Mumbai: Ashok Chawla, chairman of Yes Bank Ltd, resigned from the lender’s board on Wednesday after being named in a corruption chargesheet by the Central Bureau of Investigation (CBI). “Ashok Chawla, non-executive (independent) chairman of the board has tendered his resignation on 14 November with immediate effect," the bank said in a late evening exchange filing on Wednesday.

Chawla attributed his decision to personal reasons, a person with direct knowledge of the matter, said on the condition of anonymity. “As I resign, I wish to thank everyone at Yes Bank…and wish the bank all the luck for the transition it is going through…," read Chawla’s resignation letter, the person said.

The cloud of uncertainty over whether Chawla, who is also the chairman of National Stock Exchange of India Ltd and a former finance secretary, is in compliance with Reserve Bank of India’s “fit and proper" norms after his name appeared in the chargesheet ends with the resignation.

Yes Bank cited Chawla as saying in the resignation letter that the bank would need a chairman who could devote more time and attention in the current transition period.

Still, Yes Bank will now have to fill the position of the chairman even as it’s struggling to find a replacement for CEO Rana Kapoor, whose term has been cut short by RBI.

“The bank shall in due course announce the appointment of a chairman, post RBI’s approval," Yes Bank said.

“Chawla’s resignation has been accepted by the bank as a good corporate governance move. The resignation will help Yes Bank remove uncertainties revolving around its board chief’s office functioning, clear the bank’s board of uncomfortable questions regarding the corruption case and possibly be perceived by investors and regulators as a responsible move," said the first person.

With growing uncertainties over the outcome of the CBI chargesheet, Yes Bank had 9 November sought guidance from RBI over Chawla continuing as chairman of its board, Mint first reported on 12 November.

Chawla’s continuation as chairman of NSE is also under scrutiny on similar grounds.

Yes Bank, on Wednesday also accepted the resignation of Vasant Gujrati, the chairman of the bank’s audit committee, said a second person, also requesting anonymity.

Former Institute of Chartered Accountants of India president Uttam Prakash Agarwal will replace Gujrati, added the second person. Yes Bank’s board on Wednesday named Agarwal as an additional independent director and subsequently as an independent director of the bank for five years, subject to shareholders’ approval.

“Since RBI, while refusing to approve Rana Kapoor’s (Yes Bank’s CEO and managing director) reappointment for three years, questioned the strictness of the audit processes followed by Yes Bank, the NRC has recommended that Gujrati should step down before RBI itself directs the bank to do so. Chawla and Gujrati’s resignations will work as a clean-up process for the bank," said the second person.

Yes Bank’s nomination and remuneration committee (NRC) wrote to RBI on Friday, referring to a 4 October letter that NSE received about Chawla’s continuance on the bank’s board.

“While noting the contents of the letter (to NSE), the NRC directed the bank management to give a report along with its remarks on allegations and particularly verifiable facts and also obtain a legal opinion on the matter. In the meantime, the bank has received (on 26 October), a copy of another letter dated 22 October, addressed to NSE, raising similar issues," said Yes Bank’s letter to RBI.

Mint has reviewed a copy of the letter.

The NRC discussed the NSE letter at a meeting on 24 October and the Yes Bank board discussed the matter a day later, the bank’s letter said. It also said it is yet to receive any formal written declaration from Chawla on his “fit and proper" criteria as per the Banking Regulation Act.

On 19 July, the Central Bureau of Investigation (CBI) named Chawla in a chargesheet related to the Aircel-Maxis case. On 4 October, NSE received a letter seeking action on Chawla’s directorship on its board. This was followed by another letter demanding the same.

The bank’s letter mentions that Chawla has not yet “modified his last declaration submitted in April 2018 on ‘fit and proper’ criteria, as per the format prescribed by RBI".

“While NRC would further discuss the matter and all the related issues in its next meeting, it is considered desirable by the NRC to keep RBI apprised of the matter, as Chawla’s appointment as chairman was approved by RBI and he continues to remain as chairman subject to RBI’s relevant regulations, related instructions and orders on the matter," said the Yes Bank letter.

Yes Bank’s legal advisers have also cited two recent similar instances, one of which relates to S. Raman’s resignation from an RBI committee upon being named in a CBI chargesheet, and another instance in which S. Ravi (chairman of BSE Ltd) stepped down from the board of IDBI Bank Ltd when named in a first information report filed by CBI.

On 5 November, Mint reported that the Securities and Exchange Board of India (Sebi) is evaluating Chawla’s eligibility to continue as chairman of NSE after the CBI chargesheet triggered multiple complaints. Sebi received the complaints in the first week of October and started its scrutiny the same week. The charges against Chawla relate to a CBI probe into suspected corruption in the Aircel-Maxis case. On 19 July, CBI, as part of its investigation, filed a chargesheet naming 18 individuals, including Chawla.

On 1 October, Special CBI judge O.P. Saini set the investigative agency a deadline of 26 November to secure the government’s nod to prosecute Chawla and others. Chawla might have to step down as NSE chairman if CBI gets the go-ahead to prosecute him, the Mint report stated, citing a person aware of that development.

Individuals under prosecution and those who have been convicted of any offence involving moral turpitude or an economic offence or violation of securities laws cannot lead stock exchanges under Sebi’s stock exchanges and clearing corporations norms.

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