Interestingly, the shareholders of two banks showed to the world that they can vote out Directors, Auditors and even the Managing Director and CEO with the click of a button as their annual general meetings (AGM) were held online due to the Covid-19 pandemic.
While AGMs of listed companies are a dull affair, and online AGMs even duller, the shareholders of Lakshmi Vilas Bank (LVB) and Dhanlaxmi Bank showed that online AGMs could pack quite a punch as they voted out their officials through the virtual mode.
The first to hit the headlines last month was the Tamilnad Mercantile Bank (TMB), which is almost 100 years old.
The Tuticorin-based TMB has been a target for takeover by several groups for a long time.
On September 11, the Enforcement Directorate (ED) said its Adjudicating Authority has fined TMB Rs 17 crore and its then Chairman and Director MGM Maran Rs 35 crore.
In the same case, the Adjudicating Authority had also fined Standard Chartered Bank Rs 100 crore. The penalties were levied under the Foreign Exchange Management Act, 1999 (FEMA)
According to the ED, a probe under FEMA was taken up on the basis of a reference received from the Reserve Bank of India (RBI) to investigate advance remittances received by certain entities for the purchase of the shares of TMB through the escrow mechanism maintained with Standard Chartered Bank, Mumbai.
A penalty of Rs 35 crore was imposed on Maran, then Chairman and Director of TMB, for opening a bank account in Singapore and receiving foreign exchange to the tune of $68,50,000 (equivalent to Rs 28.08 crore) in that account from a foreign entity.
The said payment is the consideration for facilitating and assigning the rights towards transfer of shares of TMB in favour of Katra Holdings Limited, consequent to a private agreement with that company. The penalty is also for failing to repatriate the said foreign exchange of $68,50,000 to India.
But what shook the banking sector, including the Reserve Bank of India (RBI), was the voting out of seven Directors, including MD & CEO S Sundar, statutory and branch auditors by the shareholders of the Karur-based LVB on September 25.
The voting pattern, as per the regulatory filing, showed some interesting aspects.
In case of the appointment of seven Directors, 19 per cent of the votes polled belonging to the promoter/promoter group were against while the remaining 81 per cent were in favour.
As per the regulatory filing, there are 25 shareholders under the category of promoter and promoter group.
The public institutions (99 per cent votes cast) and public non-institutional shareholders (62 per cent votes cast) voted against the resolutions for appointment of Directors and statutory and branch auditors.
The RBI had asked the remaining Directors of LVB to form a Committee of Directors (CoD) to manage the bank the same day.
Meanwhile, a minority shareholder and a retired senior manager of LVB, R Subramanian, has moved the Madras High Court to direct the central government, RBI and the Securities and Exchange Board of India (SEBI) to suspend the board of the private bank and appoint an administrator.
He contended that the mismanagement has resulted in gross non-performing assets (NPA) leaping from 2.67 per cent in 2017 to 15.30 per cent in 2019 and stretching to 25.39 per cent in March 2020.
“Any such increase in gross NPAs could not be justified as a common occurrence in the banking industry. This evidences quick mortality of advances and the options of the bank made against the guidelines of the RBI and the SEBI,” Subramanian argued.
Be that as it may, the afternoon of September 30 held another surprise. On that day, the shareholders of the Kerala-based Dhanlaxmi Bank voted out MD and CEO Sunil Gurbaxani while passing other resolutions.
“As early as September 7, I was asked to quit on my own or I would be voted out by shareholders at the September 30 AGM. I didn’t quit under pressure and hence was voted out,” Gurbaxani told IANS.
Gurbaxani was appointed as MD and CEO of the bank for three years from February 27, 2020.
According to him, the RBI’s direction to dismiss an adviser who was earlier the Chief General Manager (CGM) of the bank was not the only reason for him to be voted out, but also there were governance issues like the appointment of a 69-year-old person as a Director and others.
“A sitting Board member voting against a sitting MD is also misgovernance. Only four or five shareholders voted against me while other resolutions were passed at the AGM,” Gurbaxani said.