Yes Bank says suit filed by Madhu Kapur not maintainable

Yes Bank on Wednesday took a stand before the Bombay High Court that the suit filed by Madhu Kapur, the widow of bank's co-founder Ashok Kapur, challenging the appointment of directors nominated by the current managing director Rana Kapoor, was not maintainable.

The High court, in its jurisdiction as a civil court, cannot entertain such a suit which challenged election of directors of a banking company, its counsel Ravi Kadam submitted before Justice SJ Kathawala.

He said under Section 10(A)(6) of Banking Regulation Act, a civil court cannot entertain suits which challenge the appointment of directors. Therefore, the Bombay High Court, in a civil jurisdiction, cannot entertain this matter.

Kadam also argued that the decision (to appoint the directors of a company) taken at the annual general meeting by a majority shareholders cannot be challenged in a civil court.

Madhu Kapur has challenged appointment of part-time directors Diwan Arun Nanda and Ravish Chopra and part-time chairman MR Srinivasan who were appointed in an annual general meeting of the bank held on June 8.

She has also challenged the decision of the bank's board to appoint three wholetime directors Rajat Monga, Sanjay Palve and Pralay Mondal. Their appointment, made in a meeting on June 24, is, however, subject to the approval of Reserve Bank of India and the annual general meeting.

Yes Bank argued that as a banking company it was governed by Banking Regulation Act which provides that an election of a director cannot be challenged before a civil court. Such matters concern internal management and a civil court does not have the jurisdiction if majority of the shareholders have already decided them, its counsel argued.

The arguments would continue on Thursday when Madhu Kapur's lawyers would put up her version on maintainability of the suit.  During the past three hearings, the High Court was hearing the arguments of Madhu Kapur's lawyer, Darius Khambata, who has sought a direction from the court to the bank to consider nomination of her daughter, Shagun Gogia, as a director. The suit challenges decision of Yes Bank's board to reject Shagun's nomination.

Advocate Khambata had also argued that his client, Madhu Kapur, was given to understand by Rana Kapoor that a proposal to appoint Shagun as a director will be placed before the Bank's board as a joint nomination of Indian partners (Ashok and Rana). However, eventually, it was rejected by the board and this was very unfair, he said.

Ashok Kapur was killed in the November 2008 Mumbai terror attacks. Shagun was nominated by her mother as a legal heir to Ashok's 12-percent stake. Yes Bank was founded by Ashok Kapur and Rana Kapoor. Rana Kapoor, who owns 13.7-percent stake in the bank, is now the managing director and chief executive. 

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