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Issues:
Violation of Foreign Exchange Regulation Act, 1947 and 1973; Suit for declaration of share ownership; Ad interim injunction restraining voting rights; Permission from Reserve Bank of India; Residence status of shareholder; Compliance with terms of permission; Locus standi of plaintiffs in filing suit; Delay in taking action; Justification for temporary injunction. Analysis: The judgment by the High Court of Delhi dealt with an appeal against a single judge's decision regarding the ownership of shares in a company. The primary issue revolved around the alleged violation of the Foreign Exchange Regulation Act, 1947 and 1973, specifically concerning the transfer of shares to a person residing outside India without permission from the Reserve Bank of India. The respondents, shareholders of the company, filed a suit seeking a declaration that the appellant was not a shareholder and an injunction to prevent the exercise of voting rights. The appellants contended that the shareholder was an Indian citizen studying in the United States and had obtained necessary permission from the Reserve Bank of India. The single judge restrained the shareholder from voting based on residency status. However, during the appeal, it was revealed that the Reserve Bank of India had granted permission for the shareholder to be treated as a non-resident shareholder, subject to certain terms. The court found that this permission was a crucial factor and invalidated the temporary injunction. The court emphasized the regulatory nature of the Acts governing foreign exchange and securities, highlighting the role of the Reserve Bank of India in granting permissions. The respondents argued that the shareholder's residency status made the share transfer void and raised concerns about the timing and validity of the permission obtained. The court, however, focused on the permission granted by the Reserve Bank of India, which resolved the issue of the injunction. It noted that the shareholder had been exercising voting rights for years without challenge, indicating no imminent harm. The court emphasized the balance of convenience in favor of the shareholder and set aside the temporary injunction. In conclusion, the court accepted the appeal, revoked the temporary injunction, and instructed the judge to expedite the case due to its singular issue. The court highlighted the importance of the permission granted by the Reserve Bank of India in determining the shareholder's rights and dismissed the concerns raised by the respondents regarding residency status and permission validity.
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