An independent director the bank told FE the RBI must be concerned that the shareholders voted out a person nominated by the RBI.
The Reserve Bank of India (RBI) has asked the Dhanlaxmi Bank Board to get shareholders’ approval before appointing JK Shivan as the next managing director and CEO of the bank. The move is considered somewhat unusual since typically, the board appoints the candidate recommended by the regulator as additional director and then seeks the shareholders approval at the next AGM .
The board of Dhanlaxmi had sent a list of five candidates to RBI for its approval after the incumbent Sunil Gurbaxani was voted out by majority of shareholders.
An independent director the bank told FE the RBI must be concerned that the shareholders voted out a person nominated by the RBI. Gurbaxani was voted out from the post of MD and CEO by more than 90% of the shareholders on October 1 at the first AGM held after he was appointed in February 2020.
Sherry Samuel Oommen, corporate lawyer, told FE that under the Companies Act, 2013, Section 161, grants the board of directors the power to appoint any person other than a person who fails to get appointed as a director in a general meeting, as an “Additional Director”. Such director would typically hold office up to the date of the next annual general meeting.
“It may not be wrong supposition that the present postal ballot is being undertaken based on approval/fiat of the RBI under the Banking Regulation Act and/or based on the policy framework for ownership and governance of private sector bank which mandates that the incumbent CEO should satisfy the “fit and proper” criteria,”he added.
The bank is currently managed by a committee of directors and RBI has given the bank four months to appoint a new head. The lender has seen two of its MD and CEO resign before the end of their tenure after losing confidence of the shareholders. The bank had gone through a bad phase during 2008-2013 and was under the Prompt Corrective Action (PCA) framework of the RBI for some time.
The bank Board has moved a resolution on December 26, as asked by RBI, for shareholders’ approval via electronic voting , for the appointment of Shivan as the next managing director and CEO the bank.The Bank has engaged the services of KFin Technologies as the authorised agency to provide e-voting facilities and shareholders can vote from December 27, 2020 onwards to Monday, January 25, 2021. The results of the e-voting will be declared by the Chairman on January 26, 2021.
Shivan has over 37 years of experience in State Bank of India (SBI) and has handled various areas of functional areas commercial banking. He retired as chief general manager of Stressed Assets Resolution Group of SBI and was working with Ernst & Young till March 2020.