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TMI Blog2015 (6) TMI 707X X X X Extracts X X X X X X X X Extracts X X X X ..... entative Directors” to Yes Bank’s Board. It was unnecessary to include in the Articles a mere ‘right to suggest’; brute strength in shareholding and even mere shareholding would have done as well. It is the right to nominate. It is equally incorrect to suggest that the Plaintiffs have, only on account of Ashok Kapur’s demise, transmogrified into some sort of non-promoter capacity. The applications to the RBI to this end are motivated, self-serving and prima facie unlawful. It also follows that any recommendations made by the 1st Defendant, Rana Kapoor, without the concurrence and consent of the Plaintiffs are also ultra vires the Articles and are null and void. For the reasons previously discussed, Defendant No. 8 cannot have been validly appointed as an IP Representative Director or an Independent Director. His appointment is invalid. The appointment of Defendant No.9 to the chairmanship of Yes Bank is ultra vires the Articles, and null and void, and the so-called approval of the RBI to that appointment is inconsequential. Similarly, the appointments of Defendants Nos. 10, 11 and 12 as whole time directors of Yes Bank’s Board are also prima facie ultra vires its Articles and void. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Defendant Nos. 1 to 6, by themselves, their servants, agents and officers by a temporary order and permanent injunction from in any manner initiating, taking or continuing any steps (including, making representations to any regulators/authorities and acting on the representations already made to regulators /authorities) for de-classifying and/or changing the category of the Plaintiffs as the promoter of Defendant No. 6 in the Annual Reports of Defendant No. 6 or otherwise howsoever. X X X X Extracts X X X X X X X X Extracts X X X X ..... be asserted and invoked is the right to 'nominate' representatives to Yes Bank's Board. 1.5 Matters soon came to a head. This suit was filed on 6th June 2013. Various interim proceedings were filed. A preliminary issue was framed and decided in favour of the Plaintiffs. Appeals failed. Several applications were made for disclosure of documents, and amendment. Most were allowed, some in part. 1.6 Rana Kapoor's approach, one that is adopted by Yes Bank, perhaps of necessity, is that not only is the Plaintiffs' entire case founded on a misconception and misinterpretation of the Articles, but the presence of the Plaintiffs in the functioning of Yes Bank is neither necessary nor desirable. The Plaintiffs are, they say, a disruptive influence. Any rights under the Articles were limited to Ashok Kapur himself and did not survive to his family and group companies. There is, therefore, no legal basis to the plaint. 1.7 I have heard Mr. Khambata, learned Senior Counsel on behalf of the Plaintiffs, Mr. Rohit Kapadia, learned Senior counsel for Rana Kapoor, Dr. Tulzapurkar for Yes Bank and Mr. Soli Cooper for some of its directors at quite debilitating length over severa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liefs sought are decidedly unambiguous. I have not been able to accept the submissions of Mr. Kapadia, Mr. Tulzapurkar and Mr. Cooper to deny the Plaintiffs all relief. 2. Dramatis Personae The Plaintiffs - Ashok Kapur's Family Ashok Kapur One of the co-founders of Yes Bank, Defendant No. 6. Was one of the victims of the 26th November 2008 terrorist attacks in Mumbai. Madhu Kapur Plaintiff No. 1 Ashok Kapur's wife; Shagun Kapur Gogia Plaintiff No. 2 Their daughter; also referred to as "Shagun" in this judgment. Gaurav Ashok Kapur Plaintiff No. 3 Ashok and Madhu Kapur's son. Mags Finvest Pvt Ltd Plaintiff No. 4 "Mags Finvest"; The Plaintiffs' investment company. Madhu Kapur holds 50%; Shagun holds 4% and Gaurav holds 46%. The Defendants - Rana Kapoor's Family Rana Kapoor Defendant No. 1 The second co-founder of Yes Bank. Ashok Kapur's brother-in-law; Yes Bank's Managing Director and CEO. Bindu Rana Kapoor Defendant No. 2 Rana Kapoor's wife; Madhu Kapur's sister. Radha Kapoor Defendant No. 3 Their daughter Yes Capital (India) Pvt Ltd Defendant No. 4 "Yes Capital"; An investment company of the Ran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceding SSA. 3.2 On 4th November 2003, Yes Bank, Defendant No. 6, obtained RBI approval to its Articles of Association. Yes Bank was incorporated on 21st November 2003. The initial subscribers to its Memorandum and Articles of Association ("the Articles") were Ashok Kapur, his wife Madhu Kapur (Plaintiff No. 1), their daughter Shagun Kapur Gogia, Plaintiff No.2, their son, Gaurav Ashok Kapur, Plaintiff No. 3, as also Rana Kapoor (Defendant No.1), his wife, the 2nd Defendant, Mrs. Bindu Kapoor and their daughter Radha Kapoor, Defendant No. 3. These Articles contained several clauses to which I will return shortly, after I complete the factual narrative. As on 25th November 2003, Ashok Kapur held 17.5% of the equity of Yes Bank. Another 8.5% was held by the 4th Plaintiff, Mags Finvest Private Limited ("Mags Finvest"), a company held by Madhu Kapur, Shagun Kapur and Gaurav Kapur. Rana Kapoor held 10% of the shares in Yes Bank. Defendant No. 4, Yes Capital (India) Private Limited ("Yes Capital"), a company held by Rana Kapoor, Bindu Kapoor and their daughter Radha Kapoor held another 8.5%; and Morgan Credits Private Limited ("Morgan Credits"), a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anagement of Yes Bank. 3.9 On 21st April 2009 and 22nd April 2009, Yes Bank's Nomination and Governance Committee ("NGC") met. At this meeting, this Committee apparently 'rejected' the 'nomination' of Madhu Kapur as a Director of Yes Bank. The terms of the minutes of this meeting are of some consequence. They have been emphasized by Mr. Khambata for different purposes, and I will return to these later in this judgment. What is, however, not in doubt is that the Plaintiffs knew nothing of these meetings. They first learned of this so-called nomination and rejection only on 7th June 2013 when copies of these minutes were produced by Yes Bank's counsel at the time of an ad-interim application in the present suit. Till this time, the Plaintiffs had not proposed Madhu Kapur as a Director of Yes Bank. According to the Plaintiffs, this so-called nomination and rejection was engineered by Rana Kapoor. Yes Bank has separately accepted that there was no letter of request for the nomination of Madhu Kapur to Yes Bank's Board. 3.10 On 1st June 2009, Yes Bank applied to the RBI for approval to the appointment of Rana Kapoor as Yes Bank's Managing Dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ily, were not related in terms of the relevant definitions under the Companies Act, 1956 and the RBI Act, 1934. It is at this time that Yes Bank asserted to RBI that since Ashok Kapur had passed away, and since his heirs were not involved in the management of Yes Bank and did not sit on its Board, Ashok Kapur's share ownership could no longer be "classified as Indian Promoter ownership" . This is one of the documents that were disclosed subsequently during the course of this Notice of Motion. It came to light as recently as June 2014. 3.16 In January 2011, Madhu and Shagun Kapur met Rana Kapoor to discuss the Shagun's participation in Yes Bank's management. Once again, Rana Kapoor asked Madhu and Shagun Kapur to trust him. It seems that at this point Rana Kapoor also asked that the Plaintiffs consider selling their equity shareholding in Yes Bank. 3.17 It seems that a few months later, on 25th April 2011, Rana Kapoor met with certain officers of the RBI and sought to impress upon them his contention that the Plaintiffs' shares in Yes Bank could not be classified as Indian Promoter Ownership. By this time, therefore, the question of the Plaintiffs' st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... withhold disclosure of this document and it was only pursuant to my order of 12th June 2014 that this document was disclosed. The disclosure was also made only on 20th June 2014 well after the 10th AGM held on 10th June 2014. The approval sought from the RBI came through on 31st August 2012. This approval is also impeached on the ground that what was sent to the RBI was not only defective but was materially misleading. 3.20 On 14th January 2013, Yes Bank wrote to RBI again, seeking its confirmation specifically for classifying Ashok Kapur's family's ownership as a non-promoter holding. On 23rd January 2013, the RBI replied to Yes Bank's letter of 19th May 2011 and 14th January 2013. Based on the unilateral representations made by Yes Bank and Rana Kapoor, RBI said that its earlier letter of 14th November 2011 was modified, so that the shareholding of Madhu Kapur's group, the heirs of Mr. Ashok Kapur, would not be counted as a promoter's stake subject to that group's shareholding being brought down to less than 5% of the Bank's paid up capital. The RBI said that this was a normal condition: shareholders other than promoters and financial institutions wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Kapoor. Later that day in the late evening of 4th June 2013 Rana Kapoor did meet the Plaintiffs. He said, it seems, that there were formalities to be completed for the participation of the Plaintiffs or at least of Shagun Kapur Gogia as a representative director of the Plaintiffs. The next day, 5th June 2013, Madhu Kapur wrote to Rana Kapoor requesting that effect be given to Articles 110, 121 and 127 of the Articles of Yes Bank. She suggested that the nomination of three Directors by the two Indian partners, i.e., the Plaintiffs' group and Rana Kapoor's group should be by consensus. Absent such consensus, Madhu Kapur suggested, it should be agreed that one director would be nominated by each of the Indian Partners and the third would be on an alternating basis, i.e., where one of the two groups would appoint a director at first and in the next cycle it would be the right of the second group to nominate their director. She suggested that Shagun be nominated jointly as a beginning, this recommendation being in the interest of Yes Bank, and on the understanding that Yes Bank's Board would appropriately consider her appointment as an additional director with all formalit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n this document. According to him, it demonstrates that Rana Kapoor has unequivocally accepted that the Plaintiffs have entrenched rights flowing from the Articles of Yes Bank. Mr. Khambata submits that the only question was about whether RBI's eligibility criteria were satisfied by Shagun Kapur Gogia's nomination. What is noteworthy, Mr. Khambata says, is that even at this time, Rana Kapoor did not disclose to Madhu Kapur and Shagun Kapur that he and Yes Bank had made repeated applications to the RBI to declassify the Plaintiffs' holding as Indian Promoters and to show them, instead, as non-promoter shareholders. 3.27 On 7th June 2013, on an application made for ad-interim reliefs inter alia in relation to the AGM to be held on 8th June 2013, it was clarified that the appointments of Defendants Nos. 7, 8 and 9 as Directors of Yes Bank would be subject to further orders of the Court. On 8th June 2013, Yes Bank held its AGM in Mumbai. Srinivasan was the Chairman at the AGM. At Madhu Kapur's request, Srinivasan conducted a poll to determine the outcome resolutions relating to the appointments of Defendants Nos. 7, 8 and 9. He nominated two persons of his choice for s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d rejected Shagun Kapur Gogia's nomination. This was on the basis that she did not meet the standards of Yes Bank and its peer banks and, secondly since RBI guidelines of ownership and governance in private sector banks made it undesirable that two or more "relatives" should be on the Board of the bank. 3.30 At that very meeting, Defendants Nos. 10 to 12 were appointed as Whole Time Directors of Yes Bank on the recommendation of Rana Kapoor ostensibly pursuant to Article 127A. 3.31 On 28th June 2013, the Plaintiffs received a letter from Yes Bank stating that the Board had rejected Shagun Kapur Gogia's nomination. In the meantime, Affidavits in Reply and Rejoinder continued to be filed in the Notice of Motion filed by the Plaintiffs' Suit. On 30th July 2013, the Plaintiffs' advocates wrote to the Advocates for Defendants, Rana Kapoor and Yes Bank asking them to disclose correspondence with the RBI of which the Plaintiffs had learned from a recent news report. There was no reply to this demand. 3.32 On 12th August 2013 Madhu Kapur wrote to the RBI referring to the news article that said that Rana Kapoor had sought from the RBI a declassification of the P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the process of seeking a clarification on the Plaintiffs' status as Promoters of Yes Bank from SEBI. These news reports indicated that Yes Bank had already approached the RBI with an application to declassify the Plaintiffs as promoter of Yes Bank. The Plaintiffs wrote to SEBI and requested it to not give an opinion without affording the Plaintiffs a personal hearing. There is no response from SEBI to this letter. 3.40 Further correspondence continued in this vein between the Plaintiffs and Yes Bank/Rana Kapoor in May 2014. 3.41 On 15th May 2014 the Plaintiffs received an email notice dated 23rd April 2014 of the 10th AGM of Yes Bank scheduled to be held on 14th June 2014. This is a notice that the Plaintiff describe as tricky and misleading. The Plaintiffs challenge not only the notice but the appointments made at this annual General Meeting. There followed, on 23rd May 2014 an entirely unnecessary and avoidable controversy regarding inspection being given by Yes Bank to Shagun Kapur of certain documents at the registered office of Yes Bank. 3.42 By an order of 12th June 2014, Yes Bank was directed to disclose all documents and correspondence exchanged between the Defendant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gain in Annexure " A " to this judgment. 4.3 Mr. Khambata has restricted himself to the following prayer clauses, viz., (a)(iii), (a)(iv), (a)(v), (a)(vi), (a)(vii), (a)(viii), (a)(xiii), (a)(xiv), (a)(xv) and (a)(xx). The remaining reliefs are not pressed. 4.4 These reliefs are themselves divisible into certain classes. Prayer clauses (a)(iii), (a)(iv) and (a)(v) all relate to the claimed participatory rights in management of Yes Bank and the Plaintiffs nomination of Shagun Kapur Gogia to Yes Bank's Board. Prayer clause (a)(vi) seeks to restrain Yes Bank and Rana Kapoor from acting in exercise of rights under certain defined Articles to the exclusion of the Plaintiffs and without their concurrence. Prayer clause (a)(viii) is directed against Defendants Nos. 10, 11 and 12 and seeks to restrain them from holding themselves out or acting as Directors of the Yes Bank. Prayer clause (a)(xiii) must be read with prayer clauses (a)(iii), (a)(iv) and (a)(v) but demands a reconstitution of the Board of Directors of Yes Bank to comply with Section 149 and Section 152 of the Companies Act, 2013 read with Article 121 of the Article of Associations of Yes Bank. Prayer clause (a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gement that vested in Ashok Kapur by virtue of Yes Bank's articles personal to him or did they at all survive to the Plaintiffs? (b) If so, to what extent? Specifically: (A) Did these rights require the Plaintiffs' concurrence and consent in the matter of recommendation or nomination of persons to Yes Bank's Board? And if they did, what is the effect on any such recommendations or nominations made without that consent or concurrence? (B) Is the 'right to recommend' equivalent to a 'right to nominate' or is it merely a 'right to suggest'? (C) Did the rights claimed by the Plaintiffs include the right to have a person of the Plaintiffs' choice serve on the Board of Yes Bank? 6.2 There are consequential questions or issues that arise relating to the appointments of several directors on Yes Bank's Board. Independently of these, there is the question of the validity of the appointment of two directors (Defendants Nos. 7 and 18) as "Independent Directors" of Yes Bank. 7. RELEVANT PROVISIONS OF THE ARTICLES 7.1 Several clauses of Yes Bank's Articles are referred to repeatedly. To avoid setting them out at length in the body of this judgment, and for both completeness and convenienc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch as a company, a trust and the like. The interpretation clause also states specifically that the phrase "person" in the case of a body corporate is a reference to its successors and permitted assigns and in the case of a natural person is a reference to his heirs, executors, administrators and legal representatives. 