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2015 (6) TMI 707 - HC - Companies LawRight vested by the Articles of Association denied - Control of Yes Bank - Family dispute - Held that:- Yes Bank’s Articles do contain a set of proprietary and participative rights; particularly in Article 110(b). These are rights that are attached to shares, and flow from, and only from the shareholding of Ashok Kapur and Rana Kapoor. Of these various rights, the right to recommend under Article 110(b) decidedly is not and never was personal to either Ashok Kapur or Rana Kapoor. It endures to each of their successors, legal representatives and assigns. This right is not in the nature of a ‘contract of personal service’ and was not limited to the two individuals in question. There is no question of contextual repugnancy. The right to recommend, read in context, is much more than the right to suggest. The very nature and context of Article 110 clearly indicates that this was always intended to be a right to nominate three “IP Representative 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. As regards Defendants Nos. 7 and 18, I am unable to understand how it could have been proposed to ‘treat’ them as Independent Directors. They were required to be appointed as such by validly passed resolutions at a properly called General Meeting and there is no provision in the 2013 Act to allow any person to be ‘treated’ as an independent director. 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 illegal or ultra vires, to allow it to continue for the next two decades while the suit wends its tortuous way through a trial is patently unfair. On the question of balance of convenience, commercial expediency cannot trump acts ultra vires or illegal. If reliefs are not granted, the Articles’ meaning is forever lost. The Articles of a company are to it very like what the Constitution is to citizens. Shareholders are truly ‘invested’ in the enterprise: not merely for making profits and earning dividends, but also with a view to ensure that their rights, enshrined in the Articles, are always protected. It is of little use to say that the Plaintiffs are not a minority because they have a large shareholding. - 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 - restrain Defendant No.7 from acting or holding himself out as Chairman of Defendant No.6 - 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 - 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 - restrain Defendant Nos. 1 and 6 by themselves, their servants, agents and officers by a temporary order and injunction from appointing any person either as chairman and/or as managing director without consulting and obtaining the prior written consent of the Plaintiffs in this regard - restrain 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.
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