Yes Bank promoters should jointly nominate directors, rules Bombay High Court

The Bombay High Court on Wednesday upheld the rights of Madhu Kapur as a successor of her husband and an initial promoter of YES Bank, Ashok Kapur.

The court said that Madhu Kapur, along with the promoter Rana Kapoor, has the right to jointly nominate the appointment of three directors on the bank's board and none of them can unilaterally exercise the right.

However, it turned down Madhu Kapur's request for appointing her daughter Shagun Kapur Gogia on the board of YES Bank, saying that the board's decision may be churlish or even vindictive but the court will not foist its nominee on the board. The court added that "the board's discretion is unfettered".

On an important issue as to whether the successors of Ashok Kapur can be declassified from their status of promoter, the court emphatically ruled in the negative and passed orders preventing Rana Kapoor and YES Bank from even making such declassification applications.

YES Bank said in a release that it will decide on further legal action based on the advice of its solicitors.

The order is unlikely to see the curtains to the two-year long bitter family feud.

Shagun Kapur Gogia told dna, "I am very happy with the court order and feel vindicated. As much as it was a Kapur versus Kapoor, it was also a case of right versus might. We strongly believed that our rights couldn't be ignored. We had immense faith in the judiciary of our country and that faith has been further reinforced with this verdict."

Since the right is joint, all the nominations made based on Rana Kapoor's nomination alone is void. Hence, the court held the appointments of Ravish Chopra and MR Srinivasan as void. The appointments of whole-time directors Rajat Monga, Sanjay Palve and Pralay Mondal under 127A(b), are also void because such directors can be only one or more of existing board members under that Article. Since these three directors were not on the bank's board when their appointment was made, their appointment is not valid.

The appointment of Diwan Arun Nanda and Ajay Vohra as independent directors without passing resolutions in the annual general meeting but by way of explanatory note to the agenda which purports to treat both of them as independent directors are also not yet validly appointed.

YES Bank said in its statement, "The court has asked YES Bank to take necessary steps to revalidate, appoint or reappoint the persons in question subject to them meeting statutory requirements, of course including age limits. There is no finding of disqualification of any of these directors for want of ability or credentials."

As regards to the appointment of Rana Kapoor as MD and CEO, Madhu Kapur's plea that the Reserve Bank of India's approval was procured by a misleading application was not accepted by the court. It said that this submission made to quash RBI approval cannot be accepted at this prima facie stage without the necessary evidence. According to a release by YES Bank, the court said, "It is not as if YES Bank is operating without shareholder and regulatory oversight."