High Court has allowed the power of attorney holders to exercise voting in respect of the impugned share and the same became final and hence, there is no illegality in permitting the proxies of the powers of attorney holders to exercise voting in respect of the impugned shares.

2.9. Considering the above rival contentions of the appellant herein, who are the applicants in C.A. No. 46 of 2004, and also that of the elected members, referred to above, who are the respondents 4 to 13 herein, the Company Law Board in its order dated 13.7.2004 made in C.P. No. 15 of 2003 held that, (i) the Chairman was right in allowing the proxies of the powers of attorney holders to exercise votes and taking the votes into consideration; (ii) the purpose of the petition filed by the Central Government, second respondent herein, had served, ensuring that the first respondent-Bank is managed by the newly elected representatives; and (iii) accordingly, closed C.P. No. 15 of 2003 finding no further orders are required.

6. 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.

7.1. In this regard, a reference to Section 408 of the Companies Act, which was invoked by the Central Government, with reference to Sections 397 and 398 of the Companies Act, in preferring C.P. No. 15 of 2003, are relevant to be referred to: