The Company Law Board (CLB) today declared the extraordinary general meeting (EGM) convened by IFCI for the appointment of an additional director on the board of Tourism Finance Corporation of India (TFCI) invalid. The CLB bench of Justice D R Deshmukh, while declaring the EGM null and void, said, “The meeting was convened in the violation of its earlier order.”
he direction of the board came over a petition filed by tourism finance body TFCI seeking to restrain Industrial Finance Corporation of India (IFCI) from holding the EGM. IFCI had convened the EGM for the appointment of an additional director on TFCI’s board.
Earlier, the CLB had directed that status quo is to be maintained on the board of TFCI till further orders. Minority shareholders of TFCI had approached the CLB against IFCI, alleging that it was secretly acquiring the company’s shares to gain management control.
IFCI and TFCI are locked in a legal battle after the former proposed to appoint an additional director on TFCI’s board. IFCI had issued a notice for convening an EGM of TFCI’s shareholders, which was stayed by CLB on the plea of the latter.
The shareholders maintain that as per market regulator Sebi’s Substantial Acquisition of Shares and Takeovers rules, if an investor acquires shares in a company that are more than 5%, or more than 2% if it already has 5%, then it should inform the stock exchanges.
They said IFCI didn’t inform them about its proposed EGM for the appointment of an additional director on TFCI’s board. However, senior counsel Rajiv Nayar, appearing for IFCI, opposed the plea, saying that he would challenge its maintainability.
On January 13, the CLB had directed IFCI not to hold the EGM for appointing directors. It had also turned down IFCI’s plea that convening the EGM was not in violation of the CLB order passed on December 16, directing it to maintain status quo.
As per Regulation 7(1A) of the SEBI (SAST) Regulations, 1997, only a person who holds more than 15 % Shares or voting rights in a listed company is under an obligation to inform change of 2% or more of his total shareholdings.
However in the aforementioned case the shareholders are of the view that the intimation is required for every 2% change by the shareholder holding more than 5% shares.
Accordingly the said argument is not correct.