Shareholder voting rights and arbitrary classification: minimum shareholding threshold in bank regulations was struck down as inconsistent with the Act.

Shareholder voting power was treated as an essential incident of shareholding unless the parent Act clearly displaced it. Reading section 11 of the State Bank of India Act with section 50, the Court held that a regulation could deal only with matters not inconsistent with the Act and could not add a new restriction by subordinate legislation. The rule requiring a minimum holding of 50 shares for any vote was found to curtail the ordinary voting attribute of shares without statutory support. The Court also held that the 50-share threshold created an arbitrary classification with no rational nexus to the regulatory object, so regulation 31 was invalid and the challenge succeeded.

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Issues: Whether the voting restriction in the bank regulations, which allowed one vote only to a shareholder holding at least 50 shares and one vote for every 50 shares, was inconsistent with the parent Act and violative of Article 14 of the Constitution of India.

Analysis: The voting power of a shareholder was treated as an essential incident of shareholding unless the parent Act clearly displaced that incident. Section 11 of the State Bank of India Act, 1955 was read as expressly dealing with the upper limit on voting rights, while section 50 authorised regulations only for matters not inconsistent with the Act. The regulation imposing a minimum holding of 50 shares for any vote was found to add a restriction not traceable to section 11 and, in substance, to take away the ordinary voting attribute of shares by subordinate legislation alone. The Court also held that the classification created by the "50 shares" threshold had no rational basis and lacked any nexus with the object of the regulation, making it arbitrary.

Conclusion: The voting restriction in regulation 31 was held invalid and the challenge was accepted in favour of the petitioner.

Ratio Decidendi: A regulation made under a parent statute cannot impose a substantive restriction on shareholder voting rights that is inconsistent with the Act or arbitrarily curtails an essential incident of shareholding without a rational basis.

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