8.6 Articles 47 to 61 deal with transfer and transmission of shares. Article 49(e) provides a special lock-in period. This was framed at the time when Rabobank was one of the three who took the initial share capital of Yes Bank. Article 49(e) provided that neither Rabo nor the Indian Partners would, for a period of five years from 24th May 2004, transfer a specified amount of equity shares of the company. This clause was subject to any guidelines, instructions or directions issued, recommended or approved by the Reserve Bank in relation to the capital structure of the company. Any relaxation in this clause was required to be prorated to the respective shareholdings. 8.7 We come now to the all important Article 110. Although I have set this out in the annexure to this judgment, I believe that it is necessary to set this out again here simply because it is so critica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other Directors are required to be what are called "Independent Directors". In addition to their right to recommend the appointment of IP Representative Directors, the Indian Partners were required (the word used is "shall") to propose the names of the first three Independent Directors. These names were to be approved by Rabo and these were then to be appointed to the Board. For the remaining Independent Directors, Rabo and Indian Partners were entitled to make recommendations to Yes Bank's nominations committee. 8.10 Article 111 is also important. This names Ashok Kapur and Rana Kapoor as the first two IP Representative Directors and another person as the Rabo Representative Director. Article 111(d) may have some consequence to the matter of interpretation of these Articles. It provides that the Board could appoint an Alternate Director to act for another Director. This Alternate Director's name could be suggested by the Director or he could be otherwise appointed. This alternate appointment could be made for a period of at least three months during which the Director in question was absent from the state where the Board meetings were ordinarily held. The Alternate Director was t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd of Yes Bank shall, "subject to a recommendation made by the Promoters" also include such Whole Time Directors as may be appointed. Now the word "Promoters" is not defined in these Articles. It is, however, common ground that this expression used in the amended and newly introduced Article 127A was and is interchangeable with the concept of Indian Partners, a term that is defined in these Articles. Both terms are used interchangeably and all have understood them so to be. 8.15 Article 127A(b) also provided that subject to all necessary approvals and the articles, the Board of Yes Bank is entitled to periodically appoint or reappoint one or more existing members to be designated as and to act as a Whole Time Director of a company. In any case, these Whole Time Directors are not to exceed more than one-third of the total number of Directors of Yes Bank. 8.16 Article 127A(e) opens with a non-obstante clause and says that Whole Time Directors are not subject to retirement by rotation under Article 122. They remain subjected to the other disciplines of resignations and removals and it is clarified that should any of them cease to hold the office of Directors, they will simultaneousl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... promoters and founders of Yes Bank. It is saved from being subjected to the will of the majority of the shareholders of the company by incorporation in the articles themselves. He submits that these participatory rights are recognised as enforceable in Indian Law. (Vodafone International Holdings V. v Union of India, (2012) 6 SCC 613) The Articles are also contract between members and are binding not only on the members but also on the company, i.e., Yes Bank. (Naresh Chandra Sanyal v Calcutta Stock Exchange Association Ltd, (1971) 1 SCC 50). It is not permissible, Mr. Khambata says, for Directors to act contrary to the powers conferred by the Articles. Any such action would be ultra vires the Articles as also Section 10 of the Companies Act, 2013. Consequently, any action contrary to or in defeasance of these participatory rights is by definition ultra vires and void.(Claude-Lila Parulekar v Sakal Papers Pvt. Ltd. (2005) 11 SCC 73). Further, he submits, the Articles of Association are a business document and must be construed so as to give them reasonable business efficacy, where such a construction is permissible or plausible. This interpretation is to be preferred to a result th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of a prohibition or a restraint against an assignment or transfer. The onus lies on he who seeks to contain that there is a prohibition against assignment. (Chinna Munuswami Nayudu v. Sagalaguna Nayudu (1925) ILR 49 Mad 387, affirmed in Sakalguna Nayudu v. Chinna Munuswami Nayakar AIR 1928 PC 174; Vishweshwar Narsabhatta Gaddada v. Durgappa Irappa Bhatkar (1940) 42 Bom LR 653; T.M. Balakrishna Mudaliar v. M. Satyanarayaona Rao (1993) 2 SCC 740; Shyam Singh v Daryao Singh (2003) 12 SCC 160. 8.20 The response from Mr. Kapadia and Dr. Tulzapurkar is that the right in Article 110(b) is entirely personal and is unlinked to any shareholding; i.e., that it was intended always to be a right personal to Ashok Kapur and Rana Kapoor. This right does not, therefore, they contend, survive to the two individuals' successors, legal representatives and assigns; any such reading is 'repugnant to the context'. 8.21 This raises some distinct questions: (a) Is this right personal, as the Defendants contend, or does it survive to the heirs, successors, legal representatives and assigns of Ashok Kapur and Rana Kapoor? (b) Following from this, how is that right is to be exercised? Can it be exerci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the right to 'foist' oneself to the Board, but it must also include the right to foist some other unworthy to the Board. What, in essence, Mr. Kapadia's argument translates to is this: Ashok Kapur and Rana Kapoor might indeed have had the right to impose an unsuitable person to the Board; now that Ashok Kapur has passed on, only Rana Kapoor can do so. This is simply untenable. 8.23 Mr. Kapadia then submits, as does Dr. Tulzapurkar, that the right was conferred on Ashok Kapur and Rana Kapoor in contradistinction to a corresponding right to a third entity, Rabobank, and that this was in the nature of an arrangement of a partnership. For our purposes, this makes no difference, and it is entirely impermissible in my view to carry out any such deconstruction of a plainly worded clause in the Articles. 8.24 Mr. Kapadia then points out that there are other parts of the Articles that refer to Ashok Kapur and Rana Kapoor, and these are clearly meant as references to them as individuals without including their successors: for instance, Articles 111 and 127 providing for Managing Directorship and first Directorships of Yes Bank. If, he says, the expansive definition is to be used in Articl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erees of the shares of the two groups to exercise these very rights. That, he says, could never have been the intention and it must therefore follow, in his submission, that the right was entirely personal to the two individuals in question. For instance, if the Plaintiffs' group divests itself of the entirety of its shareholding to a third party (or several such), could this entity (or the several entities coming together) invoke this right? First of all, this is an extreme scenario and it can hardly dictate or govern the interpretation of the clause as it plainly stands. Second, it is entirely possible that, in a given context, the word 'assigns' might be contextually repugnant (and it would probably be so in the scenario Mr. Kapadia outlines), but that does not mean that it should drag down with it every other term in the expanded definition, i.e., all heirs, legal representatives and successors. Certainly it is 'repugnant to the context' of Article 49(e), the lock-in provision, for that could never apply to any assign. Finally, perhaps the scenario Mr. Kapadia envisions is possible. What of it? The way the clause is worded, the right can only ever descend to one level below Ash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ically from that Article. It is not. To the contrary, it is expanded to include Affiliates, and that expansion by itself suggests that the right in that Article cannot be delinked from a shareholding. The 10% qualification in that Article attaches to the entitlement to exercise the right to recommend, but it is available only to shareholders and not to an outsider or non-member. 