Court directs warring Yes Bank promoters to nominate directors jointly

The Bombay High Court on Wednesday ruled that the right to nominate directors to the board of Yes Bank should be exercised jointly by the promoters and not individually, giving the aggrieved wife of deceased promoter Ashok Kapur and her daughter a say in the private lender's board.

However, the court held that Madhu Kapur, wife of deceased co-promoter Ashok Kapur, could not exercise her right to nominate her daughter, Shagun Kapur-Gogia, on the bank's board without the consent of the other promoter.

The other promoter, Rana Kapoor, brother deceased Ashok Kaprur, is currently the managing director and chief executive of the bank.

The court's ruling comes on a suit filed by Madhu Kapur, whose husband was killed in the 26/11 terror attack on Mumbai, demanding the right to nominate her daughter to the bank's board.

''Although the right to recommend is the right to nominate, it is an indivisible right and must be exercised jointly. It cannot be splintered into component rights with each group nominating its own person to Yes Bank's board,'' said Justice Gautam Patel in his 153-page judgement on a notice of motion taken out by the plaintiff.

''The right to nominate is also distinct from the right to serve on Yes Bank's board; there is no such right to serve, and the plaintiffs do not have the right to demand that the 2nd Plaintiff (Shagun) be accepted onto the board without Rana Kapoor's concurrence and consent,'' the judge noted.

The judge was of the view that the suggestion of each group nominating one board member and a third independent representative director being chosen for alternating terms ''is wholly outside the scheme and frame of these Articles.''

"The right must be exercised jointly or not at all. It is incorrect to say that Yes Bank's board was bound to accept the nomination of the 2nd Plaintiff (Shagun) as a joint nomination made under Article 110(b). It is also not for a court to question the sufficiency of the board's decision in that regard," the court ruled.

Madhu Kapur and her children together hold 10.29 per cent of the bank's equity shares.

The bank argued that appointment of directors by the board cannot be questioned before a court.

Madhu Kapur filed the suit in 2013 against the bank and Rana Kapoor contending that the bank had rejected her claim to nominate directors on the ground that her late husband's rights are not automatically transferred to her.