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TMI Blog1999 (8) TMI 809X X X X Extracts X X X X X X X X Extracts X X X X ..... h he disposed of sometime earlier. 2. There are two challenges thrown in this writ petition. The first is to the regulation which permits a vote to be cast by and only by a holder of a minimum number of 50 shares. The second challenge is to the number of qualification shares to he held by a possible director of the Bank, which number is 500. So far as the second challenge is concerned, namely the qualification shares of the director, in my opinion no discussion is needed: the prescription of qualification shares is so common a matter in regard to companies that if it is prescribed by the State Bank of India, the writ court is not called upon to examine its reasonableness or illegality. 3. So far as the voting right is concerned, Mr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich shares may be held and transferred and generally all matters relating to the rights and duties of shareholders;" The regulation material in the present case, as framed under the above power, is regulation 31 which is set out below : " Determination of voting rights. - (1) Subject to the provisions contained in section 11 of the Act, each shareholder who has been registered as a shareholder for a period of not less than three months prior to the date of a general meeting shall, at such meeting, have one vote for each fifty shares held by him. (2) Every shareholder entitled to vote as aforesaid who, not being a company, is present in person or by proxy or who being a company is present by a duly authorised representative, or by pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a regulation also. In testing the regulation, the question which the court would ask would be whether the classification made in the regulation is reasonable or discriminatory, and secondly, whether the distinction sought to be introduced in the regulation can be said to have a nexus with the object sought to be achieved by the regulation. No doubt, there will not always be guidance in the shape of a Statement of Objects and Reasons in regulations as there will usually be in Central or State legislation, but, even then such object and reason can be ascertained from a reading of the whole body of regulations, which exercise is also to be undertaken in the case of Central and State Acts for the purpose of determining the object and reason of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1, where at paragraph 5 there is a quotation from Abbott, CJ, to the effect that an Act is not to be evaded by shift or contrivance. According to Mr. Banerjee the regulation has operated as a contrivance, even if bona fide used, of imposing an additional restriction on voting powers than those prescribed by section 11 of the Act. 8. Mr. Ajoy Gupte appearing for the State Bank showed the meaning of inconsistent from Black s Law Dictionary, and submitted that the Act is 44 years old; that the regulations have been, in existence for nearly the same length of time : that the State Bank of India is the successor of the Imperial Bank and the Imperial Bank of India Act of 1920 prescribed in Schedule II, Item No. 30 that on a show of hands ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irected towards obtaining voting rights in regard to the writ petitioner s small holding of 17 shares. It so happened, according to Mr. Gupte that the quoted price of ten rupee face value State Bank shares is currently only a little below Rs. 250 but that would not entitle the writ petitioner to file a petition for obtaining non-existing voting rights. 11. In reply, Mr. Banerjee gave the case of Lohia Machines Ltd. v. Union of India AIR 1985 SC 421 and placed paragraph 61 from the judgment of Bhagwati, J., as His Lordship then was. His Lordship was speaking in the judgment for the then the Chief Justice Y V Chandrachud, and two other then sitting Judges of the Supreme Court. At paragraph 61 there are indications and quotations to sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re as an instrument which does not necessarily carry with it a voting power, then in the absence of clear indications given in the Act itself, it is not possible by way of a regulation only to rob a share of a body corporate of its essential and primary characteristic. 16. Viewed in this light, regulation 31, as it stands today, is also violative of article 14. The rule of allowing a vote for every 50 shares, the word fifty being introduced sometime in 1994, is nothing more than a rule of thumb without logic or reason. Nothing was shown why from 49 shares to 51, one can be said to cross a reasonable barrier or threshold. 17. Nor could any reason be found why the object of regulating the functioning of the State Bank is served by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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