8.28 To accept Mr. Kapadia's and Dr. Tulzapurkar's submissions, I would necessarily have to accept that the Articles of Yes Bank had a quite extraordinary provision, one that allowed for an outsider, i.e., someone who held no shares in it, to dictate and direct its course provided he could muster up the 10% qualification shareholding in Article 110(b). It is, I think, axiomatic that the Articles are a contract between a company and its shareholders, and it would be utterly bizarre to have in these articles a conferment of power or entitlement of this magnitude on a non-shareholder, one said to be performing a contract of personal service. 8.29 Mr. Kapadia's portrayal of Mr. Khambata's interpretation as an attempt to read the Articles "up, down and sideways" is, I think, needlessly waspish. Mr. Khambata's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that right, the class must hold shares above a certain percentage. It may be no more than chance that the two families do not each command an absolute majority in Yes Bank's equity and are, on that reckoning, a 'minority' . The defined percentage is a threshold qualification for the exercise of the right; once the shareholding drops below that barometer, the right can no longer be invoked. The discussion about the ambit and purport of the Supreme Court's decision in Vodafone (supra) carries us no further in an analysis of the Article at hand. Certainly the right Article 110(b) speaks of is participative, but is carefully circumscribed; and while there is no such threshold qualification shareholding in Article 127A, for the purposes of defining the right, this is entirely immaterial. 8.32 Mr. Kapadia's submission that the interpretation commended by Mr. Khambata would result in a shutdown of Yes Bank and that all appointments of all directors, the Managing Director, the Chairman and all whole time directors would be jeopardized for want of the Plaintiffs' consent is unwarranted. Article 110(b) speaks of IP Representative Directors. Independent Directors are to be appointed under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t hold shares that are more than 10% of Yes Bank's share capital. The Articles do not require any qualification shareholding for directors. But these are special rights and they are conferred on a class of shareholders. Any other interpretation results in an incongruity: it would necessarily mean that even if Ashok Kapur and Rana Kapoor and their groups exit Yes Bank entirely, the two persons would not be eligible for consideration to appointment (which of course they would, as might any other titan in the banking industry), but would also be in a position to steer its course by making recommendations to the Board though they would, by then, be complete outsiders to the company. Mr. Khambata is, therefore, correct when he says that Articles 110(b), 127 and 127A are members' rights and not those conferred on non-member outsiders. 8.35 Mr. Kapadia and, more emphatically, Dr. Tulzapurkar refer to other documentation to submit that there are other indicators that these rights were personal. This is doubtful, to say the least. Dr. Tulzapurkar for Yes Bank referred extensively to four Agreements: The Share Subscription Agreement of 30th April 2003; the Shareholders' Agreement of the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly to include the two individuals but also three companies, and these 'promoters' had a nomination right, one that could not, for that reason, be personal. These three companies were such that their shares could be held by the spouses and families of the two individuals. In other words, the right with which we are concerned was conferred on Ashok Kapur, Rana Kapoor, and on three companies in which they, their spouses and their families held equity. All three pre-incorporation agreements were ratified by Yes Bank's Board, as was the Master Investment Agreement. Yes Bank has executed a Deed of Adherence binding it to the Master Investment Agreement. These indicia apart, there is no manner of doubt at all that if there is a conflict between the Articles and any of these agreements, it is the former that must prevail. 8.37 Implicit in the Defendants' argument is the presumption that Yes Bank's and Rana Kapoor's conduct is consistent with their interpretation that the right is entirely personal to Ashok Kapur and Rana Kapoor. We do not have to look far to see that this consistency does not exist. Rana Kapoor holds just about 5.55% of Yes Bank's paid up capital. He also does not, on hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rst place). The NGC formed an opinion that the nomination would have to be subject to the RBI-specified criteria "and also meet the standards of Yes Bank". The NGC recommended, therefore, that: Mrs Madhu Kapur or any other family member would have to satisfy these conditions or alternatively nominate in consultation with the other Indian promoter any other person who may fulfil the same. (Emphasis supplied) 8.40 Yes Bank's Board took up this matter at its meeting on 22nd April 2009, a few days later. (Joint Compilation, pp. 505-507). It noted the NGC recommendation. It concurred. 8.41 There is no dispute that in interpreting a contract, and the Articles are nothing if not that, the conduct of parties is relevant. It shows how they understood it. As the Supreme Court said in The Godhra Electricity Co Ltd. & Anr. v The State of Gujarat & Anr. (1975) 1 SCC 199. 11. In the process of interpretation of the terms of a contract, the court can frequently get great assistance from the interpreting statements made by the parties themselves or from their conduct in rendering or in receiving performance under it. Parties can, by mutual agreement, make their own contracts; they can also, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elieve this question more or less answers itself. The right in Articles 110(b), 127(b) and 127A(a) must be exercised jointly or not at all. Nothing in either of those Articles lends itself to an understanding that each Indian Partner was entitled to exercise that right unilaterally, i.e., to the exclusion of the other. In fact, this follows directly from my conclusion that the right was not personal to the two individuals in question but accrued and accrues also to their successors. The words in the clauses do not employ the disjunctive at any stage. Nothing suggests that Ashok Kapur and Rana Kapoor each were entitled to a separate exercise of the right. The term 'Indian Partners' means both of them and though it is true that the singular is defined to mean each of them, in Article 110, 127 and 127A when the exercise of a particular right is introduced it is only vis-à-vis both of them together. For instance, Article 110(b) says that so long as the Indian Partners have the necessary qualifying shares, the Indian Partners 'shall have the right to ... "; it does not say that each of the Indian Partners shall have that right. This distinction is material and unambiguously tells ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ys that upon Rabo approving the names of the first three Independent Directors proposed by the Indian Partners, they "shall be appointed". Curiously, this phrase is used only in this clause. This is because Rabobank's approval was a precondition; without it, there could be no appointment. Where no such approval is necessary, the appointment must happen straightaway. This is also the necessary result of the next provision of Article 110(c) regarding the other Independent Directors. Here, Rabobank and the Indian Partners were given the option of recommending the names of these other Independent Directors to the NGC. This marks a clear distinction between a recommendation as a nomination and a recommendation as a mere suggestion. 