Charging Dhanlaxmi Bank Ltd's board of directors with unethical conduct, unilateral arrogation of power, lack of comprehension of issues and factionalism, independent director Sridhar Kalyanasundaram resigned just before the Bank's annual general meeting (AGM) on 30th September.
In his resignation letter, submitted by the Bank to the exchanges, Mr Kalyanasundaram levelled serious charges against members of the board while supporting the 'belligerent attitude' of the managing director and chief executive officer (CEO) of Dhanlaxmi Bank. He says, "There are many instances where despite the value of inputs given, my inputs have been deliberately negated, avoided or overruled by the other members of the Board, just to support the belligerent attitude of the MD&CEO, who is on public record (in the vernacular press) that he cares little of shareholders and the directors."
Shivan JK is the MD&CEO of Dhanlaxmi Bank. Interestingly, last year in October, a minority group of nine shareholders, constituting a shareholding of nearly 13% in Dhanlaxmi Bank, had called for an extraordinary general meeting (EGM) to suspend the powers of Mr Shivan and authorising two other directors—CK Gopinathan and Rajagopalan Nair—to settle two writ petitions filed by the lender in the Kerala High Court (HC). Dhanlaxmi Bank, however, says the call for EGM and resolutions sought to be approved "could be ultra vires of the articles of association of the Bank," and it is mandated to schedule the EGM as per the call by shareholders. (Read: Dhanlaxmi Bank: 9 Shareholders Call for EGM To Suspend Powers of MD&CEO Shivan JK
Mr Kalyanasundaram alleges that he was threatened for raising 81 queries about the agreement with the issue manager for Dhanlaxmi Bank's proposed rights issue. "I have been recording my dissent at every meeting where it was attempted to be cleared either through a bulldozer approach or through an ambush approach (where the EIC - equity issuance committee - proceedings would be attempted to be adopted at the next ensuing Board meeting without even its (EIC) minutes of the Meeting being prepared and agreed to)."
"When this did not work, the powers that be had openly threatened me with being 'sacked from the Board'. The records of the Bank regarding the EIC proceedings from January 2023 till July 2023, when the last of such meetings were held, will stand witness to my stand," Mr Kalyanasundaram says in his resignation letter.
He also charged the board and the executives with unethical conduct in the banking business with the one-time settlement (OTS) scheme for loans.
"While the OTS scheme has been put to use to a great deal of success by the banking sector at large - to effectively deal with the non-performing asset (NPA) positions - it has been seen being used even where it had no impact on the NPA position of the Bank, by its executives," he says.
Mr Kalyanasundaram shared a case of Jalan Hotels of Kolkata where he alleges that "...the OTS was used to release a guarantor, even after the original debtor had been cleared by the consortium of banks and lenders - and where the Bank held a registered charge against the property given as guarantee to the original debtor."
"Despite my advising the Board of the hugely discounted offer (Rs5.25 crore against a reported market value of Rs35 crore), I was voted out 6 to 1, and surprisingly, even one of the additional directors appointed by the regulators supported the proposal brought to the Board," he says in the letter.
Mr Kalyanasundaram alleges that Dhanlaxmi Bank's largest shareholder, Dr Ravindran Pillai, who supported his appointment as an independent director on 5 December 2022, took different views on the next AGM. He alleges that when a minority shareholder registered allegations about the appointment of the MD&CEO in 2021, the board, instead of referring the matter to the adjudicating authority, the registrar of companies at Kochi and the regional director of Reserve Bank of India (RBI) at Chennai, based it on a legal opinion.
"I am left wondering if the pressure is being brought (through the action by a majority shareholder!) on me to avoid such an escalation that might nullify the Bank's unilateral activity of simply advising the 'minority shareholder that his allegations have no merit' and particularly when there is an opportunity to rectify the same proactively, if and when the current incumbent's contractual tenure comes to an end in January 2024," he says.
In the letter, Mr Kalyanasundaram also mentions that he sent a copy of his letter to the market regulator, Securities and Exchange Board of India (SEBI), as he "does not want any modification to my resignation letter while the Bank files the same under the LODR obligations."
Dhanlaxmi Bank has been going through a crisis for some time now. It had ousted CEO Sunil Gurbaxani in a shareholder battle in September 2020. Mr Shivan, who has previously worked at State Bank of India (SBI), was appointed CEO in January 2021. Back then, Mr Gurbaxani had said: "The Bank needs deep surgery, and this bandage approach will not work. Secondly, the professional approach used by me is never accepted by these shareholders. Hence, the conspiracy."
Earlier in June 2022, a minority group of 11 shareholders, constituting a total shareholding of around 13.67%, had called for an EGM raising concerns over rising expenses, low capital adequacy and the Bank's financial performance.
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