Where decision of Board of Directors is to be taken, except otherwise provided, a majority decision would be considered the ultimate decision of Board of Directors

Kerala High Court: In the instant case where question was raised upon the legality of the acquisition of State Bank of Travancore (SBT) by the State Bank of India (SBI), the Division Bench of Navaniti Prasad Singh,C.J. and Antony Dominic, J. held that the law of meeting is well settled on points as to where the decision of the Board of Directors is to be taken, except otherwise provided, a majority decision would be considered the ultimate decision of the Board of Directors. The Court observed that since the dissent by the two directors as to the acquisition of SBT by SBI were in gross minority, therefore it would not vitiate the ultimate decision of the Board of Directors who were in the favour of the process of acquisition.

Petitioners in the instant case contended that the SBT was created by an Act of Parliament i.e. The State Bank of India (Subsidiary Banks) Act, 1959, thus, banking business of the SBT could not be taken over/ acquired by the SBI and only Parliament could have authorised such acquisition. However the Court rejected the argument stating that it is wrong to state and submit that the creation of the SBT under the 1959 Act meant that was a bank created by  Parliament. Moreover Section 35 of the State Bank of India Act, 1955 authorises SBI to acquire business of any other Banks subject to conditions laid down in the Act.

Perusing the facts of the case and relevant statutory provisions the Court observed that the SBT was created as subsidiary of the SBI under the SBI Act, 1955. It was further observed that reports regarding the acquisition were placed before the Board of Directors of both the Banks and the scheme was approved by the Central government which thereby leaves no room for the Court to interfere in the matter. Thus, on the basis of all the arguments, the Court was unable to find any merit in the writ petitions and dismissed it. [Save SBT Forum v. Union of India, 2017 SCC OnLine Ker 1257, decided on 23.03.2017]

 

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