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Questions have already been raised on director appointments and claims have been made on violation of co-promoter’s rights. And even before the board meeting starts, exchange of words has started after Gogia filed her nominations last week. YES Bank asked Gogia to refile her nominations in the ‘revised RBI format’.
A public dispute has started over board membership in the country’s youngest bank and the hastily arranged board meeting is one of the consequences. It was originally scheduled for July 24 but the high court (HC) here had asked it be brought forward.
Three weeks earlier (June 6), Madhu Kapur, widow of co-founder Ashok Kapur, and her children, Gogia and Gaurav Kapur, moved the HC for a stay on the annual shareholders’ meet and contesting the appointment of three directors Diwan Arun Nanda, Ravish Chopra and M R Srinivasan — on the board.
The Kapur family felt efforts were being made to erase his contribution to the bank he promoted with brother-in-law Rana Kapoor. Rana’s wife, Bindu, and Madhu are sisters.
It was alleged that after Kapur’s death (in the November 2008 Mumbai terrorist attack), his legal heir Madhu's right to jointly nominate directors on the board, in line with the bank’s articles of association, was violated. Two of the three directors, Chopra and Srinivasan, were recommended by Rana and the Kapur family was not consulted. Prior to this, in 2009, the bank had rejected Madhu’s verbal request to induct her as a board member. In 2011, it removed her name from the list of major shareholders.
On June 5, Madhu made a fresh request to allow her to nominate her daughter, Gogia, on the board. The next day, at around 4 pm, she moved the HC and an hour or so later, got a reply from Rana Kapoor that her request would be discussed in the next board meeting in July.
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BOARD BATTLE A public dispute has started over board membership in the country’s youngest bank with deceased co-founder Ashok Kapur’s family moving the Bombay High Court against YES Bank. A hastily arranged board meeting on Thursday afternoon is one of the consequences |
On the dispute
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On violation of articles of association
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On rejecting application of late Ashok Kapur’s wife Madhu to be placed on YES Bank board in 2009
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On proposal to appoint Shagun Kapur Gogia on YES Bank board
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On Madhu Kapur/Shagun Kapur Gogia’s eligibility to become a board member
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While the court refused to grant a stay on the annual general meeting, where a majority of shareholders voted in favour of the three directors’ appointment, it directed the bank to advance its board meeting by a month and consider Gogia’s induction. The outcome has to be reported to the court on the coming Monday.
The crucial factor in Gogia’s appointment is the “fit and proper” guidelines of the Reserve Bank of India (RBI) that banks need to follow while inducting a new director on the board. A circular issued by RBI on June 20, 2002 defined these as formal qualification, experience, track record, integrity, etc. It said the candidate should be a graduate, between 35 and 65 years of age, and not be a member of Parliament, a legislative assembly or legislative council.
On June 25, 2004, RBI issued another circular that banks should undertake a process of due-diligence to determine the suitability of the person for appointment as a director on the board, based upon qualification, expertise, track record, integrity and other fit and proper criteria.
Based on these guidelines, it appears that Gogia fits the bill. She is a double major in economics and biology from Tufts University, US, and an MBA from the Indian School of Business, Hyderabad. She has worked with ICICI Ventures and Rabo India Finance before setting up an investment firm, Tuscan Ventures.
However, a few suggest that RBI’s guidelines on ownership and governance in private sector banks might prevent her appointment. The norms, released on February 28, 2005, state: “As a matter of desirable practice, not more than one member of a family or a close relative (as defined under Section 6 of the Companies Act, 1956) or an associate (partner, employee, director, etc) should be on the board of a bank.”
While Gogia is related to Kapoor, experts say they are not “close relatives” as defined by Section 6. “The Act does not define uncle and niece as close relatives. Also, Shagun and Rana are not members of the same family. The idea to restrict family members or relatives on a bank's board is to prevent them from acting in concert. In the current situation, it is difficult to imagine that Shagun and Rana will be acting in concert,” said a top executive of a global consultancy firm. Still, doubt remains over her appointment. “A majority of board members might not be too keen to appoint someone who has moved the court against the bank,” said a person familiar with the development.
Gogia has quit Tuscan Ventures to avoid any conflict of interest. She had filed her nomination on June 17, 2013 but had to re-file after the bank asked her to give it in RBI’s prescribed format. It is to be seen if the board now decides to accept her.
