TMI Blog2015 (6) TMI 707X X X X Extracts X X X X X X X X Extracts X X X X ..... lding 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 Direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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. - NOTICE OF MOTION NO. 944 OF 2013 IN SUIT NO. 462 OF 2013 - - - Dated:- 4-6-2015 - G.S. PATEL, J. For The Defendant : D.J. Khambata, Senior Advocate, D.D. Madon, Senior Advocate, Shyam Mehta, Senior Advocate, Jimmy Avasia, M.S. Doctor, Aditya Mehta, Rohan Dakshini, Ms. Pooja Kothari, Ms. Nikita Mishra and Ms. Spenta Havewala for the Plaintiff. Rohit Kapadia, Senior Advocate, Naval Agrawal, Prashant Beri, Naval Agarwal, Prashant Beri, Dr. Veerendra Tulzapurkar, Senior Advocate, V.P. Singh, Ankoosh Mehta, Rucheta Shah, Ms. Gathi Prakash, Soli Cooper, Senior Advocate, V.P. Singh, Ankoosh Mehta, Ms. Rucheta Shah and Ms. Gathi Prakash JUDGMENT 1. Overview 1.1 This is a singularly unfortunate dispute, not least for being a matter eminently fit for a sensible and rational settlement. None has been effected, despi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght 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 several weeks. The arguments have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dedly 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or. Defendant No. 16 Appointment not challenged. Ms Radha Singh Independent Director. Defendant No. 17 Appointment not challenged. Ajay Vohra Independent Director. Defendant No. 18 Appointment not challenged. 3. Factual Matrix 3.1 On 7th February 2002, the Reserve Bank of India ( RBI ) granted an in-principle approval to Ashok Kapur, Rana Kapoor and one Harkirat Singh to promote a new bank. About a year later, on 30th April 2003, a Share Subscription Agreement ( the SSA ) was executed by Ashok Kapur, Rana Kapoor and Rabobank, another entity. Rabobank agreed to subscribe to 49% of the equity shares of the proposed banking company, while Ashok Kapur and Rana Kapoor agreed to subscribe to the remaining 51%. On the same day, a Shareholders Agreement ( SHA ) was executed by Ashok Kapoor, Rana Kapoor and Rabobank. This SHA contains several definitions too, including of Ashok Kapur and Rana Kapoor. It closely follows the preceding SSA. 3.2 On 4th November 2003, Y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l public offering ( IPO ) by Yes Bank, the shareholding of the Plaintiffs and the Rana Kapoor changed somewhat. Ashok Kapur held 13.01%. Mags Finvest held 6.3%. Rana Kapoor held 7.41%. Yes Capital held 6.3%, and Morgan Credits held 5.6%. 3.7 Tragedy struck on 26th November 2008. Ashok Kapur was one of the victims of the 26th November 2008 terrorist attacks on Bombay. Following his untimely demise, Ashok Kapur's shares in Yes Bank were transmitted to his wife Madhu Kapur and their children Shagun and Gaurav. 3.8 In January 2009, Shagun Kapur met Rana Kapoor. It seems that at this meeting Shagun Kapur enquired about the rights of the Plaintiffs to participate in the management of the Yes Bank. According to the Plaintiffs, Rana Kapoor told Shagun Kapur that she was then too young. He advised the Plaintiffs to wait and to trust him, assuring them that he would take care of their interests. Rana Kapoor also introduced Madhu Kapur and Shagun Kapur to some of the Directors of Yes Bank. According to the Plaintiffs, they were assured that they would, in time, be allowed to participate in the management of Yes Bank. 3.9 On 21st April 2009 and 22nd April 2009, Yes Bank's Nomi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oup collectively held 16.56%. The only relevance of this document in this narrative is that even as late as April 2009, Yes Bank showed these shareholdings as those of the Promoter and Promoter Group . This, again, is a matter on which Mr. Khambata bases a part of his case. 3.14 I must at this stage note that there is a grievance made by the Plaintiffs regarding the notices for the various AGMs called by Yes Bank from 2010 onwards. At each of these AGMs there have been appointments of various persons to Yes Bank's Board. These are challenged and impugned by the Plaintiffs for want of sufficient authority, principally on the ground that the recommendation of these persons are not either in accordance with law or in accordance with the terms of the Articles of Association of Yes Bank, or both. Rather than include each one of these challenges in this factual narrative, I propose to deal with them separately later in this judgment. 3.15 On 18th August 2010, Yes Bank wrote to the RBI claiming inter alia that the two families, i.e., Ashok Kapur's family and Rana Kapoor's family, were not related in terms of the relevant definitions under the Companies Act, 1956 and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h July 2012) or the ninth AGM (8th June 2013). It was sought for the first time only two years later at the tenth AGM held on 14th June 2014 on the basis of a AGM notice that the Plaintiffs described as 'tricky and misleading' . The continued appointment of Rana Kapoor as the Managing Director and CEO of Yes Bank from 1st September 2012 is challenged. 3.19 On 18th June 2012, Yes Bank applied to the RBI for approval for Rana Kapoor's reappointment as its Managing Director and CEO for a five year period from 1st September 2012 to 31st August 2017. Now this is an application on which Mr. Khambata places a great deal of emphasis. He says that what Yes Bank sent to the RBI as a certified true copy of the Articles of Association of Yes Bank is materially defective. It is not, demonstrably, an accurate reproduction of the relevant portions of the Article. Indeed, it entirely omits the all-important Article 127(b), but only includes copies of Articles 127(a) and (c). I must note that even before me Yes Bank and Rana Kapoor went to great lengths to withhold disclosure of this document and it was only pursuant to my order of 12th June 2014 that this document was disclosed. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... separately. 3.22 On 2nd May 2013, Shagun Kapur Gogia wrote to Rana Kapoor recalling the earlier assurance that he had given and the subsequent events of January 2011. She mentioned that in a December 2012 publication entitled the Yes Bank Story , all references to Ashok Kapur had been completely omitted. She asked for a meeting between herself and her mother on the one hand and Rana Kapoor on the other. There was no reply. On 13th May 2013, Shagun sent a second letter to Rana Kapoor. She said that the Plaintiffs had not even been consulted before Rana Kapoor appointed Directors ostensibly 'on behalf of the Indian Partners' . Once again there was no reply. A third letter followed on 15th May 2013, and in this, Shagun requested a meeting as an AGM was scheduled on 8th June 2013. Rana Kapoor did not reply to this letter either. 3.23 A fortnight later, on 4th June 2013, Bindu Kapoor and Radha Kapoor met Madhu Kapur and her children. At this time, Madhu Kapur gave Bindu Kapoor (her own sister) and Radha Kapoor her letter of 4th June 2013 to Rana Kapoor. Later that day in the late evening of 4th June 2013 Rana Kapoor did meet the Plaintiffs. He said, it seems, that there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quested Srinivasan to pass this on to Rana Kapoor. This suit was filed on 6th June 2013. That afternoon, Srinivasan sent an email to Shagun. In this email, Srinivasan clearly attempts to put some distance between himself and what he perceived to be a dispute between the two warring families. According to Srinivasan he only suggested that Madhu Kapur and her group could suggest Shagun's nomination (or any other nomination) for a joint proposal to the Board of Directors for its consideration, and that Srinivasan's own role was limited to arrive at an understanding on the regulatory issues involved in the matter. All other issues, Srinivasan claimed, would fall within the purview of the families of the Indian Promoters. He declined to get further involved in this matter. 