Financial Daily from THE HINDU group of publications
Friday, Oct 08, 2004
Financial Daily from THE HINDU group of publications Friday, Oct 08, 2004 |
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Money & Banking
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Courts/Legal Issues HC allows Federal Bank board to meet
K.C. Gopakumar
Kochi , Oct. 7 A DIVISION Bench of the Kerala High Court on Thursday allowed the newly elected board of directors of Federal Bank to "hold a formal meeting without taking any policy decision". The Bench - comprising the Chief Justice Mr N.K. Sodhi, and Mr Justice A.K. Basheer - issued the interim order when appeals filed by Federal Bank Ltd and its Chairman, Mr K.P. Padmakumar, came up for hearing today. The Bench made it clear that the decisions taken at the meeting "shall be subject to the orders to be passed by this court". The court observed that the question of law in the case was whether the Company Law Board could pass ex-parte orders without complying with the provisions of Regulation 14 of the Company Law Board Regulations -1991. The Bench posted the appeals to October 19 for further hearing. According to the Chairman, no notice had been given to him before passing the orders by the CLB. He challenged the order of the Additional Principal Bench of the CLB , Chennai, staying the implementation of all the resolutions passed in the annual general body meeting of the bank. The Board's order issued on September 25 directing the Chairman of the AGM to allow ICICI Bank Ltd its full voting rights in respect of shares currently held by it was also called into question. When the appeals were taken up for hearing, counsel for the Chairman and the bank contended that by issuing ex-parte orders, the Board had violated the provisions of the Regulation 14, which required the Board to issue notice to affected parties before issuing an order. The CLB had said in its stay order that the AGM had violated its earlier order directing the Chairman of the AGM to allow voting rights to ICICI Bank in respect of the shares allotted to the Bank on September 27 (45,32,400 shares). The counsel contended that the direction was only to allow voting rights in respect of the shares already allotted to the bank, for which an exemption had been granted under Section 12(2) of the Banking Regulation Act. Therefore, the CLB's observation that the AGM's decision to allow voting rights for 26,67,000 shares held by the ICICI Bank Ltd had violated its earlier order was "patently wrong and travesty of justice". Countering these arguments, counsel for ICICI Bank submitted that the petitioners could approach the CLB for modification of the order if they were aggrieved by the order. Though today was the last day for filing its reply to the CLB , Chennai, the bank would ask for more time to file its reply, Mr B.S. Krishnan, advocate for the bank, told Business Line. This is in the context of the Division Bench with the Chief Justice of the Kerala High Court passing an interim order in the case. The next hearing at CLB is expected to come up on October 18, but the bank would in all probability ask for a postponement, Mr Krishnan said. There was a sense of relief and joy among the staff of Federal Bank that the first step in a big battle has been won. Though they were waiting for the final verdict from the High Court, the Federal Bank Shareholders Association said that thousands of small shareholders who had helped build the bank from the scratch were delighted with today's ruling. Mr Baiju Mani Paul, General Secretary of the Association, said the Court was able to see the case in its totality and pass the order. The court has not vacated the stay granted by the CLB, but would help in the smooth functioning of the bank in all its daily operations, Mr Krishnan said.
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