8.49 There is more. Article 118(b) for instance allows casual vacancies of IP Representative Directors to be filled by the Indian Partners; not the Board. This could not be if the right was merely recommendatory. Article 121 provides that two of the three IP Representative Directors are not liable to retire by rotation. Only the other directors are to appointed by the general body. The initial appointment of these IP Representative Directors is, therefore, n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is. Rana Kapoor has himself not exercised his rights in so deferential or submissive manner; it cannot be happenstance that his 'suggestions' have not once been denied. 8.53 Dr. Tulzapurkar's submission is somewhat different. He says there is no ambiguity about the words in the Articles and they must receive their quotidian meaning; (Provash Chandra Dauli v. Biswanath Banerjee & Anr. 1989 Supp 1 SCC 487; Modi Co v. Union of India, AIR 1969 SC 9; V. S. Talwar v Prem Chandra Sharma (1984) 2 SCC 420). not one that results in a manifest absurdity or futility. (American Home Products Corp v. Mac Laboratories Pvt Ltd (1986) 1 SCC 465; Tillmanns & Co v. SS Knutsford Ltd, (1908) 2 KB 385). I regret that I am unable to understand what this absurdity might be, or why it should be treated as manifest. The mistake is, I think, to treat these rights as ones that endure for eternity. That is not so. The right in Article 110(b), for instance, requires a threshold shareholding. If the Indian Partners' holding falls below that limit, the right evaporates. As to the other Articles, it is always within the powers of the company to suitably amend these, regard being had to the progress and developmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a wholehearted approval of the NGC's recommendations. (d) At a 20th October 2009 meeting of the NGC, (Joint Compilation, p. 649 at p. 650), Rana Kapoor "informed" the NGC that he was "recommending" Mr. S. L. Kapur as the nominee of the Indian Promoter as Executive Part Time Chairman of the Board. The next day, Yes Bank's Board said that Rana Kapoor had the right to make this nomination. Again, the Board was informed of Rana Kapoor's nomination. This was repeated at the 15 January 2013 NGC meeting in respect of the "nomination" of M. R. Srinivasan, Defendant No.9, as the non-executive chairman of Yes Bank; (Joint Compilation, p. 1199 at p. 1200), and at the ensuing Board meeting on 16th January 2013. (Joint Compilation, p. 1203 at p. 1204). (e) On 22nd October 2012, the NGC had before it the name of the 8th Defendant, Ravish Chopra, as the "proposed Promoter Nominee"; not as the person recommended or suggested, but as a nominee. (Joint Compilation, p. 1190 at p. 1192). (f) The appointments of both Ravish Chopra and M. R. Srinivasan were placed before the general body at the AGM on 8th June 2013. (Joint Compilation, pgs. 1242-1243). These were not routine shareholder recommendati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ular of 25th June 2004 setting out the 'fit and proper' criteria for bank directors; Joint Compilation, Vol. I, p. 268). The right in the Articles is not the right to recommend anyone and everyone; it must be someone suitable. Even the additional qualifications and experience, applicable to 51% of the Board under Section 10A(2) of the Banking Regulation Act 1949, would not operate in respect of these nominees. At least as far as the Board is concerned, a nomination is akin to a reserved seat. But it must be jointly made or not at all. 8.58 Mr. Kapadia asks me to read certain paragraphs of the Plaint with him. He says that the Plaintiffs have admitted in their pleading that the Articles confer only a right to recommend the appointment of directors. I do not see what possible difference this makes. That phrase is the one used in the Articles. In at least a dozen other places, the Plaintiffs have canvassed the right as being a right to nominate and not only merely to suggest. Not to put too fine a point on it, Mr. Kapadia sails a tad too close to the wind. Rana Kapoor's own Affidavits in Reply assert that the Plaintiffs' contention amounts to a 'fetter' on the Board, i.e., that the P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Diplock, Lord Denning, MR held it would be unlawful to force managers, who could not be said to be employees within the meaning of the rule in question, to join the union absent a provision for possible conflicts of interest. He said, inter alia: Suppose a Member of Parliament should be in the pay of some outside body, in return for which he binds himself to vote as he is directed to do. The agreement would clearly be void as against public policy. . . Or take a nominee director, that is, a director of a company who is nominated by a large shareholder to represent his interests. There is nothing wrong in it. It is done every day. Nothing wrong, that is, so long as the director is left free to exercise his best judgment in the interests of the company which he serves. But if he is put upon terms that he is bound to act in the affairs of the company in accordance with the directions of his patron, it is beyond doubt unlawful, or if he agrees to subordinate the interests of the company to the interests of his patron, it is conduct oppressive to the other shareholders for which the patron can be brought to book . . . 8.61 I am unable to understand how Rolta can be usefully applied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es not mean that all the powers of the Board are denuded or that it is prevented from discharging any of its fiduciary duties. These rights are targeted and specific. They are restricted to certain numbers and certain posts. They do not dictate the entirety of the composition of Yes Bank's 15-member Board. What Mr. Kapadia suggests is some sort of forensic synecdoche, where the nominee positions represent the entirety of the Board. They do not. The Board's powers are not constrained, and here the powerful dissent in Boulting may actually work against Mr. Kapadia, for the nominees owe no allegiance to their nominator, nor are they required to. They are not there to protect or safeguard the two families' holdings or interests. The power of nomination is conferred because at the time when this enterprise was conceived and shaped, it was believed that between them, Ashok Kapur and Rana Kapoor, assumed implicitly to be acting together and without discord, could choose the correct men and women for the job; the job, that is, of conducting the affairs of Yes Bank. 8.64 There is also no statutory bar to such nominations. The Defendants argue that the RBI suitability criteria cannot be met ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter how qualified, on the Board. The recommendation as a nomination must be jointly made. This is, in fact, Mr. Khambata's submission. If that is so, then his argument that Shagun Kapur Gogia's nomination must be held to be a 'deemed' joint nomination must fail; for Rana Kapoor made it abundantly plain that he did not join in that nomination, and that if the NGC was considering her nomination it was only under an order of the Court. Consistent with what I have held, neither the Plaintiffs' nor the 1st Defendant's (Rana Kapoor's) group has the right or authority to make unilateral nomination to the exclusion of the other. 9. INDIVIDUAL DIRECTORSHIPS 9.1 Mr. Khambata makes an elaborate exposition of 'Board packing', suggesting that Rana Kapoor is deliberately filling up 'vacant' seats on the Board, ones that are 'available for the second non-retiring IP Representative Director and to cause a frustration of the Plaintiffs' rights.' This argument must be rejected. The reasons are many. For one thing, it implicitly posits an interpretation of a unilateral (non-joint) nomination and the existence of a permanently reserved seat for the Plaintiffs on Yes Bank's Board. No such interpreta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on as required by Article 127(b). Mr. Khambata also submits that the RBI's approval to this appointment was procured by way of a misleading application. Yes Bank represented that its Board was competent to make this appointment, citing only Articles 127(a) and 127(c) but omitting the crucial Article 127(b). A submission is made to quash the RBI approval. At this prima facie stage, without the necessary evidence, it is not possible to do this. Alleging ill motives to Rana Kapoor does not carry the matter further. (b) Similarly, the argument that the notice of Yes Bank's 10th AGM is tricky and insufficient as far as it relates to Rana Kapoor's appointment, Item no.11 on the agenda of that meeting. Again, this