3.26 That evening, at about 5.41 p.m. on 6th June 2013, Rana Kapoor sent an email and letter to Madhu Kapur in response of her letters of 4th and 5th June 2013. The Plaintiffs claim to have seen this letter only after the suit was filed. Mr. Khambata laid a very great deal of emphasis on this document. According to him, it demonstrates that Rana Kapoor has unequivocally accepted that the Plaintiffs have ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sume, CV and other declarations and information were also sent to the company. On 21st June 2013, Yes Bank asked the Plaintiffs to provide a revised declaration. It also called for an extensive amount for additional information and particulars. These details included information regarding lists of relatives, the probated will of Ashok Kapur, a copy of the Power of Attorney from Plaintiff No. 3, Rana Kapoor to Madhu Kapur, the consent of Ashok Kapur's legal heirs for the recommendation of Shagun Kapur Gogia and a confirmation whether Gaurav Kapur or any other member of the Ashok Kapur group had permanently surrendered their succession rights in favour of Shagun Kapur Gogia. On 24th June 2013, the Plaintiffs provided the information called for. On 26th June 2013 Yes Bank informed the Plaintiffs that it was considering Shagun Kapur Gogia's nomination pursuant to the Court order dated 10th June 2013, but that this should not be assumed, construed or deemed to be a joint nomination by the Indian partners. 3.29 At this meeting on 22nd June 2013, the NGC and Board rejected Shagun Kapur Gogia's nomination. This was on the basis that she did not meet the standards of Yes Bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lved that Madhu Kapur and her family could not be considered as Indian partners, Promoters or part of the promoters' group of Yes Bank and could not, therefore, inherit rights under the Article of Association in that capacity. At this meeting, Yes Bank's Board also appointed Defendant s Nos. 15 and 16 as additional Directors. 3.37 On 25th April 2014 Yes Bank replied to the Plaintiffs' letter of 28th March 2014. It only said that it would make appointments to the two positions of Chairman and Managing Director by following the due process of law. 3.38 That very day, even while this suit was pending, Yes Bank wrote to the RBI attempting to persuade RBI that the Plaintiffs should not and could not be considered as Promoters of Yes Bank. This correspondence, as indeed all correspondence between Yes Bank/Rana Kapoor and RBI was not copied to or disclosed to the Plaintiffs. As the following facts will show, this disclosure was only made pursuant to an order that I passed a little later. 3.39 In the meantime the financial newspapers reported that Yes Bank was in the process of seeking a clarification on the Plaintiffs' status as Promoters of Yes Bank from SEBI. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Having said that, the reliefs in the Notice of Motion also seek similar orders of restraint. The reliefs sought in regard to the Annual General Meetings held till 2014 will not, of course, survive. But there are other reliefs sought seeking inter alia to restrain Yes Bank from appointing any Directors without consulting the Plaintiffs and without obtaining their consent. There are also injunctions sought against several of the Defendants who are Directors from acting or holding themselves out as such, and an injunction restraining Yes Bank and Rana Kapoor from exercising any rights under the Articles of Yes Bank to the exclusion of Plaintiffs and without their concurrence. 4.2 Some of the reliefs survive. Others do not. Mr. Khambata has made it clear in the course of his arguments which of the reliefs he is pressing and which is not, and I will consider each of these while framing the final order to be passed. The plaint and the Notice of Motion both have both been extensively amended at least twice. For clarity and convenience, the reliefs sought in the Notice of Motion are set out again in Annexure A to this judgment. 4.3 Mr. Khambata has restricted himself to the foll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to a non-promoter shareholding. 5. VOLUMES IN THE RECORD 5.1 Before I turn to the rival arguments and submissions and the issues raised, I should perhaps indicate the record that is before the Court. There is, first of all, a three-volume plaint that runs into merely 800 pages. This includes all amendments. The record in a Notice of Motion runs into nearly twice as many volumes: six in all, totalling about 1300 pages. There is also a Joint Compilation that runs into five volumes and 2000 pages. This, I was told, was for convenience although that term seems to have been used somewhat loosely. There is also an additional compilation of correspondence with the RBI. In addition, there are several files containing the authorities cited on either side. The Plaintiffs have filed comprehensive notes of arguments and a supplemental set of written submissions as well. Defendants Nos. 1, 6 and 17 to 18 have also filed their notes of arguments. 6. BROAD ISSUES FOR DETERMINATION 6.1 To my mind, the submissions and arguments centre around these questions: (a) Were the rights to participation in management that vested in Ashok Kapur by virtue of Yes Bank s articles personal to hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and, unless it be repugnant to the context to include each of there successors, legal representatives and assignees . 8.4 The word affiliate is defined to mean any person which is a holding company or subsidiary of Rabo (i.e. Rabobank) or any person including any subsidiary or holding company which directly or indirectly (a) controls either Rabo or the Indian Partners ; (b) is controlled by either Rabo or by the Indian Partners (c) controlled by the same person who directly or indirectly controls Rabo and the Indian Partners or (d) is the subsidiary of the same person of which Rabo is a subsidiary. 8.5 The terms Indian Partners (used in these proceedings interchangeably with the phase Indian Promoters ) is defined in the Articles to mean Ashok Kapur and Rana Kapoor (as defined above), but collectively and separately. The definition makes it clear that the term Indian Partners refers to the two gentlemen together and that each of them is referred to separately as the Indian Partner . Further, the Articles make it clear that the reference to a person means not only an individual but also artificial entities such as a company, a trust and the like. The interpretat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion independent directors means Directors who apart from receiving Director s remuneration, do not have any other material pecuniary relationship or transactions with the Company, its promoters, its management or its subsidiaries which in judgment of the Board may affect independence of judgment of the Director. 8.8 The material part of this Article for our purposes is Article 110(b). The first sentence of this Article specifies a threshold limit for the Article to operate. It says that provided the Indian Partners (as defined in the Articles) along with any of their affiliates (also defined), directly or indirectly hold at least 10% of the issued and paid up share capital of the Company, the Indian Partners have the right to recommend the appointment of three Directors to Yes Bank s Board. These three recommended Directors are to be called IP Representative Directors . The second part of Article 110(b) made a similar provision for Rabobank giving it the right to recommend the appointment of one Director. 