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The Bombay High Court on Wednesday held that the right to nominate directors to the board of private sector lender YES Bank has to be exercised jointly by the promoters and not individually.
The court also held that the right of the wife of deceased co-promoter Ashok Kapur to nominate her daughter on the bank’s Board could not be exercised without the consent of the other promoter, Rana Kapoor, who is currently the Managing Director and Chief Executive of the bank.
The court delivered its order on a suit filed by Madhu Kapur, whose husband was killed in the 26/11 terror attacks in Mumbai, demanding her right to nominate daughter Shagun Kapur-Gogia on the bank’s Board.
An indivisible right “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 judgemnt 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, jointly with her children, holds a 10.29 per cent stake in the bank.
The bank argued that appointment of directors by the Board cannot be questioned before a court.
Kapur filed the suit in 2013 against the bank and Rana Kapoor.
She contended 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.
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