HC upholds action by ICICI Bank against Chanda Kochhar
Mumbai The Bombay high court on Thursday termed the action taken by ICICI Bank against its former managing director and chief executive officer Chanda Kochhar as valid and refused to grant interim relief to her in her suit against the bank
Mumbai The Bombay high court on Thursday termed the action taken by ICICI Bank against its former managing director and chief executive officer Chanda Kochhar as valid and refused to grant interim relief to her in her suit against the bank.
Both Kochhar and ICICI Bank had filed interim applications which were decided jointly by the HC on Thursday. While Kochhar had sought an honouring of the commitments and contractual obligations made by the bank when she retired on October 4, 2018, the bank sought a claw-back of bonuses and revocation of retirement benefits, including vested and unvested Employee Stock Options (ESOPs) from Kochhar as her services were treated as “termination for cause” from that date.
The single-judge bench of Justice R I Chagla, while pronouncing the order on the interim applications, stated, “I find that the revocation of the early retirement acceptance is valid and do not find… any merit in the contention on behalf of Mrs Kochhar that once there is cessation of employer and employee relationship, acceptance of early retirement cannot be revoked.”
“Having considered that the acceptance of early retirement by ICICI Bank was on account of its not having complete knowledge of the facts, including non-disclosure by Mrs Kochhar of various facts which were only learnt of upon receipt of the enquiry report by Justice Srikrishna (Retired), in my prima facie view, ICICI Bank was justified in revoking acceptance of early retirement vide communication dated 30th January, 2019,” said the court.
The bench then restrained Kochhar by an order of injunction from dealing with any of the 6,90,000 ESOPs already exercised by her and directed her to disclose if she had sold or dealt with any such shares as well as disclose the gain from such sale by way of an affidavit of disclosure within six weeks.
After the order was pronounced, Kochhar requested a stay on the effect of the interim order but it was rejected by the bench. She had filed a suit against ICICI Bank in January.
The allegation against Kochhar was that she and her husband had been the beneficiaries of illegal considerations from a firm that had been given a loan of ₹3,250 crore by ICICI Bank in 2012. Based on a specific complaint, in 2017 the Central Bureau of Investigation initiated a preliminary inquiry into the sanctioning of the loan. In June 2018, the bank instituted an inquiry by Justice (Retd) B N Srikrishna. While the enquiry report was pending, Kochhar applied for early retirement. The report submitted in December 2018 stated that Kochhar had committed “gross/serious violations” of the Code of Conduct for extended periods of time.
In January 2019, the bank passed an order of termination of Kochhar’s services and decided to claw back all bonuses given to her since 2009 when she took charge of the top post.
Kochhar, through senior advocate Aspi Chinoy, had argued that once her early retirement had been accepted by the bank on October 4, the employer-employee relationship ceased, and hence the bank could not initiate the inquiry after that.
However, senior advocate Darius Khambata, on behalf of ICICI Bank, submitted that the bank came to know of the misconduct by Kochhar later and hence was justified in its action of issuing termination for cause. He further referred to the Early Retirement Scheme (ERS) stipulations which provide that “in the event of non-compliance of good conduct, the Bank reserves the right to review vesting and exercise of options over the Exercise Period” and “The Bank reserves its right to withdraw any features / benefits given under the ERS at its sole discretion in the event of non-compliance with good conduct”.