8.9 Article 110(c) provides for Directors other than the IP Representative Directors and the Rabo Representative Director. These other Directors are required to be what ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commend the CEO and Managing Director of the Company. This Articles specifically provided that Ashok Kapur would be the first Chairman of the Yes Bank and Rana Kapoor its first CEO and Managing Director. The second part of Article 127(b), a provision that is no longer material following the exit of Rabobank, but which may nonetheless shed some light on the manner in which these Articles are to be interpreted, says that Rabobank would cause the Rabo Representative Directors to vote along with the IP Representative Directors for the appointment of the Chairman, CEO and Managing Director to the relevant committees of the Directors (as indicated by the Indian Partners) . In other words, the Rabobank representative had little choice in this matter of appointment of the Chairman, CEO and Managing Director to various committees of Yes Bank. 8.14 Article 127A was introduced by an amendment in 2004, one that was approved by the Reserve Bank of India. This Article sought to introduce the concept of Whole Time Directors into these Articles. Article 127A(a) says specifically that subject to the provision of the governing statutes and to the Articles, the Board of Yes Bank shall, subjec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apoor were the first IP Representative Directors of Yes Bank. The Indian Partners had also the right to propose the names of the first three independent Directors. This phrase is defined in the second part of Article 110(c) as being persons who apart from remuneration as directors have no other material pecuniary relationship or transaction with company, its Promoters, its management or its subsidiaries and which, in the judgment of Yes Bank s Board, might affect their independence of judgment. Incidentally, this appears to be another place where the expression Promoters has actually been used. The IP Representative Directors were also saved from retirement by rotation. Ashok Kapur and Rana Kapoor were respectively appointed under the Articles as a first Chairman and the first CEO and Managing Directors of Yes Bank. The amended Article 127A also gave the Indian Partners the right to recommend Whole Time Directors to the Board of Yes Bank. 8.18 Mr. Khambata s submission is that the right to recommend mentioned in these Articles is a recommendation that is binding and subject only to banking regulations. Its purpose is to protect the interest of the initial promoters and founder ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntatives. If the Articles intended to provide for the contrary, they would say so in terms. They do not. In the present case, Mr. Khambata submits, far from curtailing any rights of succession, inheritance or assignability, the Articles make explicit that which is implicit in the very nature of the share itself: all the proprietary rights available to Ashok Kapur, were, plainly, heritable and assignable. They cannot in any manner be construed to be personal rights. Contractual rights are by definition assignable. The exception is cases of contracts that are personal in nature or where rights are incapable of assignment either because of a statutory prohibition or because of an explicit provision in the contract itself. (Khardah Company Limited v. Raymond Co (I) Pvt. Ltd. AIR 1962 SC 1810). Ordinarily, and unless there is a contrary intention either expressed or implied a contract is enforceable against the legal heirs, representatives, assignees and transferees of a party to that contract.( Ram Baran Prasad v. Ram Mohit Hazra AIR 1967 SC 744). Usually, contractual rights are not treated as personal unless there is clear evidence sufficient to support an inference of a prohibition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd ability of Ashok Kapur and Rana Kapoor is not compelling. Every venture has its progenitor or promoter, and licenses are granted to the proposed venture because of that person s abilities. This does not colour the rights to be found in the Articles and I do not believe that any principle of interpretation can allow us this kind of a regression. Mr. Kapadia says further that the successors may not have any experience at all in banking and for that reason the right must be held to be personal. This is clearly incorrect, and it needlessly conflates distinct questions: to whom that right accrues, the precise nature of that right and whether that right includes the right to self-nominate. It does not follow from a finding that the right is not personal that it necessarily includes and means the right to nominate or foist oneself on the Board. Mr. Kapadia s submission that this is the necessary sequitur or result of finding that the right is personal is not correct. That is a possibility, not an inevitability. It might happen when both Indian Partners agree. In any case, I do not see how this helps Mr. Kapadia. If the right is personal, as he suggests, then it not only includes the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hares held by each of the two contesting groups. This argument leads us nowhere because, admittedly, the right under Article 110(b) can only ever be exercised if the two groups command 10% of the equity shareholding of Yes Bank. That is a threshold criterion for the exercise of the right (and this must be carefully separated from a right that attaches to a shareholding). Mr. Kapadia then constructs various scenarios of buying and selling of stock to demonstrate the so-called absurdity. Here, too, the argument fails because it proceeds on the assumption that within each group, each successor and each assign and each affiliate can exercise the right separately. That is not correct. In fact, as regards, heirs, successors, legal representatives and Affiliates (the latter as defined) there is no difficulty at all in accepting Mr. Khambata s interpretation. An Affiliate is an entity controlled by either of the two individuals and, in fact, both have exercised this right through such Affiliates (Mags Finvest, Yes Capital and Morgan Credits, for instance). Mr. Kapadia s analogies gain some traction when he emphasizes the use of the word assigns and asks if it is at all possible for trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , administrators, legal representatives and successors , or something of the kind, in Article 49(e). The inclusion of a general definition suggests that it must be used throughout except where (a) expressly excluded, which we find nowhere; or (b) implicitly excluded by a contextual repugnancy. The latter is a concept well known to law. An expression may be contextually repugnant if it results in an absurdity or nullifies the provision in which it is used.(Dhandhania Kedia Co. v. CIT AIR 1959 SC 219; M. Karunanidhi v Union of India, (1979) 3 SCC 431). Neither is the case here. The only Articles where such a repugnancy may be imputed are those that name Ashok Kapur and Rana Kapoor to definite and definite corporate positions as the first IP Representative Directors (Article 111(a) and (b)), the Chairman and the Managing Director-and-CEO respectively. (Article 127(b)). 8.27 The Articles are, I find, cautiously worded. At this stage, it is not unreasonable to assume that had the draftspersons intended to word Article 110(b) in the manner Mr. Kapadia and Dr. Tulzapurkar suggest, they would have said so. The words heirs, legal representatives and assigns might have been excluded s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Sundari Bhagwandas Kripalani (1991) 2 SCC 180; Provash Chandra Dalui v. Biswanath Banerji (1989) Supp. (1) SCC 487; Khardah Co. Ltd v. Raymon Co (India) (P.) (Ltd), AIR 1962 SC 1810; i, AIR 1969 SC 9). Mr. Khambata agrees whole-heartedly with this much. Is it conceivable that the Official Assignee or Official Liquidator would be entitled to exercise these rights? ask Mr. Kapadia and Dr. Tulzapurkar. It is, and may well come to pass. But that was always a possibility from the time these Articles were drawn, and not one occasioned by Ashok Kapur s passing. There is nothing so very absurd about this; it only requires the Indian Partners to be more cautious in their affairs. 