The board of ICICI Bank which had given then MD and CEO Chanda Kochhar a clean chit on allegations of nepotism and conflict of interest 10 months ago reversed its stand Wednesday after considering an investigation conducted by retired Supreme Court judge Justice B N Srikrishna. Not only did it sack her, it also decided to claw back all bonuses given to her since 2009 when she took charge of the top post.
The bank and Chanda Kochhar were under regulatory scrutiny after The Indian Express first reported on March 29, 2018 that Videocon Group promoter Venugopal Dhoot provided crores of rupees to a firm he had set up with her husband Deepak Kochhar and two relatives, six months after the Videocon Group got Rs 3,250 crore as loan from ICICI Bank in 2012.
The amount was part of the Rs 40,000-crore loan that Videocon Group secured from a consortium of 20 banks led by SBI. Almost 86 per cent of the Rs 3,250 crore loan (Rs 2,810 crore) remained unpaid. The Videocon account was declared an NPA in 2017.
On March 28, 2018, when asked about this conflict of interest, the bank had said, “The board has come to the conclusion that there is no question of any quid pro quo/nepotism/ conflict of interest as is being alleged in various rumours. The board has full confidence and reposes full faith in the Bank’s MD & CEO, Ms. Chanda Kochhar.”
However, in his report, Justice Srikrishna, who was appointed by the board to look into allegations of conflict of interest against Kochhar, found her guilty of violating the lender’s code of conduct. His report said she showed “lack of diligence” in dealing with due disclosure and recusal requirements.
In a statement Wednesday, ICICI Bank said: “After due deliberations, the Board of Directors decided to treat the separation of Ms Chanda Kochhar from the Bank as a ‘Termination for Cause’ under the Bank’s internal policies, schemes and the Code of Conduct, with all attendant consequences (including revocation of all her existing and future entitlements such as any unpaid amounts, unpaid bonuses or increments, unvested and vested & unexercised stock options, and medical benefits), and require the clawback of all bonuses paid from April 2009 until March 2018, and to take such further actions as may be warranted in the matter.”
Kochhar, who served with ICICI Bank for 34 years, said she was “utterly disappointed, hurt and shocked” by the decision.
“I have not been given a copy of the report. I reiterate that none of the credit decisions at the bank are unilateral. ICICI is an institution with established robust processes and systems which involve committee based collective decision making with several professionals with high caliber participating in the decision making. Hence the organization design and structure obviate the possibility of conflict of interest,” she said.
The bank board noted that Justice Srikrishna’s inquiry “concluded, primarily on account of ineffectively dealing with conflict of interest and due disclosure or recusal requirements, that Ms Chanda Kochhar was in violation of the ICICI Bank Code of Conduct, its framework for dealing with conflict of interest and fiduciary duties, and in terms of applicable Indian laws, rules and regulations.”
Kochhar, however, said, she had pursued her career “as an independent professional with utmost honesty, dignity and integrity”. “I continue to have faith and belief in my conduct as a professional and I am certain that truth will ultimately prevail,” she said.
Kochhar’s indictment may invite action from the Securities and Exchange Board of India (SEBI) for violation of related party disclosures, experts in securities laws said.
ICICI Bank said there was no financial implication of the findings of this enquiry.
Last Thursday, the CBI filed a FIR against Kochhar, Deepak Kochhar, Dhoot and firms including Nupower Renewables and Videocon Industries for allegedly cheating ICICI Bank of Rs 1730 crore until March 2012.
Kochhar, the CBI alleged, “dishonestly” abused her official position to disburse a Rs 300-crore loan to the Videocon Group as the very next day, her husband’s firm Nupower Renewables received Rs 64 crore from the group to acquire its first power plant.
Although the CBI has come under fire from a group of ministers — notably Union Minister Arun Jaitley who accused it of “investigative adventurism” – for naming several senior bankers including the current CEO Sandeep Bakhshi in the FIR, Srikrishna’s report will be added ammunition for the agency’s case, at least against Kochhar.
According to ICICI Bank’s statement, Srikrishna has found Kochhar guilty of violating the bank’s code of conduct.
The CBI FIR said that Kochhar was part of the credit committee on two occasions when loans amounting to a total Rs 1050 crore to Videocon were sanctioned.
“The Enquiry Report also concluded that her lack of diligence with respect to annual disclosures as required by the Bank in terms of its internal policies, the ICICI Bank Code of Conduct and applicable Indian laws, rules and regulations on her interests (direct or indirect) towards avoidance of conflict of interest, when considered that the Bank’s processes were dependent solely on the directors discharging their fiduciary duty to recuse themselves and avoid conflict, implies that the Bank’s processes were rendered ineffective by her approach to such disclosures and avoidance of conflict,” the bank statement said.
Sebi had issued notices to ICICI Bank and Chanda Kochhar on May 24, 2018 under Rule 4(1) of SCR (Procedure for Holding Inquiry and Imposing Penalties by Adjudication Officer) Rules 2005 asking responses on the matter relating to alleged non-compliance with certain provisions of the erstwhile Listing Agreement and the Sebi (Listing Obligations and Disclosure Requirements) Regulations, 2015.
“The action against Kochhar by the bank is severe and will act as sufficient deterrent for others in future. However, the bank board failed to do its job when it gave a clean chit to Kochhar a few days after the conflict of interest allegations against her surfaced in March last year,” said J N Gupta, managing director of Stakeholders Empowerment Services, a proxy advisory firm.