<div><div>The Bombay High Court on Wednesday (17 June) turned down Madhu Kapur's request for appointing her daughter Shagun Kapur Gogia on the board of YES Bank. The verdict clearly upholds the unanimous decision of the YES Bank board of directors to reject Gogia’s nomination as she does not meet the ‘fit and proper’ regulatory criteria. The high court has also rejected the repeated expectation of a reserved seat for Madhu Kapur. With this verdict, Rana Kapoor will lead YES Bank into another round of growth and continue this very young bank’s fast paced expansion. This mandate is a mandate to Rana Kapoor for YES Bank's growth.</div><div> </div></div><div>The key findings of the Bombay high court are following:</div><div> </div><div><strong>1. Articles of Association</strong>:</div><div> </div><div>The court has held that "I have very little doubt that there are articles that require amendments, both for consistency going forward and also to resolve the present disputes"</div><div> </div><div><strong>2.</strong> <strong>Shagun Kapur Gogia's rejection on the Board of YES Bank is final</strong></div><div> </div><div>The plaintiffs have sought to appoint Shagun Kapur Gogia (daughter of Madhu Kapur) on the board of YES Bank, which was rejected by the board of directors of YES Bank, as she did not satisfy the 'fit and proper' guidelines of Reserve Bank of India.</div><div> </div><div>The Bombay high court has upheld the decision of the board of directors. The court maintained that "whether or not the board found Shagun's work profile and background commensurate is not for me to assess. This is entirely outside my remit"</div><div> </div><div>The court has also observed that "the plaintiffs do not have the right to demand that the second plaintiff (Shagun Kapur Gogia) be accepted onto the board without Rana Kapoor's concurrence and consent."</div><div> </div><div><strong>3. No reservation of a seat for Madhu Kapur & her family members on the Board of YES Bank:</strong></div><div> </div><div>The court amongst other observations unequivocally held that "Nothing in the Articles leads to the conclusion that the plaintiffs are entitled to a 'reserved seat' on YES Bank's board".</div><div> </div><div>"Apart from anything else, a demand for a seat on the board seems to me to fly in the face of YES Bank's ethos. It is said to be the professional's bank. That necessarily means that it cannot run like a family estate. </div><div> </div><div>Consequently, I do not believe it is open to the plaintiffs to demand that any of them take a seat reserved for them on Yes Bank's Board."</div><div> </div><div><strong>4. Appointment of Rana Kapoor as MD & CEO of YES Bank upheld and is final</strong>:</div><div> </div><div>The court has rejected all the contentions raised by the plaintiffs against Rana Kapoor. The court has unequivocally held that the appointment of Rana Kapoor has been approved by the RBI and the shareholders. "It is not as if YES Bank is operating entirely without shareholder and regulatory oversight. It is not possible to accept the plaintiffs submission in relation to the appointment of Rana Kapoor"</div><div> </div><div>The court has also observed that "under his (Rana Kapoor) stewardship, in the seven years since Ashok Kapur's death,YES Bank has grown and progressed exponentially, to the benefit of all, not least, the plaintiffs themselves."</div><div> </div><div>Further, the court observed that "the appointment of a managing director is not an 'office or place of profit" per se. Rana Kapoor's appointment is one of the matters in the ordinary course of YES Bank's business. It is an arms-length transaction".</div><div> </div><div>The shareholders at the bank's AGM on June 5, 2015 fully supported the resolutions for reappointment of Rana Kapoor as the MD & CEO of the bank for a further period of three years.</div><div> </div><div><strong>5. Appointment of Diwan Arun Nanda and Ajay Vohra as independent directors:</strong></div><div> </div><div>The court has held that the Bank had not procedurally complied with the necessary formalities for appointment of these directors as independent directors. However, the court pointed out that "whether or not this can be rectified is for YES Bank to detennine"</div><div> </div><div>The court has further observed that "YES Bank to take the necessary steps to revalidate, appoint or reappoint the persons in question (subject to them meeting statutory requirements of course, including the age limits). There is no finding of disqualification of any of these directors for want of ability or credentials."</div><div> </div><div><strong>6. Appointment of M R Srinivasan and Ravish Chopra:</strong></div><div> </div><div>The court has held that there was a procedural infirmity in these appointments in view of the interpretation regarding the Articles of Association of the Bank. However, the court has held that "There is sufficient space and room for YES Bank to correct its course in the time ahead."</div><div> </div><div>It may also be noted the court has clarified that ''YES Bank to take the necessary steps to revalidate, appoint or reappoint the persons in question (subject to them meeting statutory requirements of course, including the age limits). There is no finding of disqualification of any of these directors for want of ability or credentials."</div><div> </div><div><strong>7. The proposed appointment of whole-time directors</strong></div><div> </div><div>The court has held that the proposed appointment of the aforesaid Whole-time directors is procedurally improper in view of the interpretation of the existing language of the Articles of Association. The court itself has suggested that these Articles of Association require redrafting.</div>