8.31 Mr. Kapadia also debunks Mr. Khambata s formulation of this being a participative proprietary right for the protection of a minority . To an extent, Mr. Kapadia may be correct. These rights have nothing whatever to do with the Plaintiffs (or the Rana Kapoor group) being a minority per se. There is no linkage between being a minority and the exercise of the right. The right is available to a certain defined class, whether a minority or a majority at any given time, and the clause says that in ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e we required to presume that Ashok Kapur and Rana Kapoor would never and in no circumstances have disagreed on a single nomination? 8.34 There is another reason too that the right with which we are concerned cannot be personal and divorced from shareholding. The right is embedded in the Articles. This is a contract between the company, Yes Bank, and its shareholders. If the Defendant s interpretation is to be accepted, then that contract would necessarily also have to be with persons irrespective of their shareholding, viz., Ashok Kapur and Rana Kapoor. This creates a considerable legal anomaly: it would confer a right independent of any shareholding, and divorce rights under the Articles from shareholding. It would then follow that that right would be enforceable at the instance of an outsider, a non-member. This is contrary to settled law, (Ramkumar Potdar v. Sholapur Spg. Wvg. Co. Ltd. (1934) 4 Comp Cas 481 (Bom)(DB); Maj Gen Shata Shamsher v. Kamaru Bros. Pvt. Ltd., AIR 1959 Bom 201), and, closely read, Article 110(b), for instance, makes that abundantly clear. That Article requires two things: first, that the persons who can exercise the right must be shareholders, and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or ( RK ). It is unclear why the warranties and representations mentioned in those documents should not bind successors, etc., as the Defendants suggest. Moreover, the first Share Subscription Agreement does not have a lock-in clause; yet it uses the expansive definition. Therefore, to suggest that in the present Articles, the expansive definition applies only to the lock-in Article 49(e) is clearly incorrect. Interestingly, the Share Subscription Agreement of 5 November 2003 (pre-incorporation) seems to suggest that the rights of the Indian Partners were also conferred on an artificial entity, a company Doit. How this right can be said to be personal to two individuals and in the nature of a contract of personal service, likened to a contract to perform on stage and so on, remains unexplained. Finding that this is not a personal right obviates the need to consider whether, like all rights that are entirely personal, it is transferable or heritable. 8.36 The Master Investment Agreement followed Yes Bank s incorporation and it is indubitably important for it yields some clues as to how the parties themselves understood the Articles and acted on them. Here again, the term promo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kapur s successors, and are entitled to exercise these rights.(This is distinct from the argument that Defendants Nos. 1 and 6 have also made admissions regarding the true nature of the right. I have discussed this later.) These admissions, a list of which was provided, indicate only that the Defendants have, at best, accepted that the Plaintiffs are Ashok Kapur s successors. Except for one important exception, this list does not in itself carry Mr. Khambata the distance he must go; for the admissions to which he refers do not show, on their own, that the Defendants have admitted the Plaintiffs entitlement to the exercise of those rights. An admission is a matter of evidence. It can always be explained. It can, for instance, be shown to have been used in a given context and therefore not to constitute an admission for other purposes. 8.39 But there are two telling documents. On 21st April 2009, Yes Bank s Nominations and Governance Committee (the NGC) met. (Joint Compilation, pp. 503-504). Among the things it considered was, it seems, a proposal for Madhu Kapur s nomination to the Board. (I am setting aside for this discussion the fact that nobody seems to have made a nominat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8.42 Unless explained, an admission furnishes the best evidence. (Ramji Dayawala Sons (P.) Ltd. v. Invest Import (1981) 1 SCC 80). If ever there was unequivocal admission by conduct as to the meaning of a contractual document, this is probably it. Neither Yes Bank s NGC nor its Board said that the right in question was unavailable to Madhu Kapur; they only questioned her credentials. Indeed, they went further, and said it was open to her to nominate an eligible candidate. It was not till much later, in the Affidavits in Reply to this Notice of Motion, that Yes Bank and Rana Kapoor reversed course and claimed that Madhu Kapur never had that right once Ashok Kapur passed on. 8.43 But, as in many things, the admission that Mr. Khambata relies on is not without a sting in its tail; Yes Bank has said that the right can be exercised jointly with Rana Kapoor. That, too, in unambiguous. If Mr. Khambata relies on this admission, then he must of necessity accept that the right in question can only be exercised jointly. In fairness, he does precisely this; but the consequence of this does not necessarily yield the results he desires. 8.44 This takes us immediately to the second que ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere the right has been purported to be exercised but not jointly, the results must stand vitiated as being ultra vires the Articles. Several directorships will then be impeached. For clarity, and on this basis, I have dealt with each of these below while discussing the individual situations at hand, but the summary of that analysis is that several directorships are rendered vulnerable. 8.47 What precisely is the nature of the right in the Articles, specifically, the right in Article 110(b), Article 127(b) and Article 127A? Is it, as Mr. Khambata says, a right to nominate or is it, as Mr. Kapadia and Dr. Tulzapurkar would have it, merely a right to suggest, the final decision always being left to the Board? Mr. Khambata says that context and common sense demand that the right to recommend must be read to mean a right to nominate. Nothing else gives them business efficacy. He is careful to say that this is, of course, subject to applicable laws and RBI directives; it will not do, for instance, to have someone wholly unsuitable and unqualified sit on Yes Bank s Board only because she or he is a nominee . 