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This article is written by Darshee Madhukallya, pursuing Diploma in Law Firm Practice: Research, Drafting, Briefing and Client Management from LawSikho. The article has been edited by Tanmaya Sharma (Associate, LawSikho), Ruchika Mohapatra (Associate, LawSikho) and Indrasish Majumder (Intern at LawSikho).

This article has been published by Abanti Bose.


“Ethics in business is extremely important; your reputation is everything you have in life” -Sir Freddie Laker”. Chanda Kochhar- Ranked 32nd in Forbes List of the World’s 100 most powerful women. Haven’t we all heard the name at some point or the other? Yes, maybe? So, Chanda Kochhar is a perfect example of women empowerment in the sphere of banking. She was the CEO of India’s fourth-largest private sector bank i.e., ICICI Bank where she immensely contributed to the bank’s flourishment. However recently, the same Chanda Kochhar was in the media, alleged for her misuse of power and involvement in illegal acts. She was linked as the sole perpetrator of the ICICI Bank- Videocon Case involving Non-Performing Assets of Rs. 3,250 crores. 

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To apprehend what actually happened in the ICICI Bank- Videocon case and the role of ex-CEO Chanda Kochhar in it, it is important to understand the main aspect of corporate governance that was violated in the case. To understand in simple terms, Corporate Governance (CG) is a system that talks about the way a corporate company or a bank shall work. It shows the direction in which the company wants to move and lays down rules and regulations for the same. The concept of corporate governance came into being due to the drawbacks of the corporate entity in fulfilling the needs and meeting the expectations of the creditors, customers, and investors. When these expectations are not fulfilled then it is termed as corporate governance failure of the company.

In India, there are various legislations that have formalized the principles of corporate governance through provisions in the Companies Act, 2013; Securities and Exchange Board of India (SEBI); Reserve Bank of India (RBI); Secretarial Standards issued by the Institute of Company Secretaries of India (ICSI); etc. Various committees were also formed to study the corporate governance system. The Companies Act, 2013 introduced a very progressive and clear formal structure for corporate governance. Through new compliance rules and regulations, it enhanced compliance, transparency, and reporting but still lacked in its effectiveness. Corporate governance plays a vital role in the functioning of management of companies but it has its own downsides too as witnessed in cases like Tata-Mistry fallout, PNB-Nirav Modi Scam, The Satyam scandal, UTI scam of 2001, Dewan Housing Finance Limited (DHFL) fraud, YES Bank, Cafe Coffee Day, Jet Airways, among some. One such recent failure was in the case of ICICI Bank. The ICICI Bank fiasco had challenged the existing framework of corporate governance in the management of the bank. The ICICI Bank crisis was basically a loan controversy between Videocon Group and ICICI Bank. It occurred because of the failures of the board members and the non-disclosure of the CEO of her interest in the deal. Through this article, the writer will try to help the readers understand whether this was a scam or a media hype or was a corporate governance failure and if yes, then how the bank could have avoided the issue by taking proper steps. This case raises a question about taking steps to improve the banking sector. The article will also analyse the loopholes in the corporate governance system that requires immediate rectification.

What is corporate governance?

To understand corporate governance failure in ICICI Bank Ltd, it is important to understand the term ‘Corporate Governance’. “Corporate” means any legal business entity that exists and “Governance” means the set of frameworks or rules necessary to govern it. It is basically a structure to manage and enhance the prosperity of businesses to raise the long-term value and protect the interests of shareholders. The first case of corporate governance failure was in the case of Bank of Credit and Commerce International in 1981 in the United Kingdom. The concept of corporate governance started in India after mid-1996 when economic liberalization and deregulation of businesses and industries came into the picture. In 1996, the Confederation of Indian Industries Code (CII) started the first initiative in the Indian industry and made an essential step towards corporate governance.

Why is corporate governance required?

In the context of the banking sphere, the primary concern of corporate governance is to ensure that the interest and necessities of all its shareholders are protected. Corporate governance is required to safeguard their money so that no illegal activity takes place in the bank. It talks about Managers, Board of Directors, Shareholders, Regulators, and other related aspects. The main area of concern of corporate governance is to deal with the effective composition of the Board of Directors (BoD), the separation of the BoD’s supervisory role from the executive management, and the constitution of Board Committees to oversee critical areas, implementing value-based corporate culture and norms; ethics in the working process; accounting of transparency; etc. It is required to ensure that the use of best management practices fulfils the requirements through ethical means. It is required to implement sustainable development and ensure that the needs, liabilities, and social responsibilities of the stakeholders are fulfilled. Companies and banks opt and should opt for corporate governance to have better access to external finance, to lower their cost of interest and loans, to improve the performance, valuation, and sustainability, and most importantly, to reduce risk.

What was the ICICI Bank Ltd Case?

