Yes Bank files replies to Madhu Kapur‘s amended petition

Saikat Das
moneycontrol.com

Private sector lender Yes Bank on Tuesday sent its replies to the amended petition filed by Madhu Kapur before the Bombay High Court two weeks back. The bank is going to serve the same to the register of the court on Wednesday. The final hearing is due on July 29.

Highlighting a select number of provisions mentioned in the Banking Regulations Act, 1949, Yes Bank has raised a fresh point under section 10A(6) that apparently rules out any litigation in court related to a bank board decision taken with majority, sources from the bank told moneycontrol.com questioning the validity of the entire legal battle with Madhu Kapur and her daughter Shagun Kapur Gogia.

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"Every appointment, removal or reconstitution duly made, and every election duly held, under this section shall be final and shall not be called into question in any court," states the section 10A(6) under the Act.

Madhu Kapur is the widow of late Ashok Kapur, one of the founders of Yes Bank. She had challenged the corporate governance of the bank.

Earlier in June, She had filed a case against Yes Bank alleging that her family was denied its right to be consulted on the appointment of three directors - Ravish Chopra, Diwan Arun Nanda and M R Srinivasan - on the bank's board as provided for in the bank's Articles of Association. Later, she claimed a seat for her daughter Shagun Kapur Gogia in the bank's board.

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In the amended petition, her counsel had raised questions on the appointment of six directors on the board. They include the above mentioned three directors and Sanjay Palve, Ravish Chopra as well as Pralay Mondal.

She also alleged that two directors including M R Srinivasan and Diwan Arun Nanda were above the age of 65 years. Srinivasan was a former chief general manager of the Reserve Bank of India (RBI).

To this, Yes Bank has quoted the RBI circular dated September 09, 2002, which had allowed banks to relax the upper age limit for non-executive directors by 5 years (from earlier 35-65 years) and specified 70 years as the upper age limit.

Even as the legal battle is turning out to be acerbic, a fine line between guidelines and regulations is being drawn. While regulations cannot be violated under any circumstances, some deviations could be pursued in case of guidelines, some argue.

Referring to section 35A(1) of the Banking Regulations Act, 1949, the bank mentioned in its replies that banks are mandated to comply with guidelines.

"…to secure the proper management of any banking company generally, it is necessary to issue directions to banking companies generally or to any banking company in particular, it may, from time to time, issue such directions as it deems fit, and the banking companies or the banking, as the case may be, shall be bound to comply with such directions," states the section 35A(1)(C)  of the Act.

Maharashtra Advocate-General Darius J Khambata is the counsel for Madhu Kapur, who can file a rejoinder by Friday based on the Yes Bank replies.

Yes Bank is declaring its first quarter (April-June) earnings on Wednesday.

saikat.das@network18online.com