Dhanlaxmi Bank case: Kerala High Court says petition against board maintainable

Issues related to Dhanlaxmi Bank are likely to drag further in the court, with the Kerala High Court on Wednesday ruling that the writ filed by a shareholder and two others against the board of the lender is maintainable. A shareholder and two others had approached the court against the board’s decision to reject their candidature for the office of director, to be placed before the members during the annual general meeting to be held on September 29, 2021.

The counsel for the bank opposed the prayer of the petitioners for an interim order, pointing out that the petitions are not maintainable because the bank being a private entity and not a statutory body or an instrumentality or an agency of the government is not amenable to the writ jurisdiction of the court. The counsel also said the bank is not one running on the government funding and its shares are held by private individuals.

Currently, the lender has six directors, including two RBI nominees, against the maximum strength of 11.

The Reserve Bank of India (RBI) had advised Dhanlaxmi Bank in June 2021 to ensure transparency in the nomination process of directors and follow the best corporate governance practices. The regulator, while pointing out that the bank has had a chequered history on the governance issues, directed it to expedite and complete the process of appointment of directors.

KN Madhusoodanan, a shareholder of the company, P Mohanan and Prakash DL had approached the court in September 2021, seeking a direction to the respondents – RBI and Dhanlaxmi Bank – to discharge their statutory responsibilities under Section 160 of the Companies Act to inform the members of the general body meeting of the candidature of the petitioner for the office of the director as mandated under Section 160(2) of the Companies Act.

The board of directors of arbitrarily rejected the applications of all five candidates, including prominent shareholder Ravi Pillai ( B Ravindran Pillai) and former independent director PK Vijaykumar, filed under Section 160 of the Companies Act.

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