ICICI Bank is one of the largest private sector banks in India. Private sector banks are non-government-owned banks. The Board of Directors of the bank formed the Corporate Social Responsibility (CSR) in the year 2009. The objective of the committee was to review the CSR initiatives undertaken but a few years back the bank gathered a lot of media attention surrounding the illegitimate use of power by the CEO, Chanda Kochhar. This fiasco was termed a money laundering case.

Facts of the case

The case was initiated in 2008 with many entwined facts. The facts are summarized below:

  • In the year 2008, ICICI Bank’s ex-CEO Chanda Kochhar’s husband- Mr Deepak Kochhar, and Videocon Group Chairman, Mr Venugopal Dhoot together started a company named “NuPower Renewable Private Limited” (NRPL) where they had equal stakes. 
  • In 2009, Mr Dhoot sold it to Mr Kochhar. In the same year, “Supreme Energy” was incorporated with Mr Venugopal Dhoot and Mr Vasant Kakade as directors. 
  • The loan transactions started when Chanda Kochhar became the CEO of the bank and sanctioned 6 loans to Videocon Group: Rs. 175 crores and Rs. 300 crores in 2009; Rs. 240 crores and Rs. 110 crores in 2010; and Rs. 300 crores and Rs. 750 crores in 2011. 
  • In 2012, Rs. 1,730 crores was declared  as NPA causing a big loss to the bank.
  • In 2010, “NuPower” was in need of money and hence got a loan of Rs. 64 crores from “Supreme Energy” which was Mr Dhoot’s company under the condition that Mr Dhoot would get some shares of “NuPower”. 
  • In 2011, “Supreme Energy” transferred its shares to its partner- Mr Mahesh Chandra Punglia. 
  • In 2012, Mr Punglia gave all the shares to a company named “Pinnacle Energy” which was owned by Mr Kochhar, for a sum of meagre 9 lakhs. 
  • In April 2012, ICICI Bank made a loan of ₹3,250 crores to the Videocon group. Until this time, there were no conflicts but the problem arose in 2017 when Rs, 2,810 crores were declared as Non-Performing Assets (NPA) and the fact that Ms Kochhar was at that time the bank’s CEO. Loans which the bank considers to be not returned are called as NPAs. 

The Chairman of ICICI Bank, M.K Singh said that the bank was a part of the 20 banks consortium that gave Rs. 40,000 crore loans to the Videocon Group Chairman- Mr Venugopal Dhoot when he demanded it. In 2016, investor Arvind Gupta, a stakeholder activist, alleged that there was a deal between the CEO Chanda Kochhar’s immediate family members and the Videocon group regarding Rs. 3,250 crore loan from the former by the latter. Even before the CBI could probe into the matter, he wrote a letter to the Prime Minister in 2016 and explained the internal dealing where a private sector bank was at loss and stated how Ms Kochhar’s husband had a business partnership with the Videocon group prior to the sanction of the ICICI loan.

When the conflict started getting attention in the public domain then the chairman of the Board of Directors, M.K. Sharma, inquired into it for two years but found nothing. It was alleged that the bank disbursed only a part of the Rs 3,250 crore. Media houses reported that Videocon was provided financial favour by Ms Kochhar and the bank gave Rs. 3,250 crore to Mr Dhoot in exchange that “Supreme Energy” was given to Mr Kochhar. The case finally came into the spotlight in March 2018 when another whistleblower complained against the bank’s top management. He alleged that there was a delay in recognising the impairment of loan accounts between 2008 and 2016. 

Issues raised

After understanding the facts of the case, certain questions arise on money laundering and mismanagement by the bank. Economists, media houses, stakeholders, and shareholders raised questions pertaining to the corporate governance of the bank. 

  1. Even after the bank was aware of the conflict of interest that took place in the case, the bank stood by its CEO for over two months and when they saw agitation growing, then the board opted for a probe. Why did the bank not raise questions in this matter too? 
  2. The second question that arises is that, even though a probe was initiated, it was by an outsider. It is important to understand why an outsider had to do the same, overshadowing the fact that it was an internal failure where the bank should have been prompt in taking steps?
  3. While the inquiry of the case was still continuing, the CEO continued her work in the office during the period of the inquiry. To what extent is this even justified? 
  4. When the Securities Exchange Board of India (SEBI) initiated the probe then Mrs Kochhar requested early retirement. So, a question arises now. Why did she opt for early retirement instead of resigning and why in the first place did she even take this step?
  5. Other issues were raised such as whether the bank had failed to make adequate disclosures about its dealings with the borrower. Also, the review process was done by the bank internally and the report too was never made public. What was the reason behind such a process and non-disclosure?

