Koshy, C.J.

The first respondent bank is registered as a Banking Company with an authorised share capital of Rs.100 Crores. Now the bank is having 344 branches throughout India with 9 Zonal Offices. The appellant is a shareholder of two hundred shares with a face value of Rs.10/- each. At present, there are 10,87,79,655 equity shares of Rs.10/-each, held by about 28,000 share holders. The Reserve Bank of India has issued directions to the bank to fulfil the requirement of attaining a minimum net worth of Rs.300 Crores on or before 30.9.2007. Ext.P1 is the communication of the Reserve Bank of India to that effect. Even before issuance of the above communication, the Reserve Bank has also formulated guidelines on ownership and governance in private sector Banks as can be seen from Ext.P2. Being a mandatory requirement, the Bank decided to increase the Subscribed Capital by further issue of shares by offering right shares to the existing share holders. Ext.P3 special resolution was passed unanimously at the Annual General Meeting held on 30.6.2006 to achieve the above purpose. Accordingly Ext.P4, letter of offer, offering 1,02,26,307 equity shares of Rs.10/-each at a premium of Rs.110/- per share, but adding a rider that the option for renunciation could be exercised only in favour of existing shareholders of the bank was issued. Ext.P3 would show that Resolution No.10(i) authorised and empowered the Board of Directors of the Bank to issue further shares of the Bank by way of Right Issue, Private Placement, Preferential or Firm allotment, Public Issue or by anyone or more of the above methods. Resolution No.10(ii) shows that the Board of Directors was also authorised as per Section 81 (1A) of the Companies Act (for short, "the Act") to issue shares through private placement on preferential basis as per Rule 4 of the Unlisted Public Companies (Preferential Allotment) Rules, 2003. The above rule provides for issue of shares on preferential basis on specific conditions only -(i) There should be an authorisation under Articles of Association (ii) There should be a special resolution passed by the members in the General Body Meeting. Here the special resolution was passed authorising the Board of Directors to raise additional capital by issue of equity shares on preferential basis and/or through private placement.

Resolution 10(i) reads as follows:

"RESOLVED pursuant to Section 81(1-A) and other applicable provisions, if any, of the Companies Act, 1956 or any statutory amendment/modification or reenactment thereof from time to time in force and the relevant provisions of the Articles of Association of the Bank, that the Board of Directors of the Bank be and is hereby authorised and empowered to offer, issue and allot all or any of the remaining unissued 6,59,04,921 equity shares of Rs.10/-each and 20,00,000 preference shares of Rs.100/- each in the capital of the bank at par or at such premium, at such time and on such terms and conditions as the Board may determine including by way of conversion of Debt into Equity, to any person or persons who may include Non-Resident Indians, Foreign Institutional Investors, Overseas Corporate Bodies, Financial/Investment Institutions, Qualified Institutional Buyers, Banks, Mutual Funds, other Bodies Corporate, Other Entities, whether domestic or Foreign, Employees and/or any other persons/individuals whether or not those persons/individuals/institutions include the holders of equity shares in the Bank, by way of Rights Issue, Private Placement, Preferential or Firm allotment, Public Issue or by any one or more of the above methods, whether on the same terms and conditions or with varying terms and conditions and whether at one time or from time to time or in such manner and on such terms and conditions, whatsoever as may be deemed appropriate by the Board of Directors". (emphasis supplied)

Thereafter Resolution 10(ii) was passed in pursuance of Rule 4 of the Unlisted Public Companies (P