argument is based on the form and nature of the application made to the RBI for its approval. It is also submitted that Rana Kapoor's appointment was not placed for shareholder approval at the previous AGM, though it ought to have been since the Board resolution for his appointment was of 25th April 2012 and should have come up for shareholder approval at the 2013 AGM. In other words, Rana Kapoor continued to act as Managing Director and CEO from 2012 without shareholder approv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the relevant Articles was attached. (Plaint, Vol II, p. 534). This copy mentioned no Article number. It merely extracted Article 127(a) and Article 127(c) and wholly excluded Article 127(b). (f) The result is an internal conflict in the application: one form mentions Article 127(b), but the annexure with the relevant Articles does not. What is not in doubt that is that the appointment did in fact receive RBI approval and, too, shareholder approval (by an overwhelming majority of over 80%). The Plaintiffs' case hinges entirely on the solitary reference to Article 127(b) in Form B on the application to the RBI. I am asked to infer from this that the RBI was misled. No such inference is possible. The RBI is not a party here. It previously approved the Articles and I think it is reasonable to assume that the RBI does not mindlessly grant approvals. The RBI was within its powers to seek a clarification; to demand to know the Article numbers, since Form B mentioned only one, but the certified copy of the Articles set out two. It did not. Even otherwise, it is not even the Plaintiffs' case (at least in my understanding of it) that the Board is powerless and, for want of a joint recom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al resolution for the appointment (or reappointments) of Directors holding an office or place of profit, but it specifically excluded Managing Directors, who could, therefore, be appointed by an ordinary resolution. (j) Mr. Khambata says this scheme has now changed with the introduction of Section 188 ('Related party transactions') and Section 196, which separately deals with the appointment of a Managing Director, Whole Time Director and a Manager. The 1956 Act had no provision corresponding to Section 196. This is a separate provision for the appointment of Managing Directors. Section 188 requires a special resolution for related party transactions, and I understand Mr. Khambata's case to mean that Rana Kapoor is covered by this since his remuneration package includes certain perquisites (accommodation and so on). Section 196, which deals with appointments of Managing Directors, only speaks of a 'resolution' , not specifically an ordinary or special resolution, and this section is, therefore, in Mr. Khambata's formulation, subject to the discipline of Section 188. Any Managing Director who receives, say, rent-free accommodation, must be appointed by a special resolution and in n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ointment was immediately placed for shareholder approval on the 2013 Act coming into force. In any case, I do not see how this can be said to be fatal. Some regard must be had to shareholder approval obtained in such numbers and to the RBI approval. It is not as if Yes Bank is operating entirely without shareholder and regulatory oversight. (m) It is not possible to accept the Plaintiffs' submissions in relation to the appointment of Rana Kapoor at this interim stage. 9.5 The appointment of Defendant No.8 (Ravish Chopra) as an IP Representative Director and as an Independent Director (a) In October 2012, Ravish Chopra was nominated as a director by Rana Kapoor claiming to be the sole surviving Indian Partner. Rana Kapoor says so in terms in paragraph 9 of his Affidavit in Reply dated 24th July 2013.(Notice of Motion, Vol II, p. 246) This was also part of the Defendants' evidence at the time of the trial on the preliminary issue. DW-1 admitted that Ravish Chopra was Rana Kapoor's nominee in October 2012. (b) As a purported nomination under Article 110(b), this could not have been done. It was an impermissible unilateral nomination. It cannot be saved. It is ultra vires the Artic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was true, he was not Rana Kapoor's nominee and Rana Kapoor could not have been said to have been 'interested' in his appointment. I notice, too, that the explanatory note speaks of Rana Kapoor as 'the Indian Promoter' (in the singular), suggesting that there is no other. To play ducks and drakes like this with director appointments is entirely impermissible. (g) What followed at the 10th AGM was even more peculiar. Mr. Chopra was 're-designated' as an Independent Director. I do not see how this was possible, or even true. Even later, Yes Bank continued to show him as non-Independent. Mr. Chopra, given his status as supposed promoter director's nominee, is not within the definition of an independent director under Section 149(6) of the 2013 Act. (h) On 14th June 2013, M. R. Srinivasan, Defendant No.9, wrote to Shagun Kapur Gogia in response to her letter of the previous day.(Plaint, Vol. III, p. 568) In this response, Srinivasan claimed that Ravish Chopra had been 'inadvertently characterised as a non-Independent Director though he fulfils all the criterion [sic] of an Independent Director as specified in law.' He also claimed that Rana Kapoor's nomination of Ravish Chopra was go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the validity of his appointment as a director in the first place. If the latter fails, so must the former. (f) To the RBI, Yes Bank represented that Srinivasan was his nominee under Article 127(b). This is set out in Yes Bank's letter dated 7th March 2013 to the RBI.(Joint Compilation, Vol. III, p. 1209) Paragraph 1 of that letter expressly refers to the Article and to Rana Kapoor's nomination of Srinivasan as Non Executive Part Time Chairman of the Board. This letter was not disclosed by the Defendants. The Plaintiffs obtained it under the Right to Information Act. (g) RBI approval was obtained on 25th April 2013.(Joint Compilation, Vol. IV, p. 1438) But the Board minutes of 16th February 2013 (Joint Compilation, Vol. III, p. 1203 at 1206) required shareholder approval to (a) the change in classification from Non Executive Non Independent Director to Non Executive Non Independent Director (Promoter Nominee) and (b) the appointment of Srinivasan as Non Executive Part Time Chairman of the Board. This approval was not sought at the 9th or 10th AGMs of Yes Bank. Shareholder approval was sought only to his remuneration. (h) Srinivasan's appointment at the 8th AGM is also bad since t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apply, because the appointments of Nanda and Vohra violate both the Articles and the statutory requirements. (c) After the 2013 Act came into force, there is a transitional period for the appointment of Independent Directors. It is entirely possible for these two appointments to be validated under the 2013 Act and to stand wholly outside Article 110(c). That Article no longer occupies the entirety of the universe of appointment of Independent Directors. Indeed, it may well be redundant now; at the time when they were approved, the Articles presaged the statutory changes that would follow some years later. (d) It is true that Nanda and Vohra are not yet validly appointed as required by law. Whether or not this can be rectified is for Yes Bank to determine. The challenge is to the appointments as they now stand. 9.8 The appointments of Defendant No.10 (Rajat Monga), Defendant No. 11 (Sanjay Palve) and Defendant No. 12 (Pralay Mondal) as Whole Time Directors (a) All three were nominated by Rana Kapoor under Article 127A.(Joint Compilation, Vol. I, p. 180). These appointments are subject to a recommendation by the 'promoters' . There was no such recommendation from the Plaintiffs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... say that he and it did not support Shagun's nomination, that nomination must be deemed to be a joint one. 10.2 The Plaintiffs say that Rana Kapoor's silence coupled with his conduct are sufficient to constitute his acceptance of her nomination;( Bharat Petroleum Corporation Ltd v Great Eastern Shippping Co. Ltd., (2008) 1 SCC 503) alternatively, that some species of estoppel by conduct runs against Rana Kapoor.