 "Court turns down TMB's recount plea")
The Madras High Court has turned down a plea for a recount by a section of shareholders of Tamilnad Mercantile Bank after members from the Pioneer Group were declared members of the bank’s board by a division bench of the court. The Tamil Nadu Mercantile Bank Shareholders Welfare Association sought the recount after ignoring the stakes of two entities amounting to around 10 per cent of the total shareholding.
The disputed holding is related to the 4.62 per cent stake transferred by the Ramesh Vangal-founded Katra Holdings and RST Ltd to Subcontinental Equities, and the 4.95 per cent stake transferred by GHI Ltd to Robert Ardies and James Company Ltd. The association contended the votes were counted in accordance with a memo issued by the Reserve Bank of India (RBI) on October 27, 2015, as opposed to an earlier order by the central bank on March 31, 2011.
According to P Wilson, lawyer for the association, the 2011 order issued by the deputy governor of the RBI had acquired status of statute under a section of the Banking Regulations Act, 1949. C Mohan, lawyer for the RBI, submitted the 2011 order was not a direction issued under Section 35A of the Banking Regulations Act and it could not continue to hold after the subsequent transfer of shares.
Wilson said the share transfer by RST Ltd and Katra Holdings to Subcontinental Equities had already been noted by the RBI before issuing the 2011 order and it could therefore not go back on it.
The court observed when the RBI passed its order in 2011 RST Ltd and Katra Holdings had disputed the sale but Subcontinental Equities produced original share certificates and blank share transfer forms.
The crux of the RBI order in 2011 was that RST Ltd and Katra Holdings were part of a group that attempted to take over Tamilnad Mercantile Bank. Subsequently, the dispute was resolved and the transfer was completed in December 2011. The stake sale by GHI Ltd to Robert Ardis and James Company Ltd occurred in January 2012. “The transfers have taken place after the order of the RBI dated March 31, 2011,” the court observed.
It was on account of the subsequent events that the RBI was constrained to file a memo in 2015, the court observed. Even this memo states it was a one-time measure.
“As a matter of fact, the parties who advance the above arguments do not even know whether these transferred shares were counted or not for arriving at the results. They have just presumed that the votes of those parties must have been taken into account by the chairman to arrive at the results. It is only on this assumption that they have addressed the above arguments and we hence have not recorded a categorical finding,” said the order issued by Justice V Ramasubramanian and Justice N Kirubakaran.
The bench added it could have resorted to another option--keeping the results on hold--but did not do so because the bank needed an administration to oversee operations.
“Shocked by this sudden volte face by the appellant, persons who set him up to file the litigation and to get interim orders, today opposed his request for withdrawal. This is not the first time that such a thing is happening in this litigation. Therefore, we would prefer to deal with the request for withdrawal later,” added the order. According to the court documents, the person who filed memo for withdrawal is P S P K Maragathrajaapandian.
The disputed holding is related to the 4.62 per cent stake transferred by the Ramesh Vangal-founded Katra Holdings and RST Ltd to Subcontinental Equities, and the 4.95 per cent stake transferred by GHI Ltd to Robert Ardies and James Company Ltd. The association contended the votes were counted in accordance with a memo issued by the Reserve Bank of India (RBI) on October 27, 2015, as opposed to an earlier order by the central bank on March 31, 2011.
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According to P Wilson, lawyer for the association, the 2011 order issued by the deputy governor of the RBI had acquired status of statute under a section of the Banking Regulations Act, 1949. C Mohan, lawyer for the RBI, submitted the 2011 order was not a direction issued under Section 35A of the Banking Regulations Act and it could not continue to hold after the subsequent transfer of shares.
Wilson said the share transfer by RST Ltd and Katra Holdings to Subcontinental Equities had already been noted by the RBI before issuing the 2011 order and it could therefore not go back on it.
The court observed when the RBI passed its order in 2011 RST Ltd and Katra Holdings had disputed the sale but Subcontinental Equities produced original share certificates and blank share transfer forms.
The crux of the RBI order in 2011 was that RST Ltd and Katra Holdings were part of a group that attempted to take over Tamilnad Mercantile Bank. Subsequently, the dispute was resolved and the transfer was completed in December 2011. The stake sale by GHI Ltd to Robert Ardis and James Company Ltd occurred in January 2012. “The transfers have taken place after the order of the RBI dated March 31, 2011,” the court observed.
It was on account of the subsequent events that the RBI was constrained to file a memo in 2015, the court observed. Even this memo states it was a one-time measure.
“As a matter of fact, the parties who advance the above arguments do not even know whether these transferred shares were counted or not for arriving at the results. They have just presumed that the votes of those parties must have been taken into account by the chairman to arrive at the results. It is only on this assumption that they have addressed the above arguments and we hence have not recorded a categorical finding,” said the order issued by Justice V Ramasubramanian and Justice N Kirubakaran.
The bench added it could have resorted to another option--keeping the results on hold--but did not do so because the bank needed an administration to oversee operations.
“Shocked by this sudden volte face by the appellant, persons who set him up to file the litigation and to get interim orders, today opposed his request for withdrawal. This is not the first time that such a thing is happening in this litigation. Therefore, we would prefer to deal with the request for withdrawal later,” added the order. According to the court documents, the person who filed memo for withdrawal is P S P K Maragathrajaapandian.