Shareholder Tamal Kumar Majumdar, in his petition filed before the Calcutta high court on August 20, has said Section 19(i)(c) and Regulation 31 of the State Bank of India Act violate Clause 31(f) of the Stock Exchange Listing Agreement.

Section 19(i)(c) of the SBI Act stipulates that a shareholder can contest a board post at the annual general meeting only if he has 500 shares in his name. Regulation 31 of the Act restricts voting rights to only those shareholders who have 50 shares registered in their name three months before the annual general meeting (AGM).

Majumdar has pointed out in his petition that under Clause 31(f) of the Stock Exchange Listing Agreement, a shareholder has the right to vote on a resolution at the AGM irrespective of the number of shares held by him.

Section 19 of the SBI Act states that when more than 25 per cent of the bank's shares are held by the public, four directors have to be elected by the shareholders. It also specifies that a shareholder seeking election to the board must hold at least 500 shares of Rs 10 each.

SBI has a share capital of Rs 526.30 crore held by 9,93,473 shareholders. As on March 31, 1997, there were 9,91,473 shareholders with less than 500 shares each, accounting for a total of 99.80 per cent of the equity between them, and 1,904 shareholders with over 500 shares each accounting for 0.20 per cent of the equity.

According to the annexure to the petition, at end-March 1993, there were 230 shareholders holding over 500 shares each accounting for 0.78 per cent of the equity base.

Regulation 31 of the SBI Act, 1955, says that a shareholder has to be registered as a shareholder for at least three months prior to the date of meeting. A shareholder has one vote for every 50 shares held by the person.Majumdar's petition notes that a shareholder with less than 50 shares "...cannot effectively participate in any general meeting of State Bank of India..."

The petition stated: "When the Act of 1955 does not lay down any minimum qualification criteria for a shareholder to participate in any general meeting of State Bank of India on the basis of his shareholding, the criteria with regard thereto laid down by the regulations of 1955 is bad in law and liable to set aside."

It further stated: "The said section and the regulation result in a two-fold classification or division of the members of the same homogeneous group into two groups." Referring to the shareholding pattern, section 19(i)(c) and regulation 31, the petition pointed out that the majority of the shareholders have neither the right to participate in the general meeting nor are eligible to contest an election for the post of a director. This will result in a very small minority of shareholders managing SBI's affairs without taking into account the views of the majority shareholders.

At the AGM on August 12, 1994, speaking on the liberty to take business decisions like the private banks, the then SBI chairman, D Basu, had noted: "Once the principle is accepted, and I do sincerely hope that it will be, there should be no hesitation on the part of the government to scrap many of the rules and procedures which typically apply to government departments and have been made less applicable to us on the basis of state ownership."

Majumdar's petition pointed out that Clause 31(f) of the Listing Agreement states: "The company agrees to -- (f) that it will send out proxy forms to shareholders and debenture-holders in all cases, that proxy form being so worded that a shareholder or debentureholder may vote either for or against each resolution."

The petition says that having agreed to send the proxy forms, SBI authorities have stopped the majority of the shareholders from either participating or contesting in the elections.

The case was listed for hearing before Justice Altamas Kabir on Monday at the Calcutta high court. Though a decision is unlikely before the AGM on August 31, hearing is slated to start shortly. The advocate on record is Ranjit Kumar Basu.