Tuticorin: Evidently, the rat race to the control Tamilnad Mercantile Bank is turning out to be one of the longest-running corporate soap operas in independent India - seven years. And, obviously, each episode has its own twists and turns. The latest being, the bank board's late night resolution to remove the chairman and chief executive officer, R Natarajan, on 25 November 2003.

(A more recent twist is the rumour that Shiv Nadar, the head honcho of the HCL group, is interested in acquiring a stake in the bank, perhaps the 34-per cent stake C Sivasankarn of the Sterling group holds. It is this part of the stake that is hanging in balance without any voting rights.)

On 25 November, the bank's board meeting in Chennai, after considering the normal business, took a different turn. Save for the Reserve Bank of India (RBI) / central government nominee directors, the other Nadar directors declared that they had lost faith in Natarajan and wanted to take action for his "omissions and commissions".

The reasons stated are increasing non-performance assets (NPA), inaction in taking disciplinary action against the bank officials involved in the Rs 2.5-crore scam (rotation of collection cheques) at the Tirupur branch, and indiscriminate lending. Another allegation against Natarajan is that he sanctioned loan to one Dr Bhanu, who figured in the actor Rajkumar kidnap case.

The nominee directors expressed their disappointment at the manner in which the allegations against Natarajan were handled at the meeting and hence decided to leave. There is also another version that the nominee directors were asked to wait outside till the other board members come to a decision. Earlier Natarajan was asked to go out of the meeting room as the matter to be discussed concerned him and the meeting was chaired by one of the Nadar directors.

Immediately after the resolution for removal of Natarajan was passed by all the Nadar directors, Natarajan's cellular phone provided by the bank was withdrawn. It is learnt that other facilities (car, housing) were also withdrawn. And, the bank directors met again on 27 November as if it was the continuation of the adjourned 25 November meeting. It is learnt that only on that day did the resolution for the removal of Natarajan was faxed to the RBI.

Many thought Natarajan was one more pawn to fall in the battle for the Rs 396-crore net-worth TMB, but the move to fire Natarajan backfired. Within two hours of receiving the faxed resolution from the TMB board, the RBI turned down their decision and asked Natarajan to continue in the office. It is learnt that the RBI team, which is conducting routine inspection at the bank, will also look at the accounts involving the allegations and then make a report.

The curious factor in this whole episode is that the board didn't consider it fit to constitute a committee to enquire into the charges before recommending Natarajan's removal.

Back at the TMB's headquarters in Tuticorin, Natarajan, 61, remains unfazed, though he refused to talk about the board meeting and the resolution removing him. "Ask me about the bank and its performance, and I will answer," is his constant refrain (See: ).

According to him, four officials, including a regional manager, have been suspended in connection with the Tirupur branch issue. The stocks belonging to the borrower have been impounded and will be auctioned off later.

He says the complaints against him were motivated by a defaulting borrower who was asked to repay his debt. He also refutes the allegation that he had sanctioned a loan to Dr Bhanu: "The original loan was sanctioned during 2001. In course of time the credit limits were increased, based on the recommendations of branch and regional managers."

On the issue of the rising NPA levels, he says: "Last year the gross NPA was Rs 340.56 crore. During the first six months it went up by another Rs 3 crore. But from November onwards the NPA levels are coming down. At the end of November the NPA was Rs 336.73 crore."

It is pertinent here to note that since 1996-97 the bank's net NPA to net advances and the NPA provisions has been increasing steadily. In 2001-02 the provision for NPA went up drastically to Rs.33.86 crore from Rs 12.50 crore the previous fiscal.

Things, in the meantime, seem to be changing for better on the NPA front. In the last fiscal the bank made a cash recovery of Rs 46 crore. During the current fiscal the cash recovery is around Rs 42 crore against an annual target of Rs 78 crore.

"When I took over, the gross NPA was 18.75 per cent of advances. Later it came down to 16.06 per cent before going up slightly. Now we have contained the NPA to 16 per cent of advances," says Natarajan. The net NPA at the end of last year was 7.91 per cent (Rs.169.69 crore). At the end of November the net NPA level came down to Rs.147.40 crore. "The strategy is to arrest the NPA growth first and then reduce the same," he says.

How the soap started frothing The TMB corporate serial started sometime in the mid-nineties when Tuticorin Spinning Mills chairman G Kathiresan, S Ashok of the Sivakasi-based Pioneer group and an M S P Raja sold their stakes in TMB, totalling 67 per cent, to the Ruias of Essar for a net amount of Rs 28 crore.

The deal came to light when the Ruias sent their representatives to the bank's annual general meeting. It was then the Nadar Mahajana Sangam formed a retrieval committee and formed the Nadar Mahajana Bank Share Investors' Forum.

The Ruias were not able to get the shares transferred in their names as the RBI refused sanction. Then they came to the negotiating table with the Nadars who agreed to pay Rs 56 crore for the shares. As the Nadars were not able to raise the money within the stipulated time, the Ruias upped their price to Rs 100 crore.

The Nadars mobilised Rs 50 crore and called the Ruias for a meeting, so that the collected amount could be paid and the balance, at a later date. To their surprise it was Sivasankaran who turned up at the meeting saying that he had bought the 67-per cent stake from the Ruias and demanded more than Rs 200 crore.

The Ruias and Sivasankaran have done other business deals earlier. The talks broke down and this time again, the RBI refused to transfer the shares in Sivasankaran's name. Once again the parties came to the negotiating table and agreed for a price of Rs 155 crore. Meanwhile, the Nadar group, which first sold the shares to the Ruias, stuck to their directorships on the ground that the shares are still in their names.

This time again the Nadars were not able to mobilise the full amount. In 2001, Sivasankaran was paid a sum of Rs 80.75 crore. It was then decided that Sivasankaran will transfer to the Nadar Mahajana Bank Share Investors' Forum the 33 per cent held by three Sterling group companies.

As the forum is now in the process of dispatching the share certificates to individual investors, the bank's annual general meeting, originally slated for 7 December 2003, has been postponed. In fact in the past seven years the bank had not conducted any annual general meeting. It is during this stage the dismissal of the bank chairman and chief executive officer was enacted.

Now the bank is proposing to shift its registered and head office to Chennai from Tuticorin. This is being proposed for better administrative management when the bank plans aggressive growth. Further, Rs 40 crore has been mobilised from the Nadars in Chennai towards the retrieval of the bank and to service the shareholders.

According to sources close to the bank, the meeting of the Company Law Board (CLB) to be held on 18 December 2003 is a crucial one. The CLB is expected to give a decision as to the date of holding the bank's annual general meeting, after a gap of seven years, and also the status of the 30-per cent equity held by Sivasankaran.

Watch this space for the next episode of the TMB prime time soap.