The Hindu Business Line : Election of TMB directors challenged before CLB

THE legal tussle among the various groups of the Nadar community to take control of the Tuticorin-based Tamilnad Mercantile Bank Ltd has assumed yet another new turn with a group challenging the election of 10 directors at the annual general meeting held on March 12.

In an application moved before the Company Law Board, Additional Principal Bench, Chennai, the group led by Mr S. Ashok and 33 others, has strongly contested the election on various grounds, including exclusion of proxies executed by the powers of attorney in the voting for election of directors, procedure adopted in violation of Section 263 of the Companies Act in regard to casting of votes and non-submission of notices under Section 257 by the proposers of candidates for election as directors.

The applicants contended that on the various grounds, the election of respondents (the 10 directors who are considered as associates of Mr B. Ramachandra Adityan) 4 to 13 were invalid and was therefore to be set aside by the Company Law Board.

According to the applicants, as a consequence of the order dated August 14, 2003 of the Company Law Board, the question of transfer of 95,418 shares was yet undecided. Since the Reserve Bank of India had not issued the requisite acknowledgements in respect of the transfer of these shares, the issue was never raised subsequently before the Board.

Also, the applicants contended, several shareholders had lodged with the Bank notice in writing of their intention to inspect the proxy forms. However, no such inspection of proxies was permitted. The bank failed to comply with the requirement of Section 176(7) to permit inspection of the proxies.

The first applicant and some other shareholders placed before the chairman at the meeting detailed representations why the powers of attorney could not be utilised to exercise any voting rights. But the chairman did not give a ruling on such objections or to even make a mention in the report of the meeting. This would establish how the votes of several shareholders had been totally excluded and the voting by power of attorney proxy holders was permitted erroneously.

It was further alleged by the applicants that by virtue of the election of directors using the powers of attorney, the control in the bank had ceased to be for the benefit of the Nadar community in general but had vested in one family. Some of the directors elected at the meeting were stated to have borrowed large amounts from the bank.

Pending disposal of the application, the board should restrain these respondents from functioning as directors and/or from taking any policy decisions in relation to the bank including the appointment/transfer of employees, granting of loans or donations, they prayed.

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