Despite all the allegations and investigation initiated and conducted, the ICICI Bank Chairman, M K Sharma, issued a statement stating that these rumours were being spread to malign the reputation of the bank and its top management officials. Neither did they reassure on taking measures to ensure higher standards of governance in the future nor had they shown any deleterious effects on the bank because of the conflict of interest and how they would halt it. As soon as they became aware of the relation, they should have tried to protect the bank’s reputation and practices but instead, they supported the CEO. These actions on part of the bank wholly point to the non-adherence to corporate governance norms. 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. But the bank too later initiated an independent probe into the matter in the wake of rising pressure.

Actions initiated

The CBI initiated an inquiry to probe the irregularities between Mr Kochhar and Mr Dhoot. It also initiated an investigation against Deepak Kochhar’s sibling Rajiv Kochhar. In 2018, the Serious Fraud Investigation Office (SFIO) got involved in the case seeking permission from the Ministry of Corporate Affairs (MCA) to launch a probe. The SEBI also initiated legal proceedings that they were not informed of the same and demanded an explanation regarding the lender’s dealing with Videocon Group and NuPower Renewable and issued a show-cause notice before July 5, 2018. 

It suspected a violation of listing agreement disclosures and asked the CEO Chanda Kochhar to respond to the allegations who later, in October 2019, gave a plea to have early retirement which was later accepted. The bank also faced a penalty of up to Rs. 25 crores under the relevant SEBI regulations and a fine was levied along with other penal action. The penalty amount was decided on the basis of the loss suffered by the investor and the benefit that was derived by the applicant. The Enforcement Directorate (ED) also filed a recovery suit of Rs. 12 crores. It also found out that the Videocon Group had transferred a flat to a family trust of Chanda Kochhar where Mr Dhoot threatened to turn the assets to NPA.

In 2018, the bank appointed Justice B.N Srikrishna as head of an independent panel to look into the matter. In the same year, a Judicial Committee was also formed under the leadership of Justice Srikrishna, who, in 2019, said that the code of conduct was violated and cheating and criminal conspiracy were committed. After this, the bank decided to take back all benefits provided to Mrs Kochhar. The ED alleged that out of the Rs. 300 crore that was sanctioned, Rs. 64 crores were given by the committee only that was transferred by Videocon to NuPower in 2009. It also investigated other loans sanctioned by the CEO in the case of Bhushan Steel, Essar Steel, Sterling Biotech.

Mrs Kochhar also didn’t stay silent on the matter and filed a suit on the basis that even though she has already given the resignation letter, her contract was still terminated which went against the approval procedure and statutory obligation. The bank then responded by stating that the termination was done on the basis of the non-disclosure of facts by the CEO herself. Also, the Bombay High Court rejected the petition as not maintainable. Another interesting fact also came into play when Mr Dhoot stated that the CEO asked him to invest in NuPower and stated that 64 crores of the 3000 crores were given to it.

Charges filed against the parties

On January 24, 2019, the CBI also registered a First Information Report (FIR) against Chanda Kochhar, her husband Deepak Kochhar, and Videocon Group Chairman Venugopal Dhoot over the irregularities in sanctioned loans. FIRs were filed for illegal gratification between related persons, illegal use of position and power by the CEO, etc. The Enforcement Directorate (ED) charged Mr and Mrs Kochhar under Section 3 and 4 of the Prevention of Money Laundering Act (PMLA) with money laundering charges based on the CBI Report. They also seized the houses of Mrs Kochhar. They were also probed by other revenue and law enforcement agencies for granting the loan by contravening the policies of the bank and the ethics of corporate governance. In January 2020, the ED attached assets worth more than Rs. 75 crores belonging to Chanda Kochhar and her family. Mr Kochhar was arrested by the ED in September 2020 under the PMLA. Regarding the criminal case registered by the ED against Deepak Kochhar, Justice P.D. Naik of the Bombay High Court granted bail to him on merits when he had approached the high court after a special court in the city rejected his bail. Later, Mr Dhoot and Mrs Chanda Kochhar were granted bail under the PMLA special court.

Aspects of corporate governance that were disregarded in this case

Good corporate governance balances each aspect. It leads to the success of the company/bank. There are certain features of corporate governance that the banking sector should abide by. Some of these include:

