Three YES Bank directors not 'fit and proper', says Madhu Kapur family

Court defers hearing to July 15 as bank opposes amendments

(Please see clarification at bottom)

The Madhu Kapur family has questioned the appointment of  Diwan Arun Nanda, M R Srinivasan and Ravish Chopra as directors on the YES Bank board, saying they do not meet the ‘fit and proper’ guidelines of the Reserve Bank of India.

In rejoinders and draft amendments to their petition filed with the Bombay High Court today, the Kapur family has said "defendant numbers 7 (Nanda) and 9 (Srinivasan) do not meet the fit and proper requirement of age criteria of 35 to 65 years, as prescribed by the RBI circulars being relied upon...Both defendant numbers 7 and 9 as per the AGM (annual general meeting) notice are 69 years old."

Business Standard has reviewed these documents.

However, the Bombay High Court deferred the hearing on the petition, as the bank's lawyers opposed the amendments made by Kapur to her petition, saying they disclose a different 'cause of action', which is not a part of the petition.

Following this, the court postponed hearing to July 15.

YES Bank has opposed the amendments, claiming it discloses a different cause of action. Madhu Kapur, widow of co-founder Ashok Kapur, and her two children (Shagun Kapur Gogia and Gaurav Kapur) had moved the court, alleging their right as co-promoters of the bank were violated. They claimed that in the articles of association, the Indian partners of YES Bank must jointly recommend appointment of directors on the bank's board.

While Madhu Kapur is the legal heir of Ashok Kapur, she was not consulted before appointing the three directors. Rana Kapoor, co-founder, managing director and chief executive of YES Bank, recommended the appointment of Srinivasan and Chopra. Nanda was inducted as an independent director. The court had directed the board to consider appointing Gogia; it had rejected her candidature. The Kapur family also claimed that while filing her nomination, Gogia was asked to provide information that the three directors did not have to furnish.

The documents further claimed it was not disclosed to the shareholders that Srinivasan was earlier engaged as an adviser and was drawing monetary benefits from the bank. Also, the bank did not inform shareholders that Nanda was a director and a member of the audit committee of Kingfisher Airlines till September 2011.

"The track record of Kingfisher Airlines in its dealings with banks and financial institutions and the government is in public domain. In this regard, it is pertinent to note that the notice of the 9th annual general meeting fails to disclose the above and other material facts to the shareholders," the Kapur family said.

They also alleged that the bank's annual general meeting (where a majority of shareholders approved the appointment of the three directors) was not properly conducted. Srinivasan acted as chairman of the meeting even when the resolution concerning his own re-appointment as a director was being considered. "This is illegal, as he was interested/concerned in the resolution," they said.

The family claimed some of the agenda items for the meeting was neither proposed nor seconded by shareholders. A close friend of Rana Kapoor was appointed as one of the scrutineers and the signatures of proxies on the ballot papers were not verified by the scrutineers. In the draft amendments, the Kapur family have made the three newly appointed executive directors – Rajat Monga, Sanjay Palve and Pralay Mondal – parties to the suit.

Clarification

YES BANK has clarified that the Reserve Bank of India had relaxed the upper limit of the age of the non-executive directors from 65 to 70 years. Also, the previous role of M R Srinivasan as an adviser with the bank had been disclosed to shareholders and discussed at the board meeting while considering his nomination as a director. Similarly, the bank had made necessary disclosure of Diwan Arun Nanda's directorship of Kingfisher Airlines and his membership of its audit committee. The Business Standard report had referred to these issues as these were the assertions made in an affidavit filed by the Madhu Kapur family with the Bombay High Court early this month.