In a big relief to Yes Bank, the Supreme Court on November 30 stayed the Uttar Pradesh Police order, freezing the lender’s voting rights in the Dish TV annual general meeting.
A bench headed by Justice DY Chandrachud took serious exception to police action in a corporate matter and also stayed the investigation until further orders.
“We cannot permit police officers sitting in Gautam Buddha Nagar to freeze voting rights of a shareholder,” the bench said. “The police here did what even the National Company Law Tribunal did not do (freeze shares and voting rights).”
Senior Counsel Abhishek Manu Singhvi, representing Yes Bank, essentially questioned the validity of the police notice issued earlier this month, asking the bank to not act on the shares, that is to say not to sell the shares or even carry out voting rights that come attached with the ownership of the shares.
Terming the notice as an “extraordinary ingenious misuse of the criminal law”, Singhvi alleged that the notice of freeze on voting rights came at an opportune time only to prevent the bank, as the largest shareholder, from voting in the annual general meeting.
If Yes Bank votes during the Dish TV AGM, it may vote to change or refuse to reappoint directors. This, the bank contends, is a primary reason behind police action against the bank coming just ahead of the AGM.
The civil proceedings that were initiated by Essel group against the bank were withdrawn earlier this year, however, “the FIR filed in the case had been languishing since August 2020” saw police action over a year later.
Remarking on this, the court said that there cannot be short-circuiting of the judicial process by using police action. "Using criminal procedure to achieve results of civil proceedings will have dangerous consequences," the Supreme Court bench observed.
Yes Bank had disbursed loans of Rs 5,270 crore to Essel group and its sister concerns between 2016 and 2018. After the Yes Bank scam surfaced and the bank’s board was reconstituted, it acted on the Dish TV shares that were pledged with it. Yes Bank grabbed 25 percent ownership after the company’s promoter failed to pay the debt and the pledged shares were invoked as a response in early 2020. This move was informed to the exchanges as well as the Reserve Bank of India in writing.
Senior Counsel Kapil Sibal, representing Subhash Chandra, contested Yes Bank’s case and argued that there was never a genuine loan transaction between the bank and Dish TV and that the company was pressured into taking loan in order to “clean the books of Yes Bank”. Sibal pressed for the case to be heard at length and for permission to file a response since "the case is not as simple as it is made to look."
The court has agreed to hear the case at length on a future date and has issued notice on Yes Bank’s appeal and allowed the parties on the other side to file their response.
On Monday, Singhvi had sought an urgent hearing of the appeal. Chief Justice of India NV Ramana allowed to list the case for hearing on November 30 since the annual general meeting for which the voting rights were sought to be exercised by the bank ends on Tuesday.
Essel Group head Subhash Chandra had last year filed a police complaint against Yes Bank and its former-managing director Rana Kapoor with allegations of fraud in the merger deal between Dish TV and Videocon D2H. The complaint kicked off a police probe and as part of the investigation by the UP Police, the voting rights of the bank were frozen through a police notice sent on November 5.
Yes Bank had urged the Allahabad High Court to stay the UP police notices against it and effectively let it exercise its voting rights during the annual general meeting of Dish TV.
The high court dismissed the plea, stating that the bank has other alternative remedies available under the law, which is, to press the case before a Magistrate's court. On this dismissal, Yes bank had approached the Supreme Court in appeal questioning not just the police action but also the high court's refusal to entertain Yes Bank's case on grounds of jurisdiction.