This appointment raised eyebrows

03 Apr 2000

1

This is probably the first time in the Indian banking industry that a court has set aside a bank chairman's appointment as legally untenable. The dubious credit for this achievement is earned by the Reserve Bank of India (RBI), the Chennai-based private
sector bank, Bharat Overseas  Bank Ltd (BOBL), and its dismissed  chairman and CEO, S. Srinivasan.

Recently, a two-member division bench, in an appeal by Srinivasan, upheld the single judge's order setting aside his reappointment as BOBL's head as void.

"It is poetic justice," reacts a beaming office bearer of the All India Bharat Overseas Bank Employees' Union, when asked for his opinion on the judgement. And he has every reason to be happy, as the key officials of the union were dismissed during Srinivasan's seven years tenure at BOBL.

Never in the BOBL's history did the employees go on the warpath against the bank's head, as they did during Srinivasan's period. It may be recalled that the employees went on a nationwide strike for a continuous period of more than 40 days during 1996. And when the issue was on the verge of developing
into an industry-wide agitation, the centre banned the strike.

Srinivasan was appointed as chairman and CEO of BOBL initially for a five-year period   (December 1, 1992 to November 30, 1997). Subsequently, he was given a three-month
extension and later, he was re-appointed for two more years (March 1, 1998 to February 28, 2000). For the beleaguered union, his re-appointment under mysterious circumstances gave the much-needed reason for protest. And now Srinivasan is out of BOBL, with the Madras High Court ruling that his re-appointment was not legal.

In early May, 1997, BOBL's board received a letter from RBI, Chennai, advising the board to submit its proposals for appointment/re-appointment of its chairman and CEO, as Srinivasan's tenure was to expire on November 30, 1997. The bank's board, in its meeting held on July 19, 1997, decided to
advertise the post, inviting applications from eligible candidates from the banking industry at large. The bank also hired a consulting agency, Price Water House Associates Pvt Ltd, Bangalore, for the purpose.

On August 12, 1997, an advertisement calling for applications for the premier position in BOBL was carried by The Economic Times. The ad stipulated that interested candidates should be between 40-50 years of age and have at least five years of experience at the top level in a bank.

Here, it should be noted that Srinivasan, aged 57, was having the requisite experience but was barred by the age factor. Nevertheless, he didn't show any interest/inclination for applying for the position once again. Subsequently, on August 20, 1997, BOBL's board decided to relax the age limit by five more years on the higher side, with other conditions remaining the same. The revised ad was published by The Economic Times on August 26,
which also stated that applications should be submitted within 10 days of the ad.

The bank began to shortlist the applicants after that. At this juncture, strange things started to happen. September 27, 1999, Srinivasan sent in his application, though he was still over the age bar at the upper limit, according to the board's decision and the ad's announcement.

Commenting on this development, the bench came down heavily on the board's decision to accept Srinivasan's application. The bench also came down heavily on Srinivasan for his non-participation in the recruitment process before he decided to submit his application. The bench also commented adversely on the manner in which he caused the circular resolution, signed
by his private secretary, circulated amongst the bank's board members, including his name for being interviewed for the post on October 1, 1997.

While four of BOBL's directors gave their consent, one opposed the resolution and two others did not indicate either one way or other. However, the board, which met on October 4, ratified the resolution passed earlier in the circular.

On this issue, the bench declared, "This court is of the considered opinion that the appellant, by being cause for sending the circular resolution for approval touching his own application for re-appointment, has disentitled himself by such conduct to be considered for the said post."

On the question of Srinivasan's style of functioning and financial
irregularities about which RBI has received complaints and made some investigations, the bench said, "We are not for a moment holding or coming to the conclusion that the appellant is guilty of
certain irregularities in approving the credit proposals. But we would like to point out two aspects of the matter:

1. All complaints were not investigated against the appellant
2. There was some evidence against the appellant with reference   to those complaints but not sufficient enough to come to a        definite conclusion."

The bench went on to declare that RBI and Srinivasan gave a go-by to all norms and procedures with respect to the selection of BOBL's head. Denying Srinivasan's prayer to allow him to continue in the position till February 29, 2000 -- the date on which his disputed term ended -- the bench directed RBI and BOBL to relieve him immediately.

The latest heard on the issue is that the employee union is consulting legal experts on the validity of BOBL settling Srinvasan's dues, as the High Court has ruled that his re-appointment as chairman and CEO was held void.

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