8.48 There is much to what Mr. Khambata says. First, there is the context ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anga Rao v. State of Andhra Pradesh (1975) 4 SCC 709; Naraindas Indurkhya v. State of Madhya Pradesh (1974) 4 SCC 788; Union of India v. Telecom Regulatory Authority of India, (1998) 3 Comp LJ 400 (Del)). Matters of Constitutional and statutory interpretation do not always exactly match those in matters contractual. There are many ways to discern contractual intent; conduct, for instance, being one. These are not applicable when assessing statutes or Constitutional provisions. Lexical definitions take us only so far, and often spiral in different directions, depending on which particular dictionary one chooses to consult. Thesaurus Lex should hold no terrors in a matter such as this. 8.52 Mr. Kapadia insists that the rights in question were personal because of the special expertise, experience and abilities of Ashok Kapur and Rana Kapoor. This, he says, allowed them the privilege of suggesting names to the Board; and this is qualitatively different from the right of an ordinary member to suggest a name at a general meeting. But, Mr. Khambata ripostes, such a limited right surely yields only a trivial advantage, hardly commensurate with the much-vaunted special status of the two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the use of the word nomination in correspondence after this litigation began). (a) In his Affidavits in Reply dated 1st July 2013 and 24th July 2013, Rana Kapoor says that his nomination of Mr. S. L. Kapur was made without any reference to the Plaintiffs. He similarly made nominations of Defendant No.8 (Ravish Chopra) and Defendant No. 9 (M. R. Srinivasan) on his own. They were not shareholders suggestions, recommendations or nominations. They were made by Rana Kapoor to the Board. If indeed they were merely suggestions, they met with curious and telling warmth. (b) The IPO Prospectus of 24th June 2005 puts it unambiguously: (Joint Compilation, p. 279 at p. 375), it speaks of the parties to the SSA having, subject to the holding 10% of the equity, the right to nominate three Independent Directors to the Board (in addition to the posts to be held by Ashok Kapur and Rana Kapoor). Rabobank too was said to have the right to nominate one non-rotational director to the Board. (c) The NGC Minutes of 21st April 2009 to which I have earlier referred also speak of Madhu Kapur s right to alternatively nominate (not merely suggest ) another candidate. This is carried forw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e placed before the General Body. Does the NGC ever consider them on merits, and reject those it finds unsound? There is no evidence, even anecdotal, of this, except of course in the case of Shagun Kapur Gogia. Does the Board look askance at these suggestions ? It would appear not. Both seem to accept these suggestions precisely as nominations and I do not think it is even remotely possible to say now that the right to recommend is a paltry and piffling right to suggest. That could never have been the contractual intent. 8.57 Mr. Khambata correctly says that in this situation once a recommendation is made, the Board, bound by Yes Bank s Articles, has no choice in the matter of that appointment, one that is subject only to the mandated eligibility criteria and statutory compliance. It is only where a person is disqualified under the Banking Regulation Act, that the nomination can be rejected; and that is not because the Board disagrees with the nomination, for it cannot, but simply because the law will not allow it. The Board is required in these cases only to ensure compliance with law. There is he says, and I think correctly, no conflict between this interpretation and the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed not travel further afield, but should we be of a mind to do so, the terrain is no different. Even the authorities cited by Yes Bank do not, correctly read, support its case. (Pennington, Company Law, 5th ed, pp. 696-699 at p. 697; John Shaw Sons (Salford) Ltd v. Peter Shaw John Shaw, (1935) 2 KB 113). I do not think it is necessary to repeat again and again that a company is bound by its Articles. That is far too well settled to admit of the least debate. (Naresh Chandra Sanyal v. Calcutta Stock Exchange Association Ltd. (1971) 1 SCC 50; Vodafone, supra). 8.60 Mr. Kapadia cites Scott v. Scott (1943) 1 All ER 582 Boulting v. Association of Cinematograph, Television and Allied Technicians (1963) 1 All ER 716 : [1963] 2 QB 606) and Rolta India Ltd Anr. v. Venire Industries Ltd. Ors. (2000) 2 Bom CR 241 : [2000] 100 Comp Cas 19 (Bom), to press his point. Scott was not in relation to restrictions in the Articles. Boulting is also inappropriate. That was an entirely different case. The questions before the Appeal Court were whether there was any principle that prevented every employee from becoming a union member; whether employee could include a manager ; and the true s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icles cannot impinge on the Board s discretion and fiduciary duties. No interpretation that fetters the Board s discretion in selecting directors and managing director should, for that reason, be accepted. Mr. Khambata s interpretation, Mr. Kapadia says, denies members and shareholders of valuable rights to elect directors; and to take away the Board s discretion, even in the slightest, is contrary to the interests of the company, and Rolta says these are paramount. It is for this reason that the Articles advisedly use the phrase right to recommend and not right to nominate . I think this overstates the position, and it is not at all what Mr. Khambata advocates. As we have seen, there is an inherent limitation in Article 110(b) (though not in the other Articles), requiring a qualifying threshold shareholding. This is an inbuilt safeguard. Secondly, the curtailment of a discretion, even one conferred by a statute, is not the same as a denial of the right to exercise a statutory power or discharge a statutory duty. Mr. Kapadia s interpretation seems to me to be an unwarranted extrapolation: the fact that certain limited seats on the Board may be subjected to a nomination (they do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in itself wholly undermines Mr. Kapadia s Rolta-based submission. Essential discretion is not taken away at all. The Board may well tell the Indian Partners that the person they nominate, suggest or recommend does not meet the necessary criteria, and the matter ends at that. 8.65 Nor am I able to accept Mr. Kapadia s submission that all this is unworkable . I do not see why. There is a positive embarrassment of choices available to the two groups. They can choose to act together. They can choose not to act at all. They can opt to reduce their shareholdings below 10% and thus give up their qualification to the Article 110(b) right. How long can this continue and till when? asks Mr. Kapadia. I should imagine the answer to that suggests itself: till the company amends its Articles, obviously. The one option that is not available to either group is to take the Articles as they stand and then, on the basis of some very latter-day epiphany, attempt to warp and metamorphose them into what is, for all intents and purposes, not so much a professionals bank but one professional s bank. 8.66 There is one submission by Mr. Khambata that I must reject. It is simply not possible, on any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther, the statute clearly requires a minimum of one-third of the total strength to be independent. The reason is obvious, and it is in the larger interests of the company. I do not think this can be construed to mean a cap or an outer limit. That would mean serving a narrow, private interest of one group (the two families taken as one) as opposed to the interests of the company itself. Finally, Article 110(b) is not compulsory. It does not say that the Ashok Kapur and Rana Kapoor shall recommend . It says they will have the right to recommend (subject to conditions, of course, as discussed). The existence of the right is embodied in the Articles; the exercise of that right is clearly a matter of volition, not mandatory. If this be so, then there is no question of Board packing or of there being only a maximum of five independent directors on Yes Bank s Board. 9.3 The appointments of Defendants Nos. 1 (Rana Kapoor), 8 (Ravish Chopra), 9 (M. R. Srinivasan), 7 (Diwan Arun Nanda) and 18 (Ajay Vohra), and 10 (Rajat Monga), 11 (Sanjay Palve) and 12 (Pralay Mondal) are all impeached as being ultra vires. 