Dhanlaxmi Bank’s independent director quits citing attitude of MD & CEO, multiple other issues

Sridhar Kalyanasundaram one of the Independent Director of the Dhanlaxmi Bank, has resigned from the Board of Directors post of the Bank, as stated in a regulatory filing by the bank.

The letter of resignation of Sridhar Kalyanasundaram,detailing his reasons for the resignation and stated that there has been instances where despite the value of the inputs given by the Independent Director , inputs have been deliberately negated / avoided / overruled by the other members of the Board, just to support the belligerent attitude of the MD & CEO of the Bank.

Here are the excerpts from the resignation letter by Sridhar Kalyanasundaram:

The specific instances in the following paragraphs are probably the drivers of my decision to quit rather than fight a lone battle where the other members of the board are either incapable of comprehending the impact of the issues or are deliberately siding with the MD & CEO, for reasons known only to them.

Rights Issue:

a. The Rights Issue of the Bank - was approved by the Board of the Bank on the 17th March 2022, and had to be held up for over 9 months since then due to the various

issues at the Board, including the status of the Board itself 'lacking composition required to transact the Rights Issue' till the 95th AGM of 30th December 2022 - the delay due to the two writ-petitions and resultant 'compromise settlements', etc.

b. Despite that, from the 6th of January 2023, the those of us on the Equity Issuance Committee (EIC) had applied ourselves with gusto to get the issue of the Block, and I personally had raised 81 queries on the then-submitted version of the Issue Agreement proposed with the Issue Manager. It is even today unresolved, despite various legal inputs from different quarters, and 'compromise meetings' held by the Chairman of the EIC in the months of June/July.

c. 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 proceedings would be attempted to be adopted at the next ensuing Board Meeting without even its ([IC) Minutes of the Meeting being prepared and agreed to].

d. 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 [IC proceedings from

January 2023 till July 2023, when the last of such meetings were held, will stand witness to my stand.

Capital Enhancement of the Bank

I had always been advising my colleagues on the Board, and the executive of the Bank, that the proposed Rights Issue based infusion of INR 130 Crores is not sufficient if the Bank was to remain competitive and relevant.

b. I had vide my email of the 241h July 2023 (10:23) addressed a detailed note to Mr.Sreesankaran Radhakrishnan, the Chairman of the Audit Committee of the Board, to

include my proposal 'to enhance the Authorized Capital of the Bank from the current position of INR 400 Crores to INR 5000 Crores'. This was denied by the gentleman concerned, vide his email of 27th July 2023 (09:08) stating that "QUOTE: We already have a rights issue pending for clearances from Directors and unless that is fast forwarded and cleared, I do not see the urgency to take up this proposal at this stage ........UNQUOTE"

However, the Secretarial Department of the Bank introduced item no D. 52 in the Agenda of the 7"Board Meeting held on the 41h September to "enhance the authorized capital of the Bank from INR 400 Crores to INR 500 Crores" under the caption "Alterations to the AoA". The 71h Board Meeting was chaired by the very

same Sreesankaran Radhakrishnan who had rejected my note of the 24th July for want of clearance of the pending rights issue but had no qualms in accepting a modified version of the same proposal directly into the Board Agenda

i. This Agenda Item was cleared despite my objections in the said board meeting and is now even a part of the AGM Notice for approval by the Shareholders.

ii. Such is the quality of the conduct of a few board members who deliberately stifle discussions by other members of the Board - me, in particular.

Conduct of Board and Committee Meetings of the Bank

I had advised the 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'. This attitude of the some of the Independent Directors led to the Management deliberately avoiding holding of some of the Committee Meetings despite the Board having approved the recommendation to hold the Risk Management Committee meetings at a monthly interval - alternating between Risks Review and Policy Review on alternate months.

Unethical conduct of the Bank's businesses

a. 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 NPA positions - it has been seen being used even where it had no impact on the NPA position of the Bank, by its executives.

b. The classic case in reference is to the recent OTS of the Jalan Hotels of Kolkata, where 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 your 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 (INR 5.25Crs against a reported market value of INR 35CRs), 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 .

Unilateral arrogation of powers by the Board despite Legal Advises

On the 31s' May 2023, a shareholder registered an allegation that the MD & 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, i.e. 29th September 2021.