The Hindu Business Line : Federal Bank probing all legal options on stay order

ON the stay order obtained by ICICI Bank on all the resolutions which were put to vote at the AGM on Monday, Federal Bank is exploring all legal options including approaching the Kerala High Court for a stay as well as contesting the case at the Company Law Board in Chennai.

Specific clauses in the Reserve Bank of India letter of May 1993 had prompted the Returning Officer to reject the ICICI Bank plea at the AGM, seeking voting rights for its total 20.45 per cent stake in Federal Bank, sources in Federal Bank told Business Line.

The RBI letter had recommended exemption from provisions of voting rights under the Banking Regulations Act, with regard to the shares "presently being allotted" by Federal Bank to ICICI, sources in the bank said. A total of 26,67,000 shares were transferred to ICICI Limited in 1993.

Similar letters granting voting rights for the shares obtained through rights issue (15,33,200 shares) and open market operations were sought from ICICI Bank, but not obtained, and hence the plea for voting rights for these additional shares was rejected, the sources added. The bank planned to use the RBI letter as a major plank in their forthcoming legal battle.

The RBI letter was sent to the Government of India, which subsequently brought out a Gazette notification in 1994, announcing the exemption for voting rights. However, bank sources admitted that the specific words, "presently being allotted" were missing from the Gazette notification. The Gazette notification said that the Central Government on the recommendations of the Reserve Bank of India exempted Federal Bank from the provisions regarding voting rights 12 (2) with respect to the shares allotted to ICICI Ltd.