9.4 Defendant No.1 : the appointment of Rana Kapoor as Managing Director ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... election, in that it requires the Rabo Representative Director to vote along with the IP Representative Directors to the appointment of the Chairman and the Managing Director/CEO to the relevant Committees of Directors (as indicated by the Indian Partners . It is possible that this is a reference to various committees other than the Board (such as the NGC, audit committees and so on), and that the reference is to the election of the Chairman and the Managing Director/CEO to these Committees of Directors . But even that makes little difference. (e) At the heart of Mr. Khambata s argument is the case that Rana Kapoor and Yes Bank proceeded on the footing, vis- -vis the RBI, that his appointment was in fact under Article 127(b), not in exercise of any inherent powers of the Board. The application to the RBI is dated 18th June 2012. (Plaint, Vol II, pp. 525-535, Exhibit M-XXIII). The covering letter is innocuous. (Plaint, Vol II, p. 525). It has several enclosures. One of these is Form B (Particulars) . (Plaint, Vol II, p. 527). This form requires a statement of who is the competent authority to make the re-appointment in question and to fix the terms thereof. The response refers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht be permitted the liberty, pique not substance . At the end of the day, all these arguments are based in equity; supposedly for the betterment of the company. This branch of the submission (the insufficiency of notice and inspection) has nothing to do with special rights available to the Plaintiff. They are equally available to all other members. None appear to have complained. Whether or not his remuneration was appropriate was something the general body could, and did, decide. Given that it is nobody s case that the Board is hamstrung in this appointment for want of the Plaintiffs concurrence, I do not think it is remotely possible to invalidate the reappointment of Rana Kapoor. Mr. Kapadia is correct in saying that it makes no difference at all whence the proposal emanated. (h) There is also a submission based on Section 188 of the Companies Act 2013, that the reappointment of Rana Kapoor was a related party transaction and therefore required a special resolution; and that he could not have been reappointed in law by means of an ordinary resolution at an Annual General Meeting. Mr. Khambata submits that Rana Kapoor is a related party vis- -vis Yes Bank and that under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... additional perquisites not available to a Managing Director. The distinction is between a Managing Director and a Director. The latter may not be entitled to these additional benefits; a Managing Director may. Mr. Kapadia is correct when he says, therefore, that the appointment of a Managing Director is not an office or place of profit per se. Rana Kapoor s appointment is one of the matters in the ordinary course of Yes Bank s business. It is an arms-length transaction, and is excluded by the third proviso to Section 188(1). Critically, the RBI while granting approval, and before whom the remuneration details were placed, (Form D, Plaint, Vol II, p. 529. This specifically mentions free furnished house , the free use of the bank s car for official purposes and, on reimbursement to the bank, for private use, telephones, etc.) did not demand that his appointment be by way of a special resolution under Section 188. (l) The argument that Rana Kapoor s reappointment was not sought at the immediately next (i.e., the 9th) AGM in 2013 though approved by the RBI in 2012 is also incorrect. Section 269 of the 1956 Act was in force in 2012 and 2013. It did not require shareholder approva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se are the only nominations that can be made by the Indian Partners. Mr. Chopra was not nominated as a Whole Time Director. He was, by the Defendants own admission, not nominated as an Independent Director. His nomination could, therefore, only fall into the category of IP Representative Director. This nomination could not have been made without the Plaintiffs concurrence. It was not sought. (e) Yes Bank and the Directors argue that Ravish Chopra s name was proposed by a member on 17th April 2013, (Joint Compilation, Vol. III, p. 1232) and that therefore even if initially appointed as a nominee, this ceased to matter since he was at the 9th AGM of the company voted in as an additional director under Section 257 of the 1956 Act. This is a very problematic formulation. Agenda Item 7 of the notice of the 9th AGM (Joint Compilation, Vol. III, from p. 1238 at p. 1242) deals with Mr. Chopra s appointment. The explanatory note says that the company has received written notices proposing his name. But the same note also says: Further since Mr. Ravish Chopra has been nominated by the Indian Promoter, Mr. Rana Kapoor may be deemed to be interested or concerned in the above resolut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , changed Srinivasan s classification from Non-Executive Non-Independent Director to Non-Executive Non-Independent Director (Promoter Nominee) , effective 28th January 2013.(Joint Compilation, Vol. III, pp. 1201, 1206). The minutes indicate that he was Rana Kapoor s nominee.(Joint Compilation, Vol. III, pp. 1204 and 1206) (c) Before his induction on the Board, Srinivasan functioned as an advisor with remuneration to Yes Bank.(Joint Compilation, Vol. III, p. 1214) He was in no sense independent . Like Ravish Chopra, since Srinivasan was not a Whole Time Director or an Independent Director, he could only have been an IP Representative Director, as a purported nominee of Rana Kapoor. This nomination is ultra vires and bad for want of the Plaintiffs concurrence and assent. (d) I must clarify that the Defendants submission that there are not only three classes of directors is correct. Other directors can be appointed as permissible in law. The distinction here is that Srinivasan s appointment was specifically as a nominee, and that could only have been under the Articles. (e) The trajectory of Srinivasan s later appointments and re-designation is also flawed. He was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... j) As a matter of fact, Srinivasan is no longer Chairman of the Board. 9.7 The appointments of Defendant No. 7 (Diwan Arun Nanda) and Defendant No. 18 (Ajay Vohra) as Independent Directors (a) Both Nanda and Vohra were directors before the 10th AGM and before the 2013 Act came into force. They were appointed as Independent Directors liable to retire by rotation under Article 110(c). Explanatory Note 11 to the Agenda Notice for the 10th AGM (Plaint, Vol. II, p. 168) purports to have both Nanda and Vohra treated as Independent Directors under Section 149(6) of the 2013 Act, i.e., as Independent Directors not liable to rotational retirement. (b) This cannot be done. A shareholder resolution appointing them as such directors is necessary under Section 152(2) of the 2013 Act. This kind of corporate bypass operation is unknown to law. But is this necessarily fatal to the appointment? The Plaintiffs were present at the 9th AGM. No point of order seems to have been raised about these appointments. Is it not, as Mr. Cooper for the directors argues, a mere irregularity, one that is by its nature curable in general meeting? ( Sunil Dev v. Delhi Cricket Association, 1990 (80) Comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s as yet no shareholder approval to their appointments. The directors contend that Monga, Palve and Mondal are not yet whole time directors. (c) Another argument raised is that should, for any reason, Rana Kapoor cease to be the Managing Director/CEO, Yes Bank would be in an unviable position, being unable to appoint suitable employees to whole time directorship; and Section 203 of the 2013 Act requires a whole time director where there is no Managing Director. This argument by the directors proceeds on too stretched a hypothetical, and indeed there is nothing that prevents the company from appointing a suitable candidate from among the 15 who serve on its Board. (d) I must note for completeness that Yes Bank s Sixth Annual Report for 2013-14 does not list Monga, Palve and Mondal as directors. Their appointments seem also not to be noted with the Registrar of Companies. 