(B. L. Sreedhar v K. M. Munireddy, (2003) 2 SCC 355). There is no doubt that there can, in a given case, be such a deemed acceptance or such an estoppel. The question is whether, in equity, it should be so read in this case. First, the consequence of this is that both Rana Kapoor and Yes Bank's Board must be deemed to have been foisted with Shagun's nomination. They have both consistently made it clear beyond all doubt that this is neither necessary nor desirable. What the Plaintiffs ask me to do is to hold that these views be relegated to the background and that conduct in correspondence be read to have this sort of an effect. I am not prepared to do anything of the kind. The correspondence indicates that there was much in discussion; including a proposal dated 5th June 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ply to this, I am asked to hold that the nomination was a joint one under Article 110(b). 10.5 On 17th June 2013, the Plaintiffs wrote to Yes Bank saying that they, the Plaintiffs, had nominated Shagun as an IP Representative Director under Article 110.(Joint Compilation, Vol. IV, p. 1502)This letter does not say that her nomination was a joint nomination with Rana Kapoor. The omission is critical; for, if indeed the Plaintiffs' case then was what it is now, they ought to have said so. They did not, and that tells me that they did not understand this nomination to be a joint one. Rather, it was seen to be some sort of via media at finding a middle ground. Yes Bank's response, of that date,(Joint Compilation, Vol. IV, p. 1501) makes this plain: it says that the nomination would be considered in terms of the High Court order of 10th June 2013. Mr. Khambata says that Rana Kapoor did not dispute his concurrence or assent to the proposal then, and this binds him. 10.6 But on 26th June 2013, just a few days later, Yes Bank made it clear that this nomination would be considered according to the High Court order and the law, but not as a joint nomination under Article 110(b).(Joint Compi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dressed. First, the question of Yes Bank's (and Rana Kapoor's) applications to the RBI for a so-called 'de-classification' of the Plaintiffs' holdings, i.e., to have them treated as non-promoter holdings and the Plaintiffs as not being covered by the definition of Indian Partners. The applications proceed on the basis that the right in question was personal to Ashok Kapur and did not survive to the present Plaintiffs. This is the subject of considerable correspondence between Yes Bank and the RBI. It was only disclosed under orders of this Court, and those orders required only the relevant parts to be disclosed. In itself, this recalcitrance on the part of the Defendants is decidedly odd. The Plaintiffs do not appear to have been given notice of the application, though it undoubtedly affected their rights. The RBI has not yet taken any decision on this. 11.2 The substratum of the argument is the one that was vigorously canvassed before me, one that I have now decided. I do not believe it is open to the RBI to now go into the question and arrive, possibly, at a contrary view. The question indeed is at the core of the Plaintiffs' case and could not have been evaded here. Now that it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ight to nominate. Also, the Defendants do not seem to have ever taken this right, when exercised by Rana Kapoor, to be a mere suggestion. His 'suggestions' or 'recommendations' have always only been taken to be nominations. It is inconceivable that he and only he is somehow qualified to 'nominate' directors, but that nobody else has that ability. 12.4 That this right is not and was not personal to the two individuals and was not restricted to merely making suggestions is belied by Yes Bank's and Rana Kapoor's repeated representations to the RBI. The fact that Yes Bank and Rana Kapoor applied to the RBI to 'declassify' the Plaintiffs' shareholding is itself an admission of sorts. Why, but for this right not being personal and not being the right merely to suggest, would they need to do so? 12.5 It is equally incorrect to suggest that the Plaintiffs have, only on account of Ashok Kapur's demise, transmogrified into some sort of non-promoter capacity. The applications to the RBI to this end are motivated, self-serving and prima facie unlawful. 12.6 It also follows that any recommendations made by the 1st Defendant, Rana Kapoor, without the concurrence and consent of the Plaintiffs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nk's articles, certain specific rights were assured to Ashok Kapur and, on his death, the Plaintiffs inherited these rights in full measure. They are, they say, entitled in law and in equity to a reasonable enforcement or enunciation of these rights; the rights cannot be silenced or smothered only on account of Ashok Kapur's untimely and tragic demise. Principal among these rights is the right to join Rana Kapoor in the recommendation of an Indian Representative Director to Yes Bank's Board. This right has been wholly denied to them and on a plain reading of the relevant Articles and statutes this denial is simply wrong and unsustainable. It must be given voice. 13.2 What of the balance of convenience and prejudice? Yes Bank is now a significant presence in the banking industry. Granting the Plaintiffs relief would jeopardize its operations, say the Defendants. This argument is as misleading as it is mischievous. Rana Kapoor seems to have exercised those very rights that the Plaintiffs claim and which have been denied to the Plaintiffs, and he seems to have done so in the very manner that he says the Plaintiffs cannot. That is an incongruity never satisfactorily resolved or explai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant statutes. If that be so, neither can invoke any equity to continue acting in that vein. The result is an inevitability, and the chips must fall where they may. There is sufficient space and room for Yes Bank to correct its course in the time ahead. 13.6 There is, however, one problematic area for the Plaintiffs. The invocation of these rights, even construed to mean a right to nominate and not merely a right to suggest, does not in and of itself give the Plaintiffs a right to a seat on the Board. To that extent, the Defendants are correct in saying that a Board's powers cannot be curtailed, nor can Yes Bank find itself foisted by some wholly unsuitable person. I have already discussed the matter of a so-called 'deadlock' , i.e., a situation where the Plaintiffs and Rana Kapoor's group are unable to agree on a nomination. That, as I have said, is a situation that could well have arisen had Ashok Kapur been alive today. It is not a situation that is in any way tied to Ashok Kapur's demise. The Plaintiffs' suggestion earlier in correspondence, and one that, in fairness, Mr. Khambata placed with evident hesitation, viz., that each side should 'nominate' one person to the Board ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... might be easily and neatly solved. 13.8 I do think it necessary to observe at this stage that given the extent of their shareholding it might well be in the Plaintiffs' interest to support the continuance of key directorships, including the appointment of Rana Kapoor. Whatever may have been his conduct, this much cannot be denied: that under his stewardship, in the seven years since Ashok Kapur's death, Yes Bank has grown and progressed exponentially, to the benefit of all, not least the Plaintiffs themselves. 13.9 It is not possible, in my view, to monetize as it were the Plaintiffs' rights under the Articles. It is also no answer to say that since the value of their shares has gone up substantially the Plaintiffs have suffered no prejudice. To say this is not only to trivialize the Plaintiffs' cause, but, and perhaps more importantly, to trivialize the value of the rights under the Articles. 13.10 If, as I have earlier said, Yes Bank has before it even now a plenitude of options even when it comes to the directors whose appointments are in jeopardy, what need is there for an interim order? Here, too, I think the answer is an inevitability: if something has been done that is i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kapadia were unavailable as well. I stood the matter over to 2nd June 2015, again after some hearing. I must point out that the vacation hearings in May 2015 were, at my instance, in camera since the attempt was to find a resolution and I felt that press reports might cause positions to harden further. On 2nd June 2015, the matter was required to be stood over by two days for personal reasons of appearing counsel. 