  1. Corporate Discipline: The word governance itself refers to the word discipline. Corporate discipline refers to the proper following of the principles and procedures established for governance. 
  2. Balancing Interest: Corporate governance strives to balance the interest between the management of the bank, the Board of Directors, Independent Directors, Chief Executive Officer, Shareholders, Investors, Auditors, and every related person to the bank. 
  3. Transparency and Fairness: The existence of transparency in order to know about the internal happenings of the bank and not just relying on the given reports and documents by the auditors is essential. Every mechanism should be transparent to the extent possible. The absence of this might lead to scandals as seen in the case. It ensures that works are completed and done in a timely manner. Clause 49 of the SEBI Listing Agreement provides for it. 
  4. Risk Management: As recommended by the Narayan Murthy Committee in 2003, it means laying down procedures for risk management and prevention procedures by the board of the bank. 
  5. Integrity and Ethics: As recommended by the Naresh Chandra Committee, the bank shall abide by the rules and maintain integrity and ethics. The board shall protect the rights of the shareholders which means avoidance of any unfair practice and corruption. It shall review the management process to ensure that ethical means have been adopted in the process. In good governance, the board shall act honestly, ethically, and morally. 
  6. Independent Working Mechanism: Corporate governance should be free from dominance. It should have an independent working mechanism that divides the power, roles, and responsibilities between the Board of Directors, Auditors, committees of the Board, and Parties.
  7. Accountability: The accountability of the bank, especially the CEO and the Board of Directors in taking decisions and making other appointments, as well as sanctions of loans to parties, should be emphasized. This is important so that the investors can be cognisant of the actions taken by the bank making the bank answerable.
  8. Responsibility of the Bank: The responsibility of the bank should be strictly adhered to for preventing mismanagement and corruption actions. Although accountability and responsibility sound the same, there exists a thin line of difference.  Accountability refers to the answerability of the bank for actions that they have committed whereas responsibility refers to the proper carrying out of the work by the bank.
  9. Powers to the CEO: Another important aspect of corporate governance is giving more powers to the CEO in order to strategize independently and oversee the management of the bank properly.  

All these aspects of corporate governance failed in the ICICI Bank-Videocon Case. It clearly showed how corporate governance has failed in such a large private sector bank. The conflict between the bank and the CEO should not have taken place in the first place and the board should have been more careful in this regard by keeping a check on the management. The bank violated the basic principle of corporate governance, failed in maintaining transparency, responsibility, fairness, accountability, and balancing of interest, and; the CEO failed in abiding by the ethics and revealing the conflict of interest.  

When Mrs Chanda Kochhar gave the loan to Mr Dhoot in 2012, she did not inform the bank about her relation with the said party which she should have informed beforehand in order to maintain transparency. Even after the loan amount was declared as NPA, she didn’t inform the bank board and the committee about her husband’s business associations with the Videocon group, which was a customer of the bank. This clearly indicates that she committed a violation of bank guidelines and something might have been wrong in the complete transaction. She kept on being a part of the advisory groups that sanctioned credit facilities to Videocon when she should have separated herself on the basis of conflict of interest. This indicates that there might have been some violation of the management and procedural norms. 

Hiding this conflict of interest was wrong and she should have distanced herself instead. These questions were raised because the way the loans were provided was different. One company out of the 5 companies that received loans in the Videocon group, was Evans Fraser &  Company India Limited which received a loan of Rs. 650 crores which were nine times its total sales. Also, it was a co-obligor to the ICICI Bank in 2012 with the only net sales and net profit of Rs. 75 crores and 94 lakhs respectively. Interestingly, the committee that passed this loan had Mrs Chanda Kochhar also. The bank argued that it was merely a coincidence.  Also, the fact that she was not the head but just a member of the committee takes the suspicion in another direction. The presence of the bank’s CEO on this committee and the support of an independent probe have created doubts over corporate governance practices. For successful corporate governance, the role of the CEO and the Board is of the very essence. However,  here both the management officials failed. The Board is ultimately responsible for every bad and good action and such actions and behaviour should be strictly monitored.

There might also have been certain other underlying reasons for this failure. Mrs Kochhar already had a charismatic personality and it might be due to this that her decision if it was, was not questioned by the Board. Since the CEO’s husband already had a business relation with Mr Venugopal Dhoot, thus she should be kept far away from this. But also, the fact that there were other members too in the committee can’t be neglected. This surely sparks doubts. Also, the Board largely depends on the decisions and views of the CEO of the bank. Here too this might have been the case. 

Turning loans into NPAs takes place in public sector banks too and Economist Arvind Panagariya stated that these banks should be privatized as these banks (except SBI) are neither profitable nor can govern and be administered on their own. Will this prove to be a beneficial solution? But ICICI Bank is a private sector bank and still, such an incident took place. When this question was raised to the then Finance Minister, Arun Jaitley, he responded by saying that it’s a challenging decision to privatize it as it requires political consensus as well as changes in the Banking Regulation Act. However, it is important to analyse the authenticity and practicality of the statement. The ICICI Bank board has clearly failed in its main fiduciary responsibility of protecting investor interest. What is done cannot be undone but it can surely be prevented in the future. This case highlighted the importance of a whistleblower and the loopholes underlying the veil of corporate governance.

What is the current situation of corporate governance in India?

The Indian Board of Directors is found to be incompetent when it comes to exercising requisite due diligence to shareholders by maintaining an intense oversight of officials like the CEOs and the promoters. The reality today is that the actual practices are tailored to