Yes Bank promoters to smoke peace pipe

CEO Rana Kapoor, pro­moter Madhu Kapur be­gin pre­lim­i­nary talks to set­tle their decade-old le­gal dis­pute out of court SAY­ING YES TO A TRUCE


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 long-drawn 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 21 Nov 2003: 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 mu­tu­ally 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 31 Jan­uary 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 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.

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.

The board had de­clined t o ap­point Go­gia, daugh­ter of Ashok Kapur, be­cause it was felt she might not meet RBI’S fit-and­proper cri­te­ria.

In 2013, Madhu Kapur (widow of Ashok Kapur) a n d h e r d a u g h t e r, G o g i a , ap­proached the Bom­bay high court, seek­ing greater say in ap­point­ing di­rec­tors and wanted the court to up­hold their right to jointly nom­i­nate di­rec­tors.

Fi­nally, in June 2015, the Bom­bay high court quashed the ap­point­ment of cer­tain di­rec­tors to the board, rul­ing that Madhu Kapur and Rana Kapoor have the right to jointly nom­i­nate di­rec­tors, while also turn­ing down Go­gia’s ap­point­ment t o t he board. The rul­ing has been chal­lenged be­fore a divi­sion bench, where it is now pend­ing.

Prob­lems were com­pounded on 17 Septem­ber when the bank­ing regulator re­jected the Yes Bank board’s re­quest for a three-year ex­ten­sion in Rana Kapoor’s ten­ure, giv­ing the bank un­til 31 Jan­uary 2019 to find a suc­ces­sor.

Newspapers in English

Newspapers from Malaysia

© PressReader. All rights reserved.