10. SHAGUN GOGA KAPUR S NOMINATION 10.1 Mr. Khambata strenuously canvasses that Shagun Kapur Gogia s nomination placed before the NGC must be considered or held or deemed to have been a joint nomination under Article 110(b). I cannot accept this submission. The reasons are many. It is not necessary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is suit was filed and later that evening Rana Kapoor emailed Madhu Kapur.(Joint Compilation, Vol. IV, p. 1449) He said that he met her to understand her expectation and that Shagun s name was to be considered as the family s nominee . Here, Mr. Khambata suggests that I should see this again as an admission of a joint nomination since Rana Kapoor was writing as an Indian Partner. He also says that this reference to the the family s nominee was in the context of the proposal of each-one-appoint-one floated by the Plaintiffs earlier. If that is so, then there is no question of the nomination being a joint one, for that proposal was entirely extraneous to the Articles. 10.4 It goes on in this vein: a word here, a phrase there. These are not pleadings. These are not even letters by lawyers. These are emails and letters between parties and there is a certain lack of formality that attaches to them. I do not think that from these linguistic pebbles it is possible to define even a molehill let alone the mountain of which Mr. Khambata attempts an ascent. On 10th June 2013, this court passed an order directing the NGC to consider Shagun s nomination.(Plaint, Vol. II, p. 231) On 15th J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. But for an express consent, every single deemed joint nomination would be suspect and would be liable to be questioned at any stage. This is not what the Articles envisage. 10.8 Mr. Khambata then wants me to sit in judgment over the Board s and NGC s rejection of Shagun s nomination or application and to render a finding that it s reasons for rejection are perverse and untenable . This is not something that I am prepared to do. It would set a wholly unhealthy and unwelcome precedent. In short, what Mr. Khambata suggests is this: that because the Articles contain a certain stipulation regarding a joint nomination to the Board, one for which the Board can have no say, and because Shagun s nomination must be inferred to be such a joint nomination, therefore the Court must exercise judicial oversight or some sort of power of review over the Board s decision on merits. This is simply untenable. It is one thing if the Board acts in violation of law or a statutorily binding directive. Whether or not the Board found Shagun s work profile and background commensurate is not for me to assess. That is entirely outside my remit. The rightness of this decision can be debated ad infin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not necessarily catastrophic; it requires Yes Bank to take the necessary steps to revalidate, appoint or reappoint the persons in question (subject to them meeting statutory requirements of course, including the age limits). There is no finding of disqualification of any of these directors for want of ability or credentials. 12. CONCLUSIONS FINDINGS 12.1 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. 12.2 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. 12.3 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 nom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or a court to question the sufficiency of the Board s decision in that regard. 12.8 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. 13. THE THREE DETERMINANTS AT THE INTERIM STAGE 13.1 I turn now to the three determinants to which I must address myself at the stage of an application for interim reliefs. First, have the Plaintiffs made out a prima facie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Plaintiffs. Yet the Plaintiffs might not be entitled to relief if it be shown that granting them relief would necessarily prejudice Yes Bank. But I do not think that either the Plaintiffs or the Court can be presented with so complete a fait accompli. This is very like saying we may have acted in a way the Court has now found to be unjustified and unlawful, but what is done is done and this is irreversible. 13.4 Mr. Khambata says that Rana Kapoor runs Yes Bank like his personal fiefdom. His word is law. He bends the company to his will. What Rana Kapoor wants, Rana Kapoor gets. This seems to me to be excessive. It calls into question the bona fides and credentials of every single member of Yes Bank s Board, and it does not sit well with the undoubted progress that the company has made in the short years since its inception. Perhaps it is true that Rana Kapoor has not been opposed, or, at any rate, there is nothing on record to indicate any opposition. What of it? Possibly he is so consummate in his work that no opposition is necessary. That is not unknown in vibrant organisations often identified with a single individual. Rana Kapoor s pre-eminence or dominance in the affair ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed reservation on the Board. This foisting may be the inevitable consequence of a joint nomination, and there the Board might have no say; in fact, it has not ever claimed to have one. But Shagun s nomination was considered by the Board this Court s orders of 10th June 2013 and 1st July 2013. I do not think it is possible to hold that Shagun s nomination was, or can be deemed to have been, a joint recommendation for the purposes of Article 110. Equally, I do not think it is possible to so completely fetter the Board s discretion in the manner the Plaintiffs suggest. 13.7 I do realize that my findings on Articles 110 and 127A are likely to result in something of an impasse at least when it comes to the appointment of the three IP Representative Directors and Whole Time Directors. There is an alternative to Mr. Khambata s one-seat-each-and-the-third-alternating proposal, the one that I have expressly rejected. This is an alternative that will possibly displease both sides in its starkness: where the two groups cannot agree on a nomination, there simply will be none. There is, as I have noted, another distinct possibility, a matter on which the two warring groups will have to mak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme Court has had occasion to hold that at this stage no Court should conduct a mini-trial, Anand Prasad Agarwalla v. Tarkeshwar Prasad Ors., AIR 2001 SC 2367 and also that, generally speaking, the purpose of a discretionary interim or interlocutory order should be to preserve the status quo where a prima facie case is made out and prejudice is shown. Dalpat Kumar Anr. v. Prahlad Singh Ors., AIR 1993 SC 276. There is also a possible argument that some of the interim reliefs sought are in the nature of final reliefs in the suit and should not, for that reason, be granted. But there is still a species of litigations in which the grant of such reliefs may be unavoidable. I believe this might well be one of them. The alternative, preserving the status quo, would in light of my findings, amount to allowing the Defendants to continue with actions that I have held to be ultra vires the Articles or contrary to law, or both. That is not, I think, a situation that can be allowed to continue while the suit winds its tortuous way through a trial to a final disposal. 