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Nadars regain virtual control of Tamilnadu Mercantile Bank

A Ganesh Nadar in Madras

The Nadars have virtually regained control of the Tamilnadu Mercantile Bank from Sivashankaran of Sterling Computers. They have done so by packing the TMB board with their nominees and without paying a paisa to Sivashankaran.

The Nadars left no stone unturned in their efforts to regain the TMB, which was formerly known as the Nadar Bank. In April, just after the new Bharatiya Janata Party assumed power in New Delhi with the support of the All-India Anna Dravida Munnetra Kazhagam and other allies, the Nadars had begun to woo the new government.

A delegation of Nadars, led by AIADMK general secretary J Jayalalitha, met Prime Minister A B Vajpayee and gave him a petition to retrieve the TMB. Promising to do the needful, Vajpayee sent the petition to the Reserve Bank of India, where an application by Sivashankaran for the transfer of the TMB shares is also pending.

Planning Commission Deputy Chairman Jaswant Singh, who was also present at the meeting, assured the Nadars that "we will not allow big industrial houses to take over banks." Much earlier, the RBI had declared: "A well-run bank should not be allowed to be taken over."

The Tamilnadu Mercantile Bank was owned and controlled by members from the Nadar community in Tamil Nadu. The controversy began when a few disgruntled Nadars sold of their shareholding, amounting to a majority in the TMB, to the Ruias of the Essar Group.

However, with the other Nadars taking umbrage at the sale, the Ruias promised to return the shares to the Nadars. However, while the Nadars were busy collecting the money to pay for the shares, the Ruias sold the shares to a non-resident Indian, Sivashankaran of Sterling Computers.

Moreover, after buying the shares, the Ruias had also appointed three persons as directors on the TMB's board -- Gopal Rao, secretary, Essar Shipping; Marimuthu; and Jayachandran, an NRI.

Jayachandran was removed when the RBI was informed that he was involved with a leasing company. Gopal Rao was also subsequently removed because he had not acquired the minimum required 500 shares within two months after his election as director.

Gopal Rao had told the Board that he had bought 575 shares with his own money by mortgaging his house. The Nadars insisted that the Essar Group and not he had paid for the shares. On this basis, he was disqualified.

Finally, the Nadars declared that Marimuthu has also been removed since, at the time of his appointment as director, it was recorded that he would continue only till the next annual general meeting.

This made it imperative for Marimuthu, a co-opted director, to file his nomination along with the deposit of Rs 500 when the 74^th AGM was convened recently. However, the meeting was adjourned because of a court order and since he had not filed his nomination, his directorship was deemed vacated.

In another twist, armed with an interim direction from the Supreme Court, two former Nadar directors -- D Ganesan and N Vikraman -- have been allowed to attend board meetings. They were earlier not allowed to do so by the Ruias.

In March last, the Nadars appointed two more of their own directors. Moreover, in a special meeting on the May 20, 1998, they co-opted one more director, Sathyaseelan from Madras.

At present, out of an allowed strength of 10, there are now 9 directors, of whom eight are Nadars. Two of them are also RBI nominees. Going by the composition of the board, the Nadras have technically retireved their bank without paying a paisa for it.

This was echoed by C S Rajendran of Tuticorin, one of the seniormost directors on the board. "We have de facto retrieved the bank, now only the de jure part remains."

Of course, the Nadars still have to pay Rs 1 billion in cash, as per the agreement reached with Sivashankaran. The Nadars have so far managed to mobilise Rs 600 million.

The Bank Retrieval Committee chairman, press baron B Ramachandran Aditan, was confident of collecting the total amount. "We can mobilise 400 million, but we do not have sufficent time," he said in Madras. "We have approached financial institutions such as the Industrial Development Bank of India and the Unit Trust of India for a loan. We have promised to repay whatever amount we borrow withing a couple of months and offered to keep the shares with the financial institutions till we do so."

The Nadars appear very confident, but their plan may still go awry. While both Shashi Ruia and Sivashankaran were not available for comment, the fact is that they have gone back on their earlier promise to the Nadars. Tamil Nadu Chief Minister M Karunanidhi was witness to that agreement.

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