By Anis Ahmed
DHAKA (Reuters) - A Bangladeshi court on Tuesday upheld an order removing Nobel Peace Prize winner Muhammad Yunus as head of the microlending bank he founded, a move his allies say was prompted by a government vendetta over his political ambitions.
Yunus, 70, had been removed as head of Grameen Bank last week by the central bank at the government's behest on the grounds that he had stayed on past the legal retirement age of 60.
The High Court struck down Yunus's petition, saying that his serving as the bank's managing director beyond age 60 was illegal. "Hence he must vacate the post," the court added.
After the verdict, about 200 Grameen Bank employees and borrowers staged a peaceful protest outside the bank building.
Yunus was absent from court when the rule was issued, but stayed in the country after cancelling his trip to Washington to meet U.S. Secretary of State Hillary Clinton.
In 2007, while Bangladesh was ruled by an interim military government, Yunus tried to set up a political party, but later stepped back from the idea, saying it would not sit well with Bangladesh's traditional politics and cycles of unrest.
Though Yunus was unlikely to pose a threat to Prime Minister Sheikh Hasina, his proposed party could well have challenged the prime minister's party because of his popularity among poor voters.
"We have advised Professor Yunus to go for appeal and he gave his consent. We may appeal tomorrow," Rokanuddin Mahmud, one of Yunus's attorneys, told Reuters.
Another lawyer of Yunus, Sara Hossain, termed the High Court judgment "abnormal, unimaginable and surprising."
"Today is a sad day for the whole nation," she added.
On the eve of Tuesday's court ruling, Yunus said his dismissal had been staged by Hasina's government as part of its drive to take over the bank.
"This is a bank owned by poor women and that's right now under threat because our government somehow feels ... that they would like to take control of the bank," Yunus said by video link to a panel on microfinance in Washington.
U.S. WATCHING SITUATION
Grameen Bank said in a statement that Tuesday's court decision was disappointing, adding that it would consult with its lawyers to consider what to do next.
"We hope that in the meantime nothing will jeopardize the stability of Grameen Bank," it added.
Attorney General Mahbubey Alam told reporters that Grameen Bank's decision to keep Yunus was wrong, adding that the Nobel Peace Prize should have been awarded to the prime minister because she has established peace by ending a tribal insurgency that had lasted 25 years.
Action against Yunus coincides with increasing criticism of microlending in developing countries, including neighboring India, with officials accusing bankers of exploiting the poor.
But analysts said the dismissal would annoy the country's friends, including the United States. Thousands of protesters marched through Dhaka last weekend to denounce Yunus's removal.
"We continue to watch the situation and hope that an acceptable compromise can be reached." said a U.S. embassy spokeswoman in Dhaka.
Analysts also expressed disappointment.
Debapriya Bhattacharya of Center for Policy Dialogue, a leading think tank, told Reuters: "Notwithstanding the verdict, I reckon, there is still an opportunity for the government to demonstrate an accommodative attitude to secure a continued institutional role for Professor Yunus at Grameen Bank."
Yunus has said he wants to step down from his position but at a time of his choosing to ensure a smooth transition for what he calls an institution "of the people."
Yunus, winner of the 2006 Nobel Peace Prize, set up Grameen, which means village in Bengali, and has been its managing director since 2000.
Lauded abroad by politicians and financiers, he has been under attack by the government since late last year, after a Norwegian documentary alleged the bank was dodging taxes.
Yunus has denied any financial irregularities.
"It (Yunus dismissal from Grameen) is not merely a legal issue, rather it is a matter of upholding the interest of the poor people," said Akbar Ali Khan, a former adviser to the 2007 caretaker government.
"I appeal to the government to reconsider the decision of the central bank and believe there is still room for discussion... (to resolve the issue amicably). Otherwise, the (Grameen) institution will be eventually destroyed."
(Additional reporting by Serajul Islam Quadir and Ruma Paul)