13.13 Today, 4th June 2015, I heard Mr. Khambata, Mr. Kapadia and Mr. V. P. Singh, learned Counsel for Yes Bank. At this time, Mr. Singh and Mr. Kapadia both submitted that my suggestion of a possible mediation be accepted and invited an order to that effect. Mr. Kapadia relied upon the decision of the Supreme Court in Afcons Infrastructure Ltd & Anr. v Cherian Varkey Construction Co (P) Ltd & Ors. 2010 (3) ILR (Ker) 917 to submit that the terms of the reference to mediation be left open and only a summary of disputes be formulated at this stage. Ordinarily, there would have been no difficulty in accepting this submission, because this is undoubtedly what needs to be done in any reference to mediation under Section 89 of the Code of Civil Procedure, 1908. In this partic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to agree on the name of the mediator, preferably a retired Judge of the Supreme Court. The matter is to be listed for this purpose on 17th June 2015 at 3.00 p.m. Should there be no agreement, the order will then be uploaded. Yes Bank and its directors will then be required to communicate it to the regulators in the usual course. 13.15 The next AGM of the Company is scheduled to be held on 6th June 2015. Mr. Khambata states that he opposes some of the agenda items at that AGM and may need to to move separate proceedings in that behalf. Should he do so, both sides will be at liberty to rely upon such portions of the judgment as they think necessary, keeping in mind that any such reliance may result in a possible settlement then becoming workable. This will be without prejudice to the rights and contentions of both sides. 14. FINAL ORDER AND RELIEFS 14.1 The Notice of Motion is made partly absolute in terms of the following prayers: (a)(v), (a)(vi), (a)(vii), (a)(viii), (a)(xv) and (a)(xx). It is clarified that as regards prayer (a)(vii) in relation to Defendant No.9, M. R. Srinivasan, and as regards the injunction in that regard, this will not operate if, because of an age-bar, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earing and final disposal of the present suit this Hon'ble Court be pleased to: (i) restrain the Defendants from holding any meeting as per the Notice dated 17th April 2013 to consider the proposed resolutions at item Nos. 6, 7 and 8; and (ii) in the alternative to prayer clause (i), the Hon'ble Court be pleased to restrain the Defendants by a temporary order and injunction of this Hon'ble Court from in any manner putting the proposed resolution Nos. 6, 7 and 8 as set out in the Notice dated 17th April 2013, to vote at the AGM scheduled on 8th June 2013 (iii) that pending the hearing and final disposal of the present Suit, the Defendants be restrained by a temporary order and injunction from nominating and/or recommending the appointment of any Directors under clause 110(b) of the Articles of Association of Defendant No. 6 without consulting and obtaining the consent of the Plaintiffs. (iv) that this Hon'ble Court be pleased to issue such orders or directions as are necessary to give full effect to its order of 10th June 2013 including directing the Board of Directors of Defendant No. 6 to reconsider the nominations of Plaintiff No. 2 to the Board of Directors o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... read with Section 152 of the Companies Act, 2013 so as to comply with the provisions of the aforesaid Sections without requiring either of the two IP Representative Directors to compulsorily retire by rotation contrary to Article 121 of the Articles of Association of Defendant No. 6 company. (xiv) restrain Defendant No. 1 by a temporary order and injunction from acting or holding himself out as Managing Director or Chief Executive Officer of Defendant No. 6. (xv) restrain the Defendants by themselves, their servants, agents and/or officers by a temporary order and injunction from acting upon Note No. 11 of the notice dated 23 April 2014 and from treating Defendant No. 7 and/or Defendant No. 18 as independent Directors without seeking the necessary approval in this regard from the shareholders of Defendant No. 6 company; (xvi) that the Hon'ble Court be pleased to declare that Defendant No. 9 was not validly appointed the Non-Executive Part-time Chairman of Defendant No. 6 from the date of his purported appointment; (xvii) that the Hon'ble Court be pleased to order and direct Defendant No. 9 to repay to Defendant No. 6 all the payments received by him as the purported ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny person, means ownership of more than 50% of voting securities of such person and the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such person, whether through the ownership of voting securities, by agreement or otherwise and the power to elect more than 50% of the directors, partners or other individuals exercising similar authority with respect to such person; "Indian Partners" Ashok Kapur and Rana Kapoor, are collectively referred to as the "Indian Partners" and each of Ashok Kapur, and Rarna Kapoor is individually referred to as the "Indian Partner"; "Rana Kapoor" means Mr. Rana Kapoor, an Indian National and resident of Grand Paradi Apartments, Rowhouse # 1, Mumbai - 400 036 and unless it be repugnant to the context, shall mean and includes his successors, legal representatives and assigns: (b) Interpretation. Any reference in these Articles to:- (iv) "person" means any individual, firm or partnership or association, joint stock company, joint venture corporation, trust, unincorporated organization or government or agency or sub-division thereof; ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Rabo in the Company. 110. (a) Until otherwise determined by a General Meeting the number of Directors shall not be less than 3 (Three) and no more than 15 (Fifteen). (b) So long as the Indian Partners hold along with any of their Affiliates directly or indirectly, at least 10% of the issued and paid up share capital of the Company, the Indian Partners shall have the right to recommend the appointment of three directors collectively referred to as the "IP Representative Directors". So long as Rabo holds along with any of its Affiliates directly or indirectly, at least 10% of the issued and paid up share capital of the Company, Rabo shall have the right to recommend the appointment of one director referred to as the "Rabo Representative Director". (c) Apart from the IP Representative Directors and the Rabo Representative Director, the other directors shall be independent ("Independent Directors"). The Indian Partners shall propose the names of the first three Independent Directors, who upon approval by Rabo, shall be appointed as such by the Board. Rabo and the Indian Partners may, recommend the names of the remaining Independent Directors to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ossesses qualification, knowledge, experience or expertise useful to the Company, may, in addition to the duties as Chairman, be called upon, if he is willing, to render such extra services on day to day basis, or by way of special assignment or in any other manner as the Board may decide. (e) The term for the Chairman, the CEO and Managing Director shall not exceed five years at a time, provided that the Chairman, the CEO and Managing Director should be eligible for reappointment. (f) Notwithstanding anything to the contrary, the Chairman and the CEO and Managing Director shall not be subject to retirement by rotation under Article 122 but shall; subject to the provisions of any contracts between them and the Company, be subject to the same provisions as to resignation and removal as the other Directors of the Company and shall ipso facto immediately cease to be the Chairman, CEO and Managing Director as the case may be if he ceases to hold the office of Director for any cause. (g) The remuneration of the Chairman, CEO and Managing Director or whole-time Director shall (subject to Section 309 of the Act and other applicable provisions of the said Acts and these presents and of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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