The Bombay High Court’s verdict on YES Bank’s two largest shareholders Rana Kapoor and Madhu Kapur, last week may not close the two-year long dispute yet. Even as Rana Kapoor, the bank’s CEO and MD, intends amending the Articles of Association (AOA) of the bank, Madhu Kapur’s daughter, Shagun Gogia, says the court has emphatically refused to declassify her family's status as a promoter. Excerpts from an interview:
How do you view the judgment passed by the Bombay High Court?
We are happy to be vindicated. As successors (of the late Ashok Kapur’s shareholding) we have been recognised as having equal rights; also the seven Directors have been unseated. On the important issue as to whether we can be declassified from our status of promoter, the court emphatically ruled in the negative and passed orders preventing Rana Kapoor and YES Bank from even making such applications to the RBI.
The order has many findings which have serious repercussions on the corporate governance issues enshrined in Clause 49 of the Listing Agreement. To state a few: The court struck down the appointment of seven directors either based on the Articles or the Statute not being followed, two directors were made independent by way of a note to the AGM agenda notice without any resolution, Ravish Chopra is a nominee director one year and being proposed independently the next! Isn’t it against the spirit of corporate governance that nominee directors are converted to independent directors? Over the last two years, the report on corporate governance by the bank’s practising company secretary does not even mention that the appointment of certain directors is subject to Court Order. The shareholders, stock exchanges and SEBI do not know about this.
Rana Kapoor intends to amend Articles of Association of the bank. Your take…
We fought the battle on the ground that we were denied our rights as per the Articles. Rana Kapoor argued that these rights were personal to him and only he had the right to nominate. He has even been unilaterally exercising the same rights as per the articles…over the last seven years. If he wants to change the Articles to deny us our rights, there wouldn’t be anything new or alarming.
However, Rana uncle’s interpretation that the High Court has directed him to amend the Articles appears to be a deliberate misreading of the order. If you want to change the Articles , then you may amend the Aticles or reduce your joint shareholding below 10 per cent. These are options, not directions.
In this company, promoters/founders/Indian partners who are a class by themselves have special rights. Even when the Articles don’t provide for, large shareholders demand seats/nominees on boards. I recall Rajiv Takru’s (then Secretary, Department of Financial Services) in an interview in 2013, saying that LIC even with a 9 per cent shareholding in certain listed stocks must demand a seat on the board of those companies to be able to play a role to safeguard its investments.
Do you fear this will take away your rights?
We will cross the bridge when we come to it.
You had also raised issues on Rana Kapoor’s appointment as MD and CEO. This has been dismissed by the court…
We objected as that appointment needed a joint nomination. The court order states that, without the necessary evidence, it is not possible to unseat the MD.” It is not that this has been dismissed by the court. However, we gave our consent in court to support the continuation of him as MD provided a full disclosure was made.
Rana Kapoor has said this (fight) is activism by ‘a 10.3 per cent shareholder in conflict with rest of the shareholders’…
So what. By this logic representatives elected by huge majorities can never be questioned for any wrong doing? The truth is not determined by the majority. Even Kingfisher and Satyam resolutions were passed unanimously. Did that change the reality? The shareholders vote with the management/board as most things are not disclosed and thus are not aware…The court order has highlighted many shortcomings in corporate governance. This fight is against Rana Kapoor for betraying our trust and denying us our legitimate rights which the High Court has upheld. This ‘10.3 per cent shareholder is the co-promoter of the bank.
What is the lesson learnt in these two years?
The hard lesson learnt by me over the past years is that close family members can take advantage of tragic situations. Having said that, my belief in the judiciary of our country has been reinforced. Trials may be excruciatingly slow but when the end comes, it comes with devastating speed.
If Rana uncle was clear we didn’t have the rights, then he should have clearly told us as early as in 2009. Why make us meet the ‘board and then minute a board resolution in April 2009 stating, “Mrs Madhu Kapur or any other family member would have to satisfy these conditions or alternately nominate in consultation with the other Indian Promoter any other person who may fulfill the same”.
Clearly the board was also well aware of our rights. What stopped them from writing to us to be able to exercise our rights as resolved above in their resolution?