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Issues Involved:
1. Regulation permitting voting rights only to holders of a minimum number of 50 shares. 2. Number of qualification shares required to be held by a potential director of the Bank, which is 500. Detailed Analysis: 1. Regulation Permitting Voting Rights Only to Holders of a Minimum Number of 50 Shares: The writ petitioner, holding 17 shares of the State Bank of India, challenged the regulation that restricts voting rights to shareholders with a minimum of 50 shares. The petitioner argued that Section 11 of the State Bank of India Act, 1955, exhaustively specifies restrictions on voting rights, and any additional restrictions imposed by regulation 31 are beyond the Act's provisions. Section 11 states, "No shareholder, other than the Reserve Bank, shall be entitled to exercise voting rights in respect of any shares held by him in excess of ten per cent of the issued capital." The petitioner contended that regulation 31, which requires a shareholder to hold at least 50 shares to vote, imposes an additional restriction not envisaged by the Act. The court noted that under Section 50 of the Act, the Central Board is empowered to make regulations, provided they are not inconsistent with the Act. Regulation 31, however, was found to be inconsistent with Section 11 as it imposed an additional restriction on voting rights. The court emphasized that a share in a body corporate inherently includes the right to participate in management and exercise voting rights. Regulation 31, by restricting voting rights to holders of 50 shares or more, effectively deprived shareholders of this essential characteristic. The court also considered the reasonableness and nexus of the regulation with the object sought to be achieved. It found no logical reason for the threshold of 50 shares and concluded that the regulation was arbitrary and violative of Article 14 of the Constitution. Consequently, the court struck down the word "fifty" in regulation 31(1) and (2) and substituted it with the word "share," allowing each shareholder one vote per share. 2. Number of Qualification Shares Required to be Held by a Potential Director of the Bank: The petitioner also challenged the requirement for a director to hold a minimum of 500 qualification shares. The court dismissed this challenge, stating that the prescription of qualification shares is a common practice in corporate governance and does not warrant judicial scrutiny for reasonableness or legality. The court held that such requirements are standard and do not infringe upon any legal or constitutional principles. Conclusion: The court ruled in favor of the writ petitioner regarding the voting rights issue, declaring regulation 31 inconsistent with the State Bank of India Act, 1955, and violative of Article 14. The court struck down the requirement for a minimum of 50 shares to exercise voting rights, allowing all shareholders to vote irrespective of the number of shares held. However, the challenge to the qualification shares for directors was dismissed, affirming the standard corporate practice. The relief granted was set to take effect from January 1, 2000, to avoid disrupting the upcoming annual general meeting.
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