YES Bank terms Madhu Kapur's allegations as baseless, untenable

Writes to shareholders highlighting its performance, governance practices

YES Bank has written to its shareholders claiming that the allegations made by Madhu Kapur against its board of directors and key management executives are “baseless and untenable”. The bank urged the shareholders to be aware of the true picture of the management, its performance and corporate governance practices while voting at the annual general meeting (AGM) on June 14.

Madhu Kapur, widow of YES Bank co-founder Ashok Kapur, had earlier appealed to the shareholders requesting them to vote against a majority of the resolutions that will be placed at the AGM. She had accused the bank's top management of not running the institution professionally and alleged irregularities over appointment of directors. She had also moved the Bombay High Court claiming her right as co-promoter of YES Bank was violated.

YES Bank, however, has strongly denied these allegations, saying her statements were incorrect and defamatory. “The bank has always acted in a manner, which is in accordance with law and has upheld the principles of corporate and management governance. The subject matter in consideration at the AGM has been finalised in a transparent and legally compliant manner,” the private lender said in a note to its shareholders.

The bank further added that its board of directors and management consist of competent and professional individuals, which reflects that it is run in a professional manner.

Madhu Kapur, in her letter, had accused YES Bank's Managing Director and Chief Executive Officer Rana Kapoor of packing the lender's board with his own people. But the bank clarified that adequate and transparent disclosures were made about these appointments in the AGM notice.

“Upon requests received from certain shareholders suggesting names for the appointment of directors and finding them 'fit and proper', as per the Reserve Bank of India (RBI) guidelines and the Banking Regulation Act, 1949, the bank has recommended their names at the AGM,” it said.

The lender also highlighted that Madhu Kapur had inherited around 43 million shares, which is currently worth around Rs 2,730 crore as against the initial investment of Rs 52 crore in 2004. If the bank's shareholders approve the board's dividend recommendation of Rs 8 per share, she would be receiving another Rs 34 crore in the present year and her aggregate returns from dividend alone would be Rs 100 crore during the period.

“Mrs Madhu Kapur has not challenged the resolutions pertaining to the finalisation of the books of accounts, and for payment of dividend recommended by the board and its management, which is an all-time high dividend of 80 per cent, the same is not surprising,” YES Bank said.

Madhu Kapur's daughter Shagun Kapur Gogia said the bank's note to shareholders was “a classic case of obfuscation”.

“It is significant that the matters of fact are not disputed but termed defamatory and sought to be obfuscated with statistics wholly irrelevant to the corporate governance issues raised,” she said.

Madhu Kapur had also said that as the second largest shareholder she did not want to disrupt the functioning of the bank, and suggested shareholders to pass the accounts while requesting them to vote against eight resolutions. She also urged shareholders to reject taking on record RBI's approval of M R Srinivasan's appointment as non-executive part-time chairman of the bank.

YES Bank clarified that Srinivasan's appointment was not only approved by RBI but he was also duly elected by the shareholders at the previous AGM. “The resolution proposed at this AGM is for seeking approval of shareholders for payment of remuneration to the chairman for his service rendered as per the RBI approval,” it said.

But Gogia disagreed. “As regards Mr Srinivasan's appointment at the last AGM, he was a nominee of Mr Rana Kapoor. Neither the AGM notice nor the resolution passed at the meeting made any reference to his appointment as a non-executive chairman or his remuneration for such appointment,” she said.

“Even now, no approval of his appointment with remuneration is being sought for. This is in total violation of clause 49(I)(B) of listing agreement...This clause 49 is the bedrock of corporate governance. The issue is not of profits, price of share or dividends. The issue is of legality, corporate governance and fair-play,” she said.

YES Bank was co-founded by Rana Kapoor and Ashok Kapur. Madhu Kapur and Rana Kapoor's wife Bindu are sisters.