Know why Shagun Gogia is fighting with Yes Bank's Rana Kapoor

Yes Bank CEO Rana Kapoor and his niece Shagun Gogia have been fighting an aggressive battle for the past two years for a prestigious seat on the Yes Bank board. One of the main reasons behind the fight is absence of Gaurav Kapur, son of co-founder late Ashok Kapur.

Gaurav Kapur left the turf for his younger sister Shagun Gogia, who is a mother of two and an entrepreneur running a fledgling private equity firm, as per an ET report.

It is a cocktail of trust and betrayal, or mixing up issues concerning business and emotions, a kind of palace intrigue, depending on who you speak with. Rana Kapoor, says the "bank is not Kapur ki hatti" while Gogia describes it as a “modern-day Mahabharata” where Rana uncle broke the trust of her family.

This battle is not being fought over splitting the assets between two brothers, or seeking control of an enterprise from the one running it through proxy battles. Rather, it is over the right to jointly nominate 'one director' to the board which has 10 members.

Gogia, a niece of Rana Kapoor's wife Bindu, is glad to see Kapoor continue as the managing director and chief executive of the bank. Kapoor has had a good relationship with his sister-in-law Madhu Kapur till two years ago, when she went to the Bombay High Court to enforce her right to jointly nominate a director as per the provisions of the Articles of Association.

"It is a fight for his reputation, for the family's reputation," Gogia told the ET.

She further said: “Don't do this (deny the right to nominate a director). It is not done. After that (her father's death in the 2008 terror attack in Oberoi Hotels), for five years you don't come and meet my mother. You don't update us."

Meanwhile, Yes Bank, under Rana Kapoor's leadership, has flourished to become the fifth biggest private sector bank and boasts of marquee shareholders including Franklin Templeton and GMO, an international fund with $118 billion in assets.

His partner's family's wealth has surged to about Rs 4,000 crore today, from Rs 300 crore at the time of Kapur's death. But, for Gogia it is the family's right to be equal to Rana Kapoor's with a nominee director that matters.

"I have been a fighter," says Gogia, who was turned away by three big law firms saying they cannot take the case because of relationships with Yes Bank.

While the Bombay High Court has ruled in favour of Madhu's contention that the bank's Articles of Association provide for joint nomination of a director, Kapoor believes Gogia is not 'fit and proper' to be on the board as per regulations.

Gogia says that it is not her candidature, but her right to nominate alongside Kapoor. Despite reminders after her father's death, her plea was ignored, hence she sought legal remedy.

"She (Madhu Kapur) is a very nice lady," says Rana Kapoor. "I know her for 32 years. It is only in the last two years that she has been angry with us. But she forgets that there are 11,000 employees. Literally, they are hostile to the bank. If you truly believe that Ashok Kapur, for the time when he was around, truly contributed to this bank, then you must respect (him) as we do in our annual condolence on his day of demise."

Rana Kapoor and Ashok Kapur have known each other for decades, and some say it was Kapur who was instrumental getting his sister-in-law to marry Rana. They subsequently became business partners at Rabo Bank in India, and moved on to promote Yes Bank, along with Harkirat Singh who exited the venture early.

Seeds of discord appear to have been sown very early in the life of Yes Bank. The rift between the families might have been present well before the death of Kapur, though it may have remained within the four walls of Yes Bank.

Take a look at the presentation of Yes Bank's annual reports. In fiscal 2006, the message from chairman Ashok Kapur comes first, followed by chief executive Rana Kapoor's, as is the convention, with both their photos of equal size. In 2006-07, Rana Kapoor's gets bigger and more prominent, and Ashok's is reduced to other directors got. Did Rana Kapoor do it deliberately?

"I don't think in Yes Bank we had the time to think about this," says Kapoor. "I have worked harder than Ashok Kapur, who was not an executive chairman of Yes Bank. The motto was simple. The harder you work, the luckier you get, in whatever form it manifests."

What made Madhu Kapur, the widow of Ashok Kapur, angry was that Yes Bank did not acknowledge the contribution of her husband and the wealth did not matter even if they are 10 times richer than they were.

The promotional material of Yes Bank did not acknowledge the contribution of her husband, and there were attempts behind their backs to throw them out of regulatory classification as 'promoters' which would have robbed them of their right to nominate along with Rana. "My father put all his wealth into starting this bank," says Gogia.

"He put his sweat and blood in building the bank. The hard lesson learnt by me in the past year has been that close family members can take advantage of tragic situations."

The fight between the founders is not new for Yes Bank. Harkirat, the partner who exited the bank very early, was not surprised at the dispute at all. "They definitely conspired and teamed up to oust me from the venture," Singh had told ET in a June 2013 interview.

"Ashok Kapur had been my colleague in Grindlays Bank. He was retiring from ABN Amro and could immediately take up the task, so I invited him to join me as a partner in this venture." Now that the Bombay High Court has said the inheritors of the shares in Yes Bank also have the right as a promoter to jointly nominate a director, what does the bank plan to do?

In fact, the bank, as per its reading of the court ruling, plans to amend the Articles of Association that would reflect the changed economic scenario and ensure the end of special rights the two promoters have held as per the document.

This again is a move to deny the rights the family has secured legally, says Gogia. While she is poker-faced when asked what her plan of action is, the bank is clear on the way ahead. "When Ashok Kapur passed away, Madhu Kapur's inherited wealth was less than Rs 300 crore," says Kapoor.

"Today, in aggregate, it exceeds Rs 4,000 crore. In six-and-a-half years it has happened because the board is professional, the management is professional, the character of the bank is professional. The genetics of the bank will be professional as long as I am alive," he said.
(Image: Indiatimes)