Yes Bank promoters begin discussions to end dispute
SMOKING PEACE PIPE Rana Kapoor, Madhu Kapur may settle case out of court
MUMBAI: Yes Bank Ltd’s estranged promoters—rana Kapoor and Madhu Kapur —have initiated moves to reach an out-of-court settlement, three people close to the development said.
Both sides have begun preliminary talks to withdraw a longdrawn and bitter legal case against each other and put an end to their decade-old feud, they said.
If taken to its logical conclusion, the move will remove uncertainties surrounding the bank’s succession plans, simplify the board’s functioning and possibly help burnish the bank’s stained credentials.
A person close to Rana Kapoor, one of the three people cited above, confirmed the development, saying it was in the best interest of the bank if the promoters could withdraw the cases and call a truce. When contacted, Shagun Gogia, daughter of Madhu Kapur, declined to comment on the developments.
The two other people familiar with the recent discussions between the two promoters confirmed this on condition of anonymity.
“Rana Kapoor has approached Madhu Kapur and her family and both parties are willing to opt for an out-of-court settlement, keeping in mind the long-term vision that was set by Ashok Kapur and Rana Kapoor for the bank, which has grown into an institution today,” the second person cited earlier said. “Withdrawal of the legal battle will benefit the bank’s board, shareholders, employees and ultimately the customers.”
“Rana Kapoor has approached Madhu Kapur recently to mutu- Nov 21, 2003: Yes Bank Ltd established with Ashok Kapur and Rana Kapoor as promoters. Kapur is the non-executive chairman, Kapoor serves as MD and CEO
Jan 21, 2004: Yes Bank’s articles of association (AOA) give promoters equal rights
Jun 4, 2013: Late Ashok Kapur’s family demands rights on the board as Indian partners of the bank
Jun 6, 2013: Ashok Kapur’s widow Madhu Kapur, daughter Gogia and son Gaurav file a petition in the Bombay high court (HC), seeking the right to nominate directors to the board
Jun 11, 2013: The Bombay HC directs Yes Bank to consider Gogia for the post of director on the board
Jun 17, 2015: Bombay HC restores Madhu Kapur’s rights as co-promoter, directs both promoters to adhere to AOA
ally agree on a plan to end the legal dispute,” the first person cited before said. “A real meeting is expected to happen soon. Hopefully, both sides will agree to new terms and withdraw their suits from the court.”
An email sent to Yes Bank remained unanswered.
The move follows the Reserve Bank of India’s (RBI) recent directive to Yes Bank to restrict managing director and CEO Rana Kapoor’s tenure till January 31, 2019. The central bank’s order has forced the bank’s board to enter into a tricky and lengthy search process due to the bank’s complex articles of association (AOA) which, among other conditions, require both sides to agree to any new appointment to the board.
Analysts say that if the settlement takes place, the appointment of directors on the Yes Bank board will be hassle-free in future. “The move will be beneficial for the bank since the current Sep 17, 2018: RBI restricts Kapoor’s tenure to 31 Jan 2019, declining the board’s request to reappoint him for 3 more years
disagreement over appointing whole-time directors on the board will no longer be present if the promoters put an end to their fight,” said Suresh Ganapathy, head of financial services research, Macquarie Research.
The turf war between the two promoters with AOA in the background has been preventing the bank’s board from functioning smoothly, the first person said.
“The settlement between the two promoters will enhance professionalism at the bank, improve the bank’s credibility and restore the confidence of shareholders as well as the employees,” the person said. In 2005, the two promoters of Yes Bank agreed on the AOA, which were amended in September 2017.
The contentious section 127(a) of Yes Bank’s AOA clearly mandates, among other things, that the board shall follow the recommendation made by the two promoters to appoint any whole-time director. Sep 28, 2018: Madhu Kapur writes to the board, suggests speeding up the process to find Kapoor’s successor Oct 6, 2018: The board appoints a panel to find Kapoor’s successor
It also says the board may appoint one of its members as whole-time director, but even that would be subject to the AOA (essentially the consent of both promoters) and then an RBI approval. The conflict between Yes Bank’s promoters began in 2009, a year after co-founder Ashok Kapur was killed in the 2008 terrorist attack in Mumbai.
Amid uncertainties, the bank’s stock, between August 20 and September 28, tumbled by a staggering 59% from its high of ₹404 to ₹166.15 apiece on BSE. The stock has slightly recovered now but is still trading about 45% down from its August 20 levels.
The fall has eroded both Kapur and Kapoor’s wealth significantly. Madhu Kapur sold 0.04% of her stake in the open market on September 21. But Kapoor, on September 28, tweeted that his shares in the bank are akin to diamonds and vowed not to sell them to cut his or his family’s promoter holding in the bank ever.