The Banker Who Crushed His Diamonds by Furquan Moharkan (read novel full txt) 📕

So long as Rabo holds along with any of its Affiliates directly or indirectly, at least 10 per cent 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”.’

Article 127 (b): ‘The Indian Partners shall have the right to recommend the name of the Chairman. Ashok Kapur shall be the first Chairman. The Indian Partners shall have the right to recommend the name of the CEO and Managing Director of the Company. Rana Kapoor shall be the first CEO and Managing Director. Rabo shall cause the Rabo Representative Director to vote along with the IP representative Directors for appointment of the Chairman and the CEO and Managing Director to the relevant Committees of Directors (as indicated by the Indian Partners).’

Article 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.’

Article 127A (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.’

Other than these, there was Article 127A (d), which continues to be in the MoA till date. It states: ‘The Whole time Director/s appointed shall, subject to the supervision, direction and control of the CEO and Managing Director and subject to the provisions of these Articles, the Act and the Banking Act, exercise such powers and authority and discharge such functions and responsibilities as may be delegated to him/them by the CEO and Managing Director from time to time.’

I spoke to multiple lawyers and company secretaries to understand this. There is a clear-cut narrative of a power grab in all this. Article 110 (b) seems to help the Indian partners (Rana Kapoor and Ashok Kapur) with more than 10 per cent of the share capital by giving them the power to recommend three directors. The thing to be noted is that it gives them the power to ‘recommend’, not the power to elect, these people as directors. On the other hand, the duo didn’t want to give Rabobank the same power as the Indian directors, because for fulfilling the same condition they got to recommend one director as opposed to three by the Indian directors.

Article 127 (b) again strengthens the Indian partners’ positions by giving them the power to ‘recommend’ (not elect) the chairman, CEO and MD. Now, the interesting thing about this article is that if you observe its language, it says that the Rabobank director shall vote ‘along with the Indian directors’. So, here we have four people on the board voting for the same guy as chairman/CEO/MD.

Article 127A (a) and (b) offer two modes to appoint these whole-time directors (WTDs). Firstly, they could be appointed on the promoters’ (Rana and Ashok’s) recommendation. Secondly, they could be appointed from amongst the already existing directors who form the board of directors. In this situation, there is a cap that, amongst themselves, more than one-third cannot be appointed as WTDs. However, it’s not an either/or position, in the sense that only one of them can be used to appoint WTDs. Some WTDs can be appointed on the basis of Article 127A (a) and some on the basis of Article 127A (b). There are also two kinds of checks and balances on the board of directors for the appointment of WTDs. They either need to be recommended by the promoters, as per Article 127A (a), or they need to be approved as per Article 127A (b). So, in a way it meant it was less strict for nominees of board members, in which case no external approval is needed, based on the MoA. If you see 127A (d), it puts these WTDs under the control of the CEO and MD, Rana Kapoor. In effect, the power structure was putting everything in the hands of two brothers-in-law.

With the bank commencing its operations, everyone thought that it would be a case of happily ever after. But that did not happen as Rana’s behaviour started to rattle everyone. There seemed to be no decentralization of power. Rana, who was now being referred to as a control freak and maverick banker, wanted to do it all by himself. In fact, when the bank was buying tiles for office floors, Rana personally spent hours on selecting them, which pissed Ashok off.

While the popular narrative in the media has been that things started getting messy only after Ashok Kapur’s death, truth be told, not everything was fine between the two even before that.

One fine day, Ashok reached office to see that his cabin was locked. When he inquired about this, it came to the fore that it was Rana’s doing. He tried to reason with Rana as per former employees of the bank and people who Ashok had confided in. According to a person who knew of this episode, Rana told him: ‘There is no need for you to come to office from now. You are a non-executive chairman; just come for the board meetings.’ Thus, yet another feud had started, one which would go on for years. Sometime after this, Ashok allegedly spoke to two very powerful industrialists about wanting to remove Rana Kapoor from YES Bank, a person privy to that conversation told me.

But why was there friction? Ashok, who seemed to be the stabler among the two, wanted to go slow, while Rana was in a lot of hurry. Ashok wanted him to decentralize a bit, but Rana was all about controlling things.