Context:
A large private sector bank, with disproportionate high visibility for a few years, faced a unique problem. The Chairperson of the Audit Committee, which is the ultimate custodian of the stakeholders’ interest, saw several things going wrong, and decided to confront the management. What were the failings, and on whose part?

• In January, 2020, Chairperson of Audit Committee of a private sector bank resigned from the Board citing serious concerns regarding deteriorating standards of the Corporate Governance, failure relating to compliance, improper management practices and the manner in which state of affairs of the Bank were being conducted. He also stated that he was not satisfied with the process of raising capital that was being followed by the Bank.
• He further mentioned that the Bank was management-driven, and not Board-driven.
• A little time before this, RBI had refused to grant a new term to the promoter-Managing Director (MD). The Bank had then onboarded a new MD. The Director also alleged that the new MD was responsible for several regulatory breaches and non-compliances, and was influencing a number of Board members.
• He alleged that he had raised his concerns on these critical matters from time to time, including by raising these matters at the Board level, and had left no stone unturned while discharging his duties as an Independent Director.
• He also wrote letters detailing all the matters to all the regulatory authorities.
• The Bank intimated the Stock Exchanges about his resignation. In the same filing, they mentioned that as directed by RBI, the Bank was re-assessing the ‘fit and proper’ status of the resigning Director. This was because he had failed to disclose details of criminal cases that had been filed against him before his appointment to the Board. The Bank had received a whistleblower complaint, questioning the Director’s fit and proper status soon after he was appointed to the Board.
• In this respect, the Bank had obtained legal opinions from eminent jurists. These opinions were to be considered by the Nomination and Remuneration Committee (NRC) and the Board in their meetings scheduled on the same date on which the director resigned. However, prior to the commencement of the proceedings of these meetings, the Bank had received the resignation letter.
• Around 2 months after the Director resigned, the Bank was put under Moratorium by RBI, and the Board was superseded.