The stern action taken by ICICI Bank against former managing director and chief executive Chanda Kochhar after an indictment from the Justice BN Srikrishna report, is a warning for other boards of the corporate world, believes JN Gupta, former SEBI Executive Director and Managing Director of Stakeholders Empowerment Services.
“I feel in corporate India it is first of its case. A stern action has been taken. I always believe this act as a deterrent or warning to others that things shouldn’t be taken lightly,” Gupta said.
Justice Srikrishna committee that was tasked with probing the quid-pro-quo transactions in ICICI Bank, said Kochhar violated the bank’s code of conduct.
The panel suggested treating her separation from ICICI Bank as termination.
Shareholder whistleblower Arvind Gupta was the first to raise concerns in October 2016 through a blog, alleging impropriety in loan-related decisions made by Chanda Kochhar. He also alleged quid pro quo in the approval of loans given to Videocon Group, whose promoter had business dealings with Kochhar’s husband Deepak.
Following the Justice BN Srikrishna panel report indicting Kochhar, the bank said it will retrieve bonuses she received since 2009.
The board, following the receipt of the enquiry report, on January 31 decided to treat “the separation of Kochhar from the bank as a ‘termination for cause’ under the bank’s internal policies, schemes and the code of conduct, with all attendant consequences.”
These include 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.
According to a report in the Economic Times, Kochhar owes the bank close to Rs 350 crore, of which Rs 343 crore is through employee stock options (ESOPs) since FY09, and almost Rs 10 crore is in form of cash bonuses.
The Srikrishna panel found there was lack of certain disclosures and procedures were not followed.
Blaming ICICI Bank board for giving a clean chit to Kochhar, Gupta said, “Now for knowing this one doesn’t need a Justice, you can find out internally, that raises a question on the board of ICICI that gave a clean chit to Chanda Kochhar in almost no time when the issue came up. It means that the earlier board that gave the clean chit didn’t apply its mind.”
With Justice BN Srikrishna indicting Chanda Kochhar for lack of disclosures and not following procedures, Gupta sought the statutory bodies to act fast.
“The inquiry done by Justice Srikrishna is limited in scope. Justice Srikrishna acted as a senior person available in the country who can do justice without statutory backing,” Gupta said.
“He couldn’t go deep into the issue by summoning people and accounts. He could not have examined any criminal aspects of the case,” he added.
An investigation led by Srikrishna is in sharp contrast with the stance 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 all due processes were followed.
“How is it that MK Sharma, the earlier board chairman gave Chanda Kochhar a clean chit while this board chaired by GC Chaturvedi says she has violated the bank’s code of conduct?” said Hemindra Hazari, an independent banking analyst.
“I expect Kochhar to challenge her dismissal in court where more details of how the board concluded its decisions will be made public. It also shows how overpaid the top CEOs are in private sector banks,” he added.
On January 24, CBI booked Kochhar on charges of criminal conspiracy, cheating and abuse of official position for “dishonestly sanctioning loans to the Videocon Group”.