The Reserve Bank of India (RBI) in June had advised Dhanlaxmi Bank to ensure transparency in the nomination process of directors and follow the best corporate governance practices. The regulator also directed the bank to expedite and complete the process of appointment of directors.
The lender currently has just 5 directors, against the maximum strength of 11. It also has two RBI nominees on the board as additional directors. Dhanlaxmi does not have a chartered accountant on board as director after the tenure of the former chartered accountant-director ended on September 30, 2020.
The board kept in abeyance the recommendations of the nomination and remuneration committee of the bank, including the reappointment of prominent investor Ravi Pillai.
Following that, five individuals, including two former directors and Ravi Pillai, moved their candidature under Section 160 of the Companies Act. It was rejected by the board and not placed for consideration of the annual general meeting.
According to sources privy to board deliberations, there is a concerted attempt by some board members to delay the appointment of directors.
“It is a truncated board and they want to keep it that way to have a controlling stake. It helps them to take unilateral decisions against shareholders’ interests, corporate governance, Companies Act, Sebi LODR and even RBI circulars,” sources added.
A board member, however, told FE that the RBI wants to make sure that the independent directors are truly independent and qualified.
“All the candidates for the board were brought by the shareholders. RBI has two directors on board and wants to make sure that all the recommendations are scrutinised properly. No one on the board is against Ravi Pillai’s candidature. It was only deferred for the time being,” sources said.
The Kerala High Court on Wednesday directed Dhanlaxmi Bank to refrain from concluding the annual general meeting scheduled for Wednesday (September 29). The single bench of the high court gave an interim order directing the bank to adjourn the AGM to a day after one month after transacting the businesses included in the agenda for the meeting.