1. This appeal is directed against the judgment of a learned single judge dated March 22, 1984. It was dismissed by us by a short order dated May 16, 1984. Now we proceed to give our reasons for that order.
2. Appellant No. 1, M/s. Bhaskar Stoneware Pipes Pvt.Ltd., is a private limited company registered under the Companies Act, 1956. Mr.Vashishta Bhaskar, appellant No. 2, holds 2,475 shares in this company. According to the respondents/plaintiffs, these shares were allotted to him during the period October 11, 1972, to March 20, 1974.
3. Section 13 of the Foreign Exchange Regulation Act, 1947 (hereinafter to be called 'the 1947 Act'), prohibits the transfer of a security (which admittedly included shares of a company) in favor of a person resident outside India without the permission of the Reserve Bank of India. This Act was repealed by section 81 of the Foreign Exchange Regulation Act, 1973 (hereinafter to be called as 'the 1973 Act'). Section 19 of this Act also prohibits the transfer of a security in favor of a person resident outside India.
4. Relying on these provisions and alleging that appellant No. 2 at the time of allotment of these shares was a resident of the United States of America, the respondents, Rajendra Nath Bhaskar (since deceased) and Vinay Bhaskar, the shareholders of the company, filed a suit for declaration that appellant No. 2 was not a shareholder of the company. They also claimed mandatory injunction requiring appellant No. 1 company to rectify its register of members by deleting the name of appellant No. 2 and also a permanent injunction restraining appellant No. 1 from permitting appellant No. 2 to vote in person or through proxy or attorney as a shareholder.
5. In this suit, the respondents filed an application seeking an ad interim injunction restraining appellant No. 1 from permitting appellant No. 2 or his proxy from exercising the right of vote in respect of the said 2,475 shares.
6. The appellants resisted the suit as well as the application. It was averred that Vashishta Bhaskar was a born citizen of India. During the period he acquired the shares, he was in the United States of America for studies. He was holding a student visa. His period of stay was always certain as a student visa had an expiry date. He was granted a green card only in July, 1975. There was no question of taking any permission from the Reserve Bank of India at the time of allotment of the shares. In my case, the requisite permission had since been obtained from the Reserve Bank of India. It was further averred that the respondent/plaintiffs had no locus standi to file this suit. They had full knowledge but took no action. The suit was belated and was barred by time.
7. Learned single judge observed that appellant No. 2 was admittedly holding a green card since 1975 and was residing in the United States and, thereforee, could not be permitted to exercise the voting rights in the company. With these findings appellant No. 2 was restrained from exercising his voting rights in person or by proxy in regard to the shares mentioned in the plaint till the disposal of the suit.
8. Feeling aggrieved the appellants have filed the present appeal.
9. During the course of arguments, learned counsel for the appellants showed us a letter dated January 27, 1982, from the Joint Controller, Exchange Control Department, Reserve Bank of India, New Delhi. According to this letter, the necessary permission was granted to the appellant company under section 19(4)(b) of the 1973 Act to treat appellant No. 2 as a non-resident shareholder of the company. It was subject to certain terms mentioned in the letter. There is no dispute that the terms are being complied with.The permission having been granted by the Reserve Bank of India to treat appellant No. 2 as a non-resident shareholder, we are of the opinion that the learned judge was not justified in granting the temporary injunction.
10. Mr. V. N. Koura, learned counsel appearing for the respondents, contended that appellant No. 2 was admittedly residing in the United States when the shares were acquired. It was not a flying visit. On the other hand, he was studying there and the period of stay was about three years. thereforee, he was a resident outside India. The transfer of the shares in his name consequently was void ab initio. It was further argued that the appellants were at least required to seek the necessary permission immediately in 1975 when a green card was issued to appellant No. 2. It was also contended that the permission from the Reserve Bank of India was obtained by misrepresentation.
11. In our opinion, we need not go into these questions in this appeal. The permission granted by the Reserve Bank of India, in our view, was a complete answer to the claim for ad interim injunction. These Acts were enacted to regulate certain payments, dealings in foreign exchange and securities and the import and export of currency and bullion. It seeks to preserve rupee resources against foreign exchange in dollars. The Reserve Bank of India is the regulating authority. It has to grant or refuse the permission. The Reserve Bank of India having given the necessary permission there could not be any justification for granting the temporary injunction. Appellant No. 2 had been exercising his right as a voter since 1973 or 1974. His right was never challenged all these years. No irreparable injury is likely to be caused if appellant No. 2 was allowed to exercise his right as a shareholder till the disposal of the suit. Balance of convenience is definitely in his favor.
12. In conclusion we accept the appeal, set aside the impugned order and discharge the temporary injunction granted by the learned single judge. The learned judge will deal with the case as expeditiously as possible, if possible within six months, as there is only one issue. There will be no order as to costs.