Foreign exchange approval and shareholder voting rights: interim restraint should not continue absent irreparable injury and balance of convenience.

An ad interim injunction restraining a shareholder from exercising voting rights was held unsustainable after the Reserve Bank of India granted permission to treat the holder as a non-resident shareholder. The regulatory approval under foreign exchange law answered the immediate objection to the exercise of voting rights, and the continued exercise of that right for years without challenge weighed against restraint. As no irreparable injury was shown and the balance of convenience favoured allowing the shareholder to vote, the temporary injunction was discharged pending trial.

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Issues: Whether the ad interim injunction restraining exercise of voting rights attached to the shares could be sustained after the Reserve Bank of India had granted permission to treat the shareholder as a non-resident shareholder.

Analysis: The only substantive question was whether interim relief could continue in the face of the regulatory permission granted under the foreign exchange law. The permission issued by the Reserve Bank of India, the competent regulatory authority under the statute, was treated as answering the immediate objection to the shareholder exercising voting rights. The Court also noted that the voting right had been exercised for years without challenge and that no irreparable injury was shown to justify restraint pending trial. On the facts, the balance of convenience was found to lie in favour of permitting the shareholder to vote until the suit was decided.

Conclusion: The temporary injunction was not justified and was liable to be discharged.

Ratio Decidendi: Where the competent regulatory authority has granted the necessary permission under the foreign exchange law, an ad interim injunction restraining the corresponding shareholder right should not be maintained absent a showing of irreparable injury and a balance of convenience in favour of restraint.

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