Karnataka HC Upholds Director Removal Process as Section 284 Operates Independently

Karnataka Bank Ltd. Vs A.B. Datar (Karnataka High Court)

In, the Karnataka High Court considered appeals filed by Karnataka Bank Ltd. against interim injunction orders restraining the bank from giving effect to resolutions passed at its sixty-eighth annual general meeting held on October 29, 1992. The dispute arose after certain shareholders issued special notices under Section 284 of the Companies Act, 1956, proposing resolutions for removal of directors, including A.B. Datar and Dr. Ravishankar Adiga. The bank notified the concerned directors and published the notices in newspapers under Section 190(2), since the annual general meeting notices had already been dispatched to more than 26,000 shareholders.

The plaintiffs challenged the validity of the annual general meeting and the proposed resolutions on several grounds. They alleged that the chairman-cum-managing director had acted mala fide by instigating shareholders to seek removal of directors, that Section 188 requirements were not complied with, that reasons for removal were not disclosed, that the notice period was insufficient, and that the board resolution increasing the number of directors had not been validly confirmed. The trial court accepted many of these objections in two suits and restrained the bank from implementing the resolutions removing the directors, though it had rejected similar relief in another suit.