Kochhar challenges RBI decision to terminate her; HC seeks bank’s response

Banking Regulation Act says that prior approval of the RBI is required to terminate the contract of a bank’s chairman or managing director

Chanda Kochhar, former managing director and chief executive officer of ICICI Bank, on Monday challenged the Reserve Bank of India’s (RBI) approval in terminating her. She said the move was illegal and had no legal base.

The central bank on March 13 gave its consent to the bank management on Kochhar’s termination, after the bank fired her on January 31. Kochhar is now contesting that the bank should have secured the RBI’s permission first before terminating her services.

Chanda Kochhar had originally moved against the bank, but decided to file an amended petition, making the central bank party to the case. Following the amended petition on Monday, the Bombay High Court served notice to the RBI, seeking its response. The case will be next heard on December 18. The amended petition argued that the bank wrote to the RBI on February 5, days after serving her the termination letter on January 31. The RBI subsequently approved the move on March 13.

“The RBI issued the alleged approval without due and proper application of mind and in colorable exercise of powers, by mechanically accepting the mala fide request of the respondent bank (ICICI) without disclosing contents thereof to the petitioner (Kochhar) and contrary to the provisions of Section 35B (1)(b) of the Banking Regulations Act,” Kochhar said in her petition.

Videocon case: ICICI Bank weighs leave for Chanda Kochhar till probe report

The ICICI board, which consists of 12 members, is divided on whether Kochhar should be on leave during the internal enquiry

 

ICICI Bank Chairman M K Sharma has written an email to board members seeking their opinion on whether Managing Director (MD) & Chief Executive Officer (CEO) Chanda Kochhar should be asked to go on indefinite leave until the internal enquiry is concluded, said people in the know.

“In an email sent to board members last week, Sharma asked board members whether they agreed that Kochhar should go on indefinite leave until the ICICI Bank-constituted enquiry is completed to have a fair outcome,” said one of the persons cited above.

Kochhar is on her planned annual leave, the bank had said on June 1.

The ICICI Bank board had come out in support of Chanda Kochhar on March 28, quashing allegations of a quid pro quo and favouritism in giving a loan to the Videocon group, which, in turn, had invested in Chanda’s husband Deepak Kochhar’s company NuPower Renewables.

The initiation of probes by multiple agencies, including the Central Bureau of Investigation, income-tax department, and Securities and Exchange Board of India (Sebi), and a subsequent complaint from an anonymous whistle-blower led to the board’s decision to conduct an independent probe.

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“This may have prompted Sharma to ask the board on whether Kochhar should go on extended leave,” said one of the sources.

Some of the board members are of the view that Kochhar should resume office after her leave so as to not cause any uncertainty among shareholders.

“Since the events are already recorded and possibly cannot be altered, requesting Kochhar to proceed on leave at this point in time may send the wrong signal to stakeholders, especially after the board had showed full confidence and faith in her when the issue first broke out,” one of the board members told Business Standard.

An email sent to ICICI Bank did not elicit response. Sharma, too, did not respond to text messages and phone calls.

The ICICI board, which consists of 12 members, is divided on whether Kochhar should be on leave during the internal enquiry, indicated another person.

Sources said this matter would come up for discussion in the bank’s board meeting scheduled to be held on June 27. The meeting would be the last for Chairman Sharma, who retires on June 30.

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ICICI Bank-Videocon loan case: Things to know about Rajiv Kochhar

Rajeev Kochhar's Avista Advisory is said to have helped ICICI Bank clients recast their foreign loans

Avista Advisory group, a Singapore based company owned by Rajeev Kochhar, is said to have helped ICICI Bank clients in restructuring their foreign loans. On Thursday, the Central Bureau of Investigation stopped Kochhar at the Mumbai airport and questioned him. But who is Rajeev Kochhar?

Here are a few things to know about Rajeev Kochhar and his alleged role in the ICICI Bank-Videocon loan case:

Rajiv Kochhar is the brother of ICICI Bank MD & CEO Chanda Kochhar’s husband Deepak Kochhar, who is facing a CBI probe in relation to an alleged impropriety in the loan the bank gave consumer durables firm Videocon. It is being investigated if the loan was granted to Videocon in lieu of the firm’s investments in Kochhar’s personal company Nupower.

Nupower, the ICICI Bank board and Videocon have denied any wrongdoing.

The Kochhar brothers are well known in Mumbai’s financial circles for setting up Credential Finance in the 1990s. The company folded up in the early 2000s and both brothers parted ways. Rajeev Kochhar, who is the son-in-law of Sharad Upasani, the former chief secretary of Maharashtra, later went to Singapore to set up Avista Advisory group.

Over the past six years, Avista won the mandate to restructure foreign currency-denominated debt deals worth over $1.7 billion to seven companies. All these companies were borrowers of ICICI Bank. In at least one of these deals, ICICI Bank was the lead bank of the lenders, the Indian Express reported on Tuesday.

On Monday, Subramanian Swamy, a BJP Member of Parliament, had tweeted that the CBI should probe whether Avista Advisory received 5 per cent on every big loan for certification. Avista, according to an industry source, had expertise in restructuring foreign currency loans in association with Houlihan Lokey, a US-based firm.

Rajiv Kochhar had denied any conflict of interest in business dealing with ICICI Bank in his earlier interviews to the media. “There is no conflict. The entire process of selection of ‘debtor advisor’ was competitive. We were chosen as a ‘debtor advisor’ in the restructuring of the FCCBs of Jaiprakash Associates Limited, Jaiprakash Power Ventures Limited and GTL Infrastructure. In these restructuring transactions, the ‘Debtor’ of the FCCBs were the respective companies and the ‘Creditor’ were the respective foreign currency convertible bondholders who are ‘Foreign Investors’ in these FCCBs. Avista advised the companies in the negotiation with these Foreign Investors in order to restructure the FCCBs. Since the FCCB restructuring transaction did not involve any negotiations between the companies and the ‘Domestic Lenders’, there is no conflict of interest of whatsoever nature,” he had said.

According to Avista’s website, the company has a strong stressed asset restructuring advisory practice and a successful NPL resolution platform in South East Asia and India and access to a wide spectrum of pools of institutional and private capital. The company was also in the process of setting up a stressed asset and special situation (SASS) investment management and investment advisory platform.

Read more: ICICI Bank