Articles of Association prevail over private shareholding arrangements; prior ratio clause could not bind after amendment, while Union had standing.

A private 65:35 shareholding arrangement could not be enforced once the amended Articles of Association deleted the clause preserving that ratio; the Articles prevailed over the prior settlement and related correspondence, so the post-amendment share transfer was not restrained. The Union, however, had locus standi to sue because the 1974 settlement was treated as an industrial settlement under the Industrial Disputes Act, 1947, and the Union was a party to it with a sufficient legal interest to complain of its alleged breach. The appeal therefore failed on merits in relation to enforcement of the shareholding ratio, while the challenge to locus standi was rejected.

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Issues: (i) Whether the appellant could enforce a pre-existing 65:35 shareholding arrangement after the Articles of Association were amended to delete that ratio. (ii) Whether the appellant Union had locus standi to maintain the suit on behalf of the non-management staff shareholders.

Issue (i): Whether the appellant could enforce a pre-existing 65:35 shareholding arrangement after the Articles of Association were amended to delete that ratio.

Analysis: The right asserted by the appellant flowed from a prior settlement and related correspondence, but the amended Articles of Association deleted the clause requiring maintenance of the 65:35 ratio from 29 June 1998. The transfer of shares challenged in the suit took place after that amendment. In such a situation, a restriction or arrangement not surviving in the Articles could not be enforced against the company. The principle that the Articles prevail over a private arrangement governing transfer restrictions was applied, and the authorities distinguishing that principle did not assist the appellant on the facts.

Conclusion: The appellant could not enforce the 65:35 arrangement against the company after the amendment to the Articles of Association.

Issue (ii): Whether the appellant Union had locus standi to maintain the suit on behalf of the non-management staff shareholders.

Analysis: The settlement of 1974 was treated as an industrial settlement under the Industrial Disputes Act, 1947 and the Union was a party to it. On that basis, the Union had a sufficient legal interest to complain of breach of the settlement and the trial court's view on lack of locus standi was not accepted.

Conclusion: The appellant Union had locus standi to maintain the suit.

Final Conclusion: The appeal failed on merits because the claim to enforce the shareholding ratio could not survive the amended Articles of Association, even though the Union was found to have locus to challenge the alleged breach of the settlement.

Ratio Decidendi: A private shareholding arrangement or transfer restriction cannot be enforced against a company once the contrary provision has been validly deleted from its Articles of Association, and the Articles prevail over such inconsistent arrangements.

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