“Gurbaxani’s removal from his post by shareholders is a test case. There is no precedent for the bank’s managing director (MD) and chief executive officer (CEO) being removed from his post in this manner. It’s only the RBI under the BR Act which has the powers to decide on their appointment and removal, and this will override the Companies Act,” said a source.
Section 10BB of the BR Acts vests the central bank with the powers to appoint “the chairman of the board of directors on a whole-time basis or MD of a banking company”. This could be a technical reason why the central bank is yet to formally accept Gurbaxani’s resignation.
Last month, 90.49 per cent of the bank’s shareholders voted against Gurbaxani’s appointment as MD and CEO despite the blessings received from the board of directors and the banking regulator. He had taken charge effective February 27 this year for a period of three years; and his removal by shareholders makes his tenure the shortest of any bank’s MD and CEO in the history of the country’s banking.
Shareholders had also voted out S Sundar, Laxmi Vilas Bank’s interim MD and CEO. But that was more due to differences of opinion among its key investors. Nuances apart, sources indicated that the central bank may want to ensure that whimsical shareholders and fights between large investors don’t create instability in banks, especially when some of these banks are inherently weak.
The three big investors in Dhanlaxmi Bank are B Ravindra Pillai (10 per cent), Gopinathan C K (7.5 per cent), and Kapilkumar Wadhawan (5 per cent).
Shareholders though cleared the appointments of Gopinath C K, G Subramonia Iyer, Captain Suseela Menon R, G Rajagopalan Nair, and P K Vijayakumar as directors of the bank. After the exit of Gurbaxani, the central bank had set up a committee of directors to exercise the powers of MD and CEO with G Subramonia Iyer as chairman, G Rajagopalan Nair and P K Vijayakumar as its members.
In the run-up to the drama at Dhanlaxmi Bank last month, the central bank had asked the management to terminate the services of P Manikandan as chief general manager. While the reasons for this move were never made public, there is speculation that this was due to governance issues.
The appointment of D K Kashyap, general manager-RBI to the board of the bank is an indicator that governance may not have been up to mark. The private bank had come out of the RBI’s prompt corrective action framework last year.
 "Sunil Gurbaxani")