ICICI-Videocon Loan: Srikrishna Panel Finds Chanda Kochhar In Violation Of Bank’s Code Of Conduct
An investigation led by retired Supreme Court judge BN Srikrishna into alleged quid pro quo in ICICI Bank Ltd.’s loans to Videocon Group found that former Managing Director and Chief Executive Officer Chanda Kochhar violated the lender’s code of conduct.
The findings prompted the bank to treat Kochhar’s resignation as a termination. The bank will revoke all her existing and future entitlements and claw back all bonuses paid to her from April 2009 until March 2018.
In a release on Wednesday, the bank said:
- Chanda Kochhar was in violation of the ICICI Bank ‘Code of Conduct’ and its framework for dealing with conflict of interest and fiduciary duties.
- The Enquiry Report also concluded that she failed to discharge her fiduciary duty to recuse herself to avoid any conflict of interest.
- The Bank’s processes were rendered ineffective by her approach to such disclosures and avoidance of conflict.
The bank, however, noted that “there are no implications of the enquiry report on its published financial statements” for April 2009 to March 2018.
Soon after the bank issued a statement, Kochhar said she was “utterly disappointed, hurt and shocked by the decision”. In a statement she noted that
- none of the credit decisions at the bank are unilateral.
- the bank has established robust processes and systems which involve committee based collective decision making.
- the organisation design and structure obviate the possibility of conflict of interest.
I have served ICICI for the last 34 years with all my dedication and hard work. I have never shied away from taking tough decisions whenever required to be taken in the best interest of the organization. This decision from the Bank has caused me immense hurt and pain.Chanda Kochhar, Former MD and CEO, ICICI Bank
Read Chanda Kochhar’s full statement here.
The findings of the Srikrishna investigation are in sharp contrast with the position taken by the bank’s board when the allegations first came to light in March 2018. At the time, the board, led by then chairman MK Sharma, had backed Kochhar saying that all due processes were followed.
“In March 2018, the board of ICICI, and many members are still serving the board, had said that Chanda Kochhar was innocent and she had followed all procedures of the bank,” said Anil Singhvi, founder of governance advisory firm IiAS. “Why are the facts that have gone out today so different and contrary to the facts which were there in March 2018,” Singhvi asked.
Following the findings of the committee, the bank said that it would treat Kochhar’s exit from the bank as a ‘Termination for Cause’ under the bank’s internal policies. This would require the revocation of all her existing and future entitlements such as any unpaid amounts, unpaid bonuses or increments, unvested and vested and unexercised stock options, and medical benefits, and require the clawback of all bonuses paid from April 2009 until March 2018.
The bank also said that it would take any “further actions as may be warranted in the matter.”
Singhvi said that actions, including the clawback, will only go through if they are permitted as per the bank’s contract with Kochhar.
This whole matter will now go into the court of law and I don’t think today we have heard the last word on this subject. It is messy for the bank board, particularly.Anil Singhvi, Founder, IiAS
Kochhar’s lawyer Somasekhar Sundaresan said in an emailed comment to BloombergQuint that the “outcome is disappointing” and that he had yet to see the Srikrishna enquiry report.
However, going by the press release issued by the bank, it appears that the findings returned in the enquiry is that there is breach of the Code of Conduct in terms of diligence required for making disclosures - which can mean that in the view of the enquiry committee, Ms. Kochhar ought to have asked her husband about all his commercial relationships, and should have recused after ascertaining the position. Indeed, the outcome is disappointing but it would not mean that there is a finding of there being a quid pro quo for decisions of the Bank, which has in fact clarified that the financial statements indeed represent a true and fair view.Somasekhar Sundaresan, Advocate (appearing for Kochhar in SEBI matter)
This is a decision of the internal governance processes of the bank, Sundaresan pointed out. The standards that apply to the determination of issues internally are not the same as in general law, he added. “One can comment in more detail only after seeing the report.”
Sundaresan is appearing for Kochhar in penalty proceedings conducted by market regulator Securities Exchange Board of India for alleged failure to make disclosures of the alleged conflict of interest in the Videocon Group loan matter.
Last week, the Central Bureau of Investigation filed a first information report (FIR) against Kochhar, her husband Deepak Kochhar and Venugopal Dhoot, the chairman of Videocon Group. Other entities named in the FIR include the private firms Supreme Energy Pvt. Ltd., Videocon International Electronics Ltd. and Videocon Industries Ltd. The FIR also names “unknown public servants”.
The FIR alleged quid pro quo in one of the six high value loans granted by ICICI Bank to companies related to the Videocon Group. According to the FIR, a day after ICICI Bank transferred a Rs 300 crore loan to Videocon International Electronics Ltd, an amount of Rs 64 crore was transferred to a company promoted by Deepak Kochhar.
In addition to those named as accused in the FIR, the CBI had said that it may investigate the role of senior officials including KV Kamath in the sanctioning of Rs 1575 crore in loans to companies related to the Videocon Group. These loans were sanctioned by various committees on various dates, said the FIR. Members on these committees, whose role the CBI said may be investigated, include:
- KV Kamath, former CEO of ICICI Bank
- Sandeep Bakshi, current CEO of ICICI Bank
- NS Kannan, current CEO of ICICI Prudential Life Insurance
- Rajiv Sabharwal, current CEO of Tata Capital
- Zarin Daruwala, current CEO of Standard Chartered Bank in India
- Sonjoy Bhattacharya, chairman of Goldman Sachs (India) Securities
- K Ramkumar, former executive director of ICICI Bank
- Homi Khusrokhan
The bank, however, said it does not intend to investigate the matter any further.
We believe that the matter is over as far as we are concerned. Will be cooperating with CBI as we have in the past. In our understanding, there is no allegation or evidence of any other bank official having done anything wrong. It would be inappropriate for the bank to initiate any investigation against the officials named in the CBI report.Sandeep Batra, President-Corporate Center, ICICI Bank
The allegations of a quid pro quo between Kochhar’s family and the Videocon Group had first come to light in 2016 and re-emerged in 2018 when Indian Express, in an article published on March 29, detailed a series of transactions between the Videocon Group and NuPower Renewables between 2008-2013.
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