Kochhar litigation against ICICI Bank to test corporate governance norms

Board's conduct to come under legal scrutiny

With the former chief executive officer and managing director of ICICI Bank, Chanda Kochhar, moving Bombay High Court against the bank, the conduct of the bank’s board during the crisis will come under legal scrutiny, which did a somersault by giving her a clean chit in March last year and then sacking her in January this year.

Kochhar’s resignation was accepted by the same board in October 4 2018, when an inquiry had already been ordered by the board in June 2016 to be conducted by retired Supreme Court justice B N Srikrishna.

In its October 4 communication to the stock exchanges, ICICI Bank said the board accepted Kochhar’s request seeking early retirement with immediate effect. The bank also said the inquiry instituted by the board would remain unaffected by this and certain benefits would be subject to the outcome of the probe. 

In her petition to the high court, Kochhar said her termination in January was “illegal, untenable, and unsustainable” in law. The termination was without taking the permission of the Reserve Bank of India, which is a breach of statutory obligation, she said.

According to corporate lawyers, the entire handling of Kocchar issue was ‘mishandled’ by the board and showed the board in poor light. 

The board gave her a clean chit in March and as soon as the scandal broke out in the media, then chairman M K Sharma addressed a news conference defending Kocchar saying all loans to Videocon was above board. On June 6 2018, the bank appointed retired justice Srikrishna to inquire into the allegations of quid pro quo after its large shareholders sought answers.

“An independent investigation should have been the first step in handling such serious corporate governance crisis,” said a Mumbai-based lawyer, asking not to be named.

By August 2018, US-based proxy firm Glass Lewis recommended to the shareholders of ICICI Securities to vote against the proposal to elect Kochhar citing significant legal and regulatory issues. This put more pressure on Kochhar to seek an early retirement.

“Shareholders want good governance, transparency and accountability and that was something missing in the entire controversy,” said another lawyer. 

In January 30, the ICICI board terminated Kochhar after Srikrishna report indicted her. However, the report has not been made public by the bank. 

Though the quid pro quo case was probed by several investigating agencies, including the Central Bureau of Investigation and the Enforcement Directorate, Kochhar has not been chargesheeted by any of the agencies. “According to law, she is presumed innocent till any court indicts her. Till then, she is on strong wicket,” said a lawyer.

Chanda vs ICICI Bank

• Kochhar moved HC against her wrongful termination

• HC to hear Kochhar petition on Monday

• ICICI Bank board dilly-dallied on Kochhar probe

• Board took action in Jan 2018 after Srikrishna report indicted her