The principal bench of the Company Law Board (CLB), New Delhi, has on May 14 dismissed the application of United Western Bank (UWB) for freezing the voting rights of 14 minority shareholders.
However, in a subsequent development, the Bombay High Court has asked both the parties to maintain status quo on the bonus-cum-rights issue and convening of an extraordinary general meeting (EGM).
Earlier, the Satara-based bank had filed a petition before CLB under Section 250 of the Companies Act, 1956, for investigating the real ownership of the shares held by the 14 shareholders, who collectively hold 10.54 per cent of its share capital. It had also sought interim relief for protection of the interest of the bank through suspension of the shareholders' voting rights.
The shareholders had filed a petition before the CLB challenging the rights issue of shares proposed by the bank. Due to this, the rights issue was kept in abeyance for over 9 months. Last month, when the CLB permitted the issue, the shareholders filed an appeal against this order in the Bombay High Court.
These shareholders -- PIK Securities, Vibhuti Investments, Ganesh Benzoates Pvt Ltd, Impress Packaging, Mittal Fabrics Mfg, Maliram Makharia Investment Company, Veena Makharia, Rekha Makharia and others -- had issued a notice on April 11, 2001, to the company secretary of UWB calling for an EGM, convened for the appointment of a Reserve Bank of India nominee as a director on the bank's board as also the appointment of an independent chairman.
Meanwhile, the bank has informed the Bombay Stock Exchange that the CLB had allowed it to implement the decision taken by its board of directors in their meeting held on August 8, 2000, to the rights issue.
It said the EGM convened on November 24, 2000, on the basis of requisition received from the 14 shareholders -- which also was deferred sine die by the CLB vide its order dated November 13, 2000 -- should be convened as if the requisition was received by the bank on April 30, 2001, in pursuance of Section 169 of the Companies Act, 1956.
The bank was involved in a controversy relating to the setting up an unregistered employees' trust that bought UWB shares from the open market using the bank's funds. Following reports of share buyback through the employees' trust, the RBI had directed the UWB management to recall the loan extended to the trust and liquidate the shares purchased by the trust.
The trust had acquired over 24.32 lakh shares, representing about 8.41 per cent of UWB's capital of Rs 29.88 crore. The shareholders have stated that on account of such heavy purchases, share price shot up to five-year high of Rs 70. After the acquisitions, the share price has fallen resulting in substantial loss to the bank.
The CLB, on March 30, 2001, had overruled the contention of the petitioners (minority shareholders) against the bank coming out with a bonus-cum-rights issue. Last year, the UWB board had recommended a 1:5 bonus issue (one bonus share for every five shares held) and a related rights issue in the ratio of 1:2.
