KV Mugundan, a shareholder of Tamilnad Mercantile Bank (TMB), has filed an appeal to the Madras High Court to direct the Reserve Bank of India (RBI) to immediately clear any one of the names from the panel for appointment of MD & CEO of TMB.

S Krishnan resigned as Managing Director and Chief Executive Officer (MD & CEO) of the bank on September 28, 2023. The Thoothukudi-based TMB sent the names to the RBI on November 22, says the petition, a copy of which is available with businessline.

“Notice has been ordered by the court; returnable by April 23,” TV Lakshman, the counsel for the petitioner, told businessline.

The petitioner has also urged the court to grant an interim order directing the RBI to issue a suitable directive to the bank so that the current MD & CEO (Krishnan) does not take any major decision which has an impact beyond the date of his resignation or occupancy in office and till the disposal of the writ petition. He also urged the court to pass orders as may be deemed necessary on the facts and in the circumstance of the case.

According to the petitioner, the inaction of the RBI, beyond the prescribed 90 days, is arbitrary and unreasonable.

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Further, the continuance of the existing MD & CEO is inimical to the interests of the TMB, its shareholders and depositors. The inaction is also palpably discriminatory against the TMB, its stakeholders/depositors and shareholders as RBI acted well within the prescribed 90 days in the case of appointment of new MD & CEO of two other private banks—Kotak Mahindra Bank and DCB Bank.

The omissions and commissions of the existing MD & CEO has direct impact on various businesses and commercial parameters of the TMB. For example, its market capitalisation has been declining for the past two quarters, making it more vulnerable for a takeover bid, especially considering that its shareholders have been fighting hostile takeover for the past three decades.

The Nomination and Remuneration Committee of the bank’s board should have ensured that the process of the appointment of the new MD was completed within the prescribed period of 90 days.

Having failed to to discharge its duty and petitioner being affected as stakeholder/depositor and shareholder, a suitable direction to the RBI is necessary, the petition says.

“The arbitrary inaction of the RBI even beyond the period prescribed by itself is the cause for the continuance of the current MD & CEO even after his resignation. The RBI failed to take note of the inimical presence of the current MD & CEO at the helm of affairs of TMB. If he is allowed to take major decisions having long-term impact beyond his date of resignation, it will cause irreparable damage to TMB and its stakeholders/depositors and shareholders, and, thus, a regulatory direction by RBI is necessary,” the petition said.