Bombay High Court Makes RBI Party To Chanda Kochhar’s Case

The Bombay High Court allowed Chanda Kochhar's demand to make the Reserve Bank of India a party to her case challenging ICICI Bank Ltd.'s decision to claw back bonuses paid to her over nine years.

Kochhar moved the court seeking quashing of ICICI Bank's move to claw back an amount of Rs 7.4 crore granted to her between April 2009 and March 2018, and declare the bank's decision to terminate her as illegal and non-binding.

Vikram Nankani, counsel for Kochhar, argued that her removal as the managing director and chief executive officer of the bank was in contravention of the law since the bank had already approved her retirement request. And the RBI must be impleaded in the petition because her termination was subject to the regulator's approval.

ICICI Bank had named a panel headed by Justice BN Srikrishna to probe the alleged quid pro quo in ICICI Bank's loans to Videocon Group when Kochhar's husband had business dealings with the conglomerate's founder Venugopal Dhoot. The panel found that Kochhar violated the bank's code of conduct and she failed to discharge her fiduciary duty to recuse herself to avoid any conflict of interest. This prompted the bank to treat her resignation as termination.

Kochhar asked for copies of the report and the material considered in the inquiry and minutes of the relevant board meeting from the bank, according to her petition in the high court. The private lender, however, only shared excerpts from the report and declined to share the minutes, it said, adding that the bank didn't provide the copies even when she requested again.

The court allowed Kochhar time to amend the petition to implead the RBI and will hear the matter on Dec. 9.

Kochhar's Plea

Kochhar has sought:

• The high court must declare that her request for early retirement with the bank is valid, while the lender's email seeking to claw back the bonus and terminate her are illegal and non-binding.
• As she had already sought retirement which was accepted by the bank, there was no ‘termination for cause' and hence, the court must set aside the corresponding action of the bank.
• Restrain the bank and its employees from claiming, demanding, cancelling or recovering benefits granted to her as per her October 2018 letter with the bank.
• Direct the bank to treat the unvested stock options as on Oct. 4, 2018 as vested ones and permit her to exercise the benefits of stock options.
• Grant an interim injunction against any action to restrain the bank or its officers from proceeding with any action as per the bank's January and February 2019 emails to her.

Kochhar's Arguments

• The purported termination was in contravention of the law as she had had already sought retirement, which the bank had approved.
• ICICI Bank had obtained a post facto—after the event—approval in March 2019 for her termination. The Banking Regulation Act requires a bank to seek prior approval of the central bank to terminate a chief executive officer and hence this post facto approval was not in line with the law.
• Reserve Bank of India must be impleaded in the petition in light of the fact that Kochhar's removal was subject to its approval.

ICICI Bank's Counter

Darius Khambata, counsel appearing for ICICI Bank, argued:

• A writ petition under Article 226 of the Constitution of India cannot be filed against ICICI Bank as it is private banking entity.
• There is no need to implead RBI in the present case as the main petition is yet to be decided by the court.
• The petition filed by Kochhar was not maintainable.

How It Unfolded

• October 2016: An investor writes to the PM alleging potential conflict of interest in ICICI Bank's loans to Videocon.
• April 2017: RBI approves Chanda Kochhar's reappointment as MD & CEO till March 31, 2019.
• May 2018: ICICI Bank says it's probing an anonymous complaint against Kochhar.
• June 2018: ICICI Bank appoints Justice Srikrishna committee to probe the alleged quid pro quo.
• Oct. 3, 2018: ICICI Bank considers and approves Kochhar's request for early retirement.
• Jan. 30, 2019: ICICI Bank informs Kochhar that her separation from the bank would be treated as termination for cause, and she must return bonus paid to her between April 2008 to March 2018.
• Feb. 2, 2019: ICICI Bank seeks to claw back Rs 7.41 crore granted to her as bonus.