13.12 I placed this matter for pronouncing judgment on 7th May 2015. At that time, yielding to a final hope of a mutuall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in fact be possible once the judgment is made available and parties are made aware of their respective positions. There is, however, another concern, one that is expressed by Mr. Kapadia, viz., that once the judgment is made available and passes into the public domain, given the corporate status of Yes Bank, positions are likely to harden, making any resolution for the future almost impossible. For this reason, I have chosen to adopt some what unusual course but only in the hope that this will facilitate a possible resolution. 13.14 I am proceeding to pronounce this judgment today. Authenticated copies of this order will be made available to the Advocates on record for the parties, namely, Federal Rashmikant, M/s. Beri Co. and M/s. Cyril Amarchand Mangaldas. (Mr. Singh undertakes to file a vakalatnama by M/s Cyril Amarchand Mangaldas in replacement of the earlier vakalatname by M/s Amarchand Mangaldas S. A. Shroff Co.). The order is not to be uploaded at this stage. The parties are also directed for the present not to issue any press release or to communicate with the media the substance of this judgment. Yes Bank and its directors are also directed not to communicate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh and their respective attorneys for their very considerable assistance in this matter. Mr. Singh states that a vakalatnama by M/s Cyril Amarchand Mangaldas will be filed in substitution of the original vakalatnama filed by M/s Amarchand Mangaldas S. A. Shroff Co. This is noted. (G. S. PATEL, J.) 17th June 2015. 15A. This Judgment was pronounced on 4th June 2015. For reasons recorded on that day, the matter was kept pending without the judgment being uploaded till today. However, copies were made available to the contesting parties for the purposes of exploring the possibility of agreeing on a set of disputes to be referred to mediation. Since it now appears that this is not possible, the Judgment may now be uploaded. 16. Mr. Khambata makes an application for speaking to the minutes to correct certain inadvertent errors in the judgment that was made available on 4th June 2015. The application is allowed. The necessary changes have now been carried out and incorporated in the foregoing judgment. In addition, I have myself noticed certain typographical errors which have been corrected. Parties are directed to use copies of the judgement that will be uploaded later ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Plaintiffs (or at least Plaintiff No. 1) and without their express concurrence (or at least Plaintiff No. 1's express concurrence); ( vii ) restrain Defendant Nos. 8 and 9 from acting or holding themselves out as Directors of Defendant No. 6; ( viii ) restrain Defendant Nos. 10, 11 and 12 from acting or holding themselves out as Directors of Defendant No.6; ( ix ) restrain Defendant No. 7 from acting or holding himself out as Director of Defendant No. 6; ( x ) restrain Defendant No. 7 from acting or holding himself out as Chairman of Defendant No. 6; ( xi ) Defendant No. 6 be directed by an appropriate order and direction of this Hon'ble Court to disclose and furnish a copy of the video recording of the 9th Annual General Meeting of Defendant No. 6; ( xii ) Defendant No. 6 be directed to give inspection of the minutes of the Nomination Governance Committee's meetings and the Board of Directors meetings recorded in the minute books in ordinary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Defendant No. 6; ( xix ) 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. ( xx ) 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; (b) for ad-interim reliefs in terms of prayer clause a(i) to (iii) above; (c) for costs of the Notice of Motion; (d) Such other reliefs as this Hon'ble Court may deem fit and proper in the circumstances of this case. ANNEXURE 'B' RELEVANT ARTICLES Art ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rson shall include, in case of a body corporate, references to its successors and permitted assigns and in case of a natural person, to his heirs, executors, administrator and legal representatives; 49. (a) An application for the registration of a transfer of any share (s) debenture (s) or any other securities or other interest of a Member in the Company may be made either by the transferor or by the transferee. (b) Where the application is made by the transferor and relates to partly paid Shares, the transfer shall not be registered, unless the Company gives notice of the application to the transferee and the transferee makes no objection to the transfer within two weeks from the receipt of the notice. (c) For the purpose of sub-article (b) above, notice to the transferee shall be deemed to have been duly given if it is dispatched by prepaid registered post to the transferee at the address given in the instrument of transfer and shall be deemed to have been duly delivered at the time at which it would have been delivered in the ordinary course of post. (d) Acquisition of Shares by a person/group which would take in the aggregate his/her/its holding to a level of 5 per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Company. For the purpose of this Article the expression independent directors means Directors who apart from receiving Director's remuneration, do not have any other material pecuniary relationship or transactions with the Company, its promoters, its management or its subsidiaries which in judgment of the Board may affect independence of judgment of the Director. 118. (a) The Office of a Director shall become vacant as per the provisions contained in Section 283 of the Act and where: (i) he resigns office by notice in writing addressed to the Company or to the Board; or (ii) he becomes disqualified under Article 112 (b); or (iii) he is disqualified for being appointed as a Director under any of the provisions of either of the said Acts. (b) If the office of any Director appointed by the Company is vacated before his term of office expires in the normal course, the resulting casual vacancy may be filled by the Board of Directors at a meeting of the Board and the Directors so appointed shall hold office only upto the date on which the Director in whose place he is appointed would have held office if it had not been vacated. Such vacancy if that of the Ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een him and the Company) be fixed by the Board, from time to time and may be by way of fixed salary and/or perquisites or by any or all these modes or any other mode not expressly prohibited by the Act. (h) The appointment, reappointment, termination of appointment, remuneration payable to and other terms and conditions of service of the Chairman and the CEO and Managing Director shall be subject to the approval of the Reserve Bank and also subject to such approval as may be necessary under the Act. 127A. (a) Subject to the provisions of the said Acts and these presents, the Board shall subject to a recommendation made by the Promoters, also include such Whole time Director/s as may be appointed in terms of these Articles. (b) The Board may, subject to its obtaining approval from the Reserve Bank and also subject to such approval as may be necessary under the Act, and subject to the other provisions of these Articles, appoint and/or re-appoint from time to time one or more of its member(s) to be designated and to act as Whole Time Director/s of the Company, not in any case exceeding one third of the total number of the Directors of the Company for the time being. (c) Th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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