Shareholders of Dhanlaxmi Bank have rejected the appointment of statutory auditors and branch auditors at the annual general meeting (AGM) held on September 29 which was adjourned following the Kerala High Court order, according to a stock exchange update.
Also, the shareholders rejected the resolution to give authorisation to the board of directors to appoint and fix the remuneration of auditors. Shareholders approved the audited financial results of the company and passed the appointment of Gopinathan C K as director of the bank.
Such a move is unusual.
"This is a very positive development. Shareholders have significant minority rights under Indian law but these rights have seldom been exercised on acvount of various bottlenecks including delays in enforcing these rights using court process," said Mohit Saraf, Founder & Managing Partner, Saraf & Partners.
"Now NCLT and SEBI are helping shareholders exercise control which will go a long way in attracting more FII and Private Equity investments in Indian Companies. Rejection of auditors by Dhanlaxmi shareholders will go a long in improving shareholders control over their company," said Saraf.
According to the poll results, 65.44 per cent of the valid votes were polled against the proposal to appoint P B Vijayaraghavan & Co., Chartered Accountants, Chenna as statutory auditors. Also, 34.56 per cent voted in favour of the resolution.
The Kerala High Court on September 29 passed an interim order directing Dhanlaxmi Bank to refrain from concluding the AGM. Former directors had moved the High Court seeking judicial intervention to direct the Bank to place their candidature for the directorship of the Bank in the AGM of the Bank.
On September 29, while asking the bank to adjourn the AGM, Kerala High Court said the order will not preclude the bank from transacting the businesses included in the agenda for the meeting. “Needless to say that after transacting the businesses included in the agenda for the meeting, the meeting shall be adjourned to a day after one month,” the order said.
Also, the Bank would be free to issue appropriate communication to the Securities and Exchange Board of India concerning the businesses transacted in the AGM, the order said.
The petitioners and other former directors, including prominent investor Ravi Pillai and PK Vjayakumar, had sought Board seats. The nomination committee is understood to have cleared their names. However, the Board did not approve the appointments, leading the petitioners to move court.
“If any change has occurred after the said recommendation in the director Board meeting, it can only be because of the undue influence exerted by the additional directors, who are nominees of the 1st respondent (the RBI),” says the petition.
Dhanlaxmi Bank comprises four non-executive directors, two additional directors (RBI nominees), and the managing director. The petitioners have alleged that though the nomination committee has recommended the names of three persons — Ravi Pillai and others — the application was rejected.
On September 9, the petitioners, along with B Ravi Pillai and PK Vijayakumar, had submitted their applications and relevant forms under Section 160 of the Companies Act, 2013, to be placed before the members during the AGM to be held on September 29.
Dhanlaxmi Bank reported nearly 11.5 percent rise in its net profit to Rs 6.79 crore for the first quarter ended June 30, mainly on account of lower provisioning. The bank had posted a net profit of Rs 6.09 crore in the year-ago period.