Dhanlaxmi Bank independent director resigns; cites factionalism in board
Adding to the long list of conflicts in the Thrissur-based private sector lender Dhanlaxmi Bank, Sridhar Kalyanasundaram, an independent director of the bank, has resigned from the board of directors with effect from 16 September. In his resignation letter, Kalyanasundaram has raised issues regarding factionalism in the board, his differences regarding the rights issue, and alleging a ‘lack of depth of knowledge in banking’ by other members.
This comes after Ravindran Pillai, head of R P Group and who holds a 9.99 per cent stake in the bank (largest shareholder), came out with a special notice for the removal of Kalyanasundaram by passing a resolution at its 96th Annual General Meeting (AGM) to be held on 30 September. Neither the bank nor its CEO, J K Shivan, responded to questions from Business Standard.
“There are many instances where, despite the value of the inputs given, my inputs have been deliberately negated/avoided/overruled by the other members of the Board, just to support the belligerent attitude of the managing director and chief executive officer — who is on public record (in the vernacular press) that he cares little for shareholders and the directors. I am not the only or even the first director to face his wrath for not towing his line, as many had left, rendering this board legally inconsistent with the required composition,” Kalyanasundaram said in his letter.
One of the major issues highlighted includes ’81 queries’ regarding the bank’s rights issue on the Issue Agreement proposed with the issue manager, that remain unresolved, according to him. “It is even today unresolved, despite various legal inputs from different quarters and ‘compromise meetings’ in the months of June/July,” he added. The Rights Issue of the bank was approved by the board of the bank in March 2022 and had to be held up for over nine months since then due to various issues at the board, including the status of the board itself ‘lacking the composition required to transact the Rights Issue’ till the 95th AGM and also due to the two writ petitions and resultant ‘compromise settlements’.
He added that his view regarding capital enhancement of the bank was also deliberately stifled by other board members. This comes at a time when the AGM is set to take up a proposal to enhance the authorised capital of the bank from Rs 400 crore to Rs 500 crore for shareholder approval.
Another issue raised by him was regarding a shareholder allegation that the MD and CEO’s appointment in 2021 was not in order and fraught with discrepancies and therefore he had ceased to hold the position with effect from the AGM date, 29 September 2021. “The bank’s management took recourse to referring the matter to legal counsel (Cyril Amarchand Mangaldas, Mumbai) and obtained a legal opinion that pronounced that the allegations of the shareholder had no merit,” he added. On 4 September, Kalyanasundaram had written to all members of the board that, in the event of the bank not referring the matter to the Adjudicating Authority as advised, he would be constrained to refer the matter himself in his capacity as the Independent Director.
“I had advised of irregularities in the manner that the MD and the Company Secretary were conducting the Board and Committee Meetings, deciding on the Agenda and the frequency of the same, at both the meetings of the Independent Directors. It was brushed away as ‘not a serious issue’,” Kalyanasundaram added. He also alleged probity and lack of consensus in dealing with whistle-blower concerns. “This board has been in receipt of numerous complaints of both the anonymous and the signed varieties but has been singularly focused on dismissing all of them as ‘the habit in this bank over time’. There is no consensus on demanding action by the CVO on any or all of them,” he added.
Interestingly, Pillai had supported his appointment too through his e-voting at the 95th AGM.