HC admits Madhu Kapur's plea against YES Bank

In a setback to YES Bank, the Bombay High Court on Monday admitted a plea of Madhu Kapur, widow of YES Bank co-founder Ashok Kapur, which challenged the appointment of three directors on the bank’s board.

Rana Kapoor, the bank’s other co-founder, is also its managing director and chief executive. Madhu and Bindu, Rana Kapoor’s wife, are sisters.

Earlier, Madhu Kapur had requested the bank to induct her daughter Shagun Kapur Gogia as a board member. After this idea was promptly dismissed by the bank, Madhu Kapur had taken legal recourse. However, YES Bank had argued the appointment of a director couldn’t be heard by a civil court.

While admitting the suit, the high court said it had the authority to hear the plea.

“The bank had made a preliminary objection that according to section 10A (6) of the Banking Regulation Act, 1949, a dispute over the appointment of directors on a bank’s board cannot be heard by a civil court. But the court holds the bar is not applicable in this case and will hear the case in detail. There was no ruling on the merit of the case. We are awaiting the full text of the order and we will wait and see what the court has to say,” said Soli Cooper, senior advocate for YES Bank.

The plea, however, has only been accepted on grounds of maintainability; the court will hear the legal merits of the case later.

YES Bank had opposed Madhu Kapur’s lawsuit, claiming it had followed all procedures in the appointment of the three directors — Diwan Arun Nanda, Ravish Chopra and MR Srinivasan — on its board. Shareholders cannot challenge the selection of directors on a bank’s board.

Madhu Kapur had moved court, alleging her right as co-promoter of YES Bank was violated; she wasn’t consulted before the appointment of the three directors, she added. According to the bank’s articles of association, the Indian partners of YES Bank must jointly recommend the appointment of directors on the board. In the petition, Madhu Kapur also claimed the three directors didn’t meet the central bank’s ‘fit and proper’ criteria.

Representatives of Madhu Kapur did not comment on the matter, saying it was sub judice.