The Bombay High Court on Friday dismissed private lender YES Bank’s appeal against its order that it had the jurisdiction to hear Madhu Kapur’s plea challenging the appointment of directors on the bank’s board.
“The court has dismissed the bank’s appeal. Hence, the hearing on the case between Madhu Kapur and YES Bank will continue,” said a person associated with court proceedings. The case will be heard only after the court resumes work following its summer break. The hearing has been adjourned until June 19.
The court’s dismissed YES Bank’s preliminary objection that, according to Section 10A (6) of the Banking Regulation Act, 1949, dispute over appointment of directors on a bank’s board cannot be heard by a civil court.
Madhu Kapur, widow of YES Bank co-founder Ashok Kapur, had moved the court claiming that her right as co-promoter of the bank was violated and she was not consulted before the bank appointed a few directors on its board. Ashok Kapur had co-founded the bank with his brother-in-law Rana Kapoor. Madhu and Rana’s wife Bindu are sisters.
But the bank has so far maintained its stance of not considering Madhu Kapur as a co-promoter. The bank’s board at its last meeting did not change this stand reducing the scope for an out-of-court settlement. YES Bank claims that banking is not a family business and ‘financial family successors’ do not automatically become part of the promoter group of a bank due to regulatory criteria.
“Mrs Madhu Kapur being successor of late Mr Ashok Kapur cannot be considered as Indian partner or Indian promoter and accordingly, cannot inherit the rights under articles of association or the status of promoter of YES Bank,” the bank had said in an emailed statement.
“We are yet to receive the entire court order, we will decide the further course of action post discussion with our legal team,” a YES Bank spokesperson said when asked about future course of action for the bank.