The Central Bureau of Investigation (CBI) has registered a preliminary enquiry (PE) against ICICI Bank Managing Director (MD) and Chief Executive Officer (CEO) Chanda Kochhar's husband Deepak Kochhar, officials of the Videocon group and others to determine whether any wrongdoing was involved in the sanctioning of Rs 32.5 billion (Rs 3,250 crore) loan to the Videocon Group by the ICICI Bank as part of a consortium of banks in 2012, according to news agency IANS.
Chanda Kochhar, her husband Deepak Kochhar, and Videocon Group Chairman Venugopal Dhoot are caught up in a controversy over ICICI Bank allegedly granting loans worth Rs 32.5 billion (Rs 3,250 crore) to Videocon. Out of this, Rs 28.1 billion (Rs 2,810) were unpaid and declared non-performing asset (NPA) in 2017.
The ICICI bank loan amount was part of Rs 400 billion (Rs 40,000 crore) loans that Videocon group secured from a consortium of 20 banks led by the State Bank of India.
The role of Deepak Kochhar in the Videocon loan case dates back to December 2008, when he set up a joint venture NuPower Renewables (NRPL) with 50-50 shares owned by both Dhoot and Deepak Kochhar and their associates.
In 2009, Dhoot resigned as NRPL director and transferred around 25,000 of his shares to Deepak Kochhar and a year later, his company Supreme Energy Private Limited allegedly gave a loan of Rs 640 million (Rs 64 crore) to NRPL.
In what followed a timeline of share transfer between the two, Dhoot's Supreme Energy took over the majority of shares of NRPL, which he transferred to his associate Mahesh Chandra Punglia.
Punglia, in turn, transferred his entire stake in Supreme Energy to Deepak Kochhar's Pinnacle Energy for only Rs 900,000 just six months after the Videocon Group got the Rs 32.5-billion loan from ICICI Bank.
This has raised a question of conflict of interest, on part of Chanda Kochhar.
In his defence, Dhoot said that his investment in Supreme Energy, company alleged to have invested in Deepak Kochhar's promoted NuPower Renewables, was only in thousands of rupees and temporary, according to Economic Times. He also denied that any Videocon group company had funded NuPower when he was an investor in Supreme, said the report.
What is a preliminary enquiry?
A preliminary enquiry is the first step to investigate an alleged corruption or fraud. In tune with the procedure, the CBI first collects all relevant material to determine if there is a prima facie criminality, which would require the registration of a first information report (FIR), according to Live Law.
If it is concluded that there is not enough ground to register a case, the PE is closed, but only after CBI director’s approval. There is no deadline to finish a probe registered as a PE.
A PE can be filed on the directions of the Central government, state governments or courts as well as a “source information report”.
Unlike her husband and Venugopal Dhoot, Chanda Kochhar’s name was not mentioned in the PE, which was registered a month ago on the basis of information received, according to a Times of India report quoting sources. However, the PE mentions “unknown bank officials”.
Therefore, Deepak Kochhar, Dhoot and “unknown bank officials” of ICICI Bank and other banks who constitute the consortium, will be called for examination soon, according to media reports. Whether Chanda Kochhar will be called for enquiry or not, shall be taken only after the examination of documents, it added.
The CBI has collected documents pertaining to the total loan amount of Rs 400 billion as well as documents related to the setting up of NRPL.
Here’s the timeline of the events explaining the Videocon loan row (as per the reports published in media):
December 2008: Chanda Kochhar’s husband Deepak Kochhar and Venugopal Dhoot set up NuPower Renewables Private Limited (NRPL) in December 2008. Dhoot held 50 per cent stake in the company with his family members and associates. The remaining 50 per cent was owned by Deepak Kochhar and Pacific Capital, a company owned by Chanda Kochhar’s brother’s wife and Deepak Kochhar’s father, according to Indian Express.
January 2009: Videocon’s Venugopal Dhoot resigned as the director of NRPL and transferred 24,999 of his shares in NRPL to Deepak Kochhar for Rs 250,000.
March 2010: NuPower received a loan of Rs 640 million (Rs 64 crore) from Supreme Energy Private Limited, a company which was 99.9 per cent owned by Dhoot. This loan was given as a fully convertible debenture, which is a debt security in which the whole value of the debenture is convertible into equity shares at the issuer's notice.
Series of shares transfer: A sequence of transfer of shares happened from Venugopal Dhoot to Deepak Kochhar to Pacific Capital to Supreme Energy. After that, Supreme Energy became a 94.99 per cent shareholder in NuPower by March 2010 end. Deepak Kochhar had owned the remaining 4.99 per cent stake in NuPower.
November 2010: Venugopal Dhoot transferred his entire shareholding in Supreme Energy (99.9 per cent) to his associate Mahesh Chandra Punglia.
2012-2013: Between September 29, 2012, and April 29, 2013, Mahesh Chandra Punglia transferred his shareholding (99.9 per cent) to Pinnacle Energy Trust, where Deepak Kochhar was the managing trustee, according to Indian Express. Interestingly, Punglia’s share transfer to the trust was just for Rs 900,000.
The controversy: Therefore, as it turns out, Supreme Energy gave a loan of Rs 640 million (Rs 64 crore) to NuPower and within three years of that, it got subsumed by Pinnacle Energy. Six months before the transfer of these shares took place, Videocon received a loan of Rs 32.5 billion (Rs 3,250 crore) from ICICI Bank. Almost 84 per cent or Rs 28.1 billion (Rs 2,810) of that loan was unpaid and the Videocon account was declared as NPA in 2017.
After ICICI Bank cried foul over the controversy surrounding the loan sanctioned to Videocon Group, Indian Investors Protection Council’s trustee Arvind Gupta on Friday said that the evidence in the case clearly shows the bank's CEO, Chanda Kochhar, being a beneficiary of the loan, according to news agency ANI.
"Venugopal Dhoot transferred money from Videocon Group to Supreme Energy, in which he had 90 percent shares. He promoted it and later transferred it to Deepak Kochhar. Deepak Kochhar then transferred his shareholdings to Pinnacle Energy. Pinnacle Energy was a trust formed by Kochhar family. Now they are saying they sold their shares of NuPower Renewables much before that. NuPower Renewables was a special purpose vehicle made to revert allegations in future. ICICI never gave it loan, the but company was benefited," Gupta claimed, according to ANI.
He added that the bank is only trying to save itself since the money has become an NPA.
Earlier, ICICI Bank Chairman M K Sharma had claimed that attempts were being made to malign the reputation of the bank and Chanda Kochhar. Sharma defended the loan sanctioned to the debt-laden company, saying that the ICICI bank's Board had reviewed the internal processes and details of the exposure to the group.
Commenting on the statement issued by the ICICI Bank, Gupta asked: "That reply doesn't inspire any confidence in me or any deposit holder or any shareholder. The question is when I say dirty banking, somebody else, other than the bank and its functioning or the management, has to look into the matter. And if you see their reply, they have gone into examining the internal process of giving loans. I am not asking about the process, your process may be very robust, your process may be very strong, transparent, but how does it matter?", according to ANI.
"The net result is that your money has gone down the drain...you have given them the money and it has gone bad and become NPA," he added.
Market regulator Securities and Exchange Board of India has also begun looking into the matter for any possible disclosure and corporate governance-related lapses, according to news agency PTI.
Videocon Industries and its promoters have come under the regulator's scanner as the matter relates to alleged "quid pro quo" involving loans to the company by a group of lenders, including ICICI Bank and some public sector banks.
The markets watchdog has begun a preliminary enquiry into various disclosures made by the top private sector bank over the last few years while the stock exchanges may seek additional clarifications regarding recent reports in this regard that relate to dealings that took place way back in 2012, a senior official said, according to news agency PTI.
ICICI Bank is India's fourth most valued bank with a market capitalisation of about Rs 1.8 trillion and its shares are also part of the benchmark stock market index Sensex.