HC dismisses Fed Bank petition against CLB

The Alluva -based private sector Federal Bank today received a major blow after the Kerala High Court division bench dismissed its appeal against a Company Law Board (CLB) order staying the appointments of new directors on the board.

In addition to this the court also dismissed the writ petition filed by K P Fabian, the newly appointed director of the bank.

The controversy first began on September 27, after Federal Bank denied full voting rights to ICICI Bank, which holds 20.44 per cent in the bank, at its annual general meeting. ICICI moved the CLB seeking a stay order on the decisions taken at the AGM.

ICICI Bank moved the application ex-parte as it was allegedly allowed to use its voting rights to the extent of 2,670,000 shares even though it holds 4,532,400 shares in Federal Bank.

The CLB order, signed by K K Balu, stated that all resolutions which were put to vote at the AGM by way of poll would not be implemented until the disposal of the order.

ICICI Bank had originally purchased a 12.7 per cent stake in Federal Bank in 1993 but subsequently its stake went up to cross 20 per cent through subscribtion to rights issues and so on.

The RBI had made an exception and granted ICICI bank full voting rights in accordance with its stake even though in normally the voting rights of an investor in a private bank are capped at 10 per cent.

Following the CLB stay, the Federal Bank board now has only five members. Padmakumar's term as chairman comes to an end on December 31.