The Hindu Business Line : CSB rights issue: HC annuls order

Kochi, Sept. 29 The Kerala High Court on Monday quashed an order of a court in Thrissur restraining the Catholic Syrian Bank from proceeding with a rights issue.

Mr Justice P.R. Raman set aside the order while allowing a writ petition filed by Mr R. Venkataram, Chairman of the bank, and others.

A Munsiff Court in Thrissur passed the order when a petition filed by Mr V.O. John, a shareholder, challenged the rights issue. The lower court found that there was violation of the right of individual shareholders.

The board had offered 1,57,35,028 equity shares having a face value Rs 10 for a premium of Rs 110 a share to existing shareholders. The offer was in ratio of one new share for every existing share. The offer opened on August 16, 2007, and closed on August 29.

Issue of the issue

Mr John contended that this had violated the mandatory provisions under section 81 of the Companies Act, which stipulated that there should be less than 15 days for the offer. The period of the offer had only 14 days in which 4 days were holidays for the bank, he pointed out. The intention of the bank was to keep ordinary shareholders away from subscribing, he alleged.

The bank Chairman and others contended that the rights issue was approved by the board of directors. The decision was taken as the Reserve Bank of India had directed the bank to raise its assets to Rs 300 crore on or before September 30, 2007. They contended that the company law board had allowed the bank to proceed with the rights issue.

Jurisdiction problem

While allowing the bank’s petition, the High Court observed that there was lack of jurisdiction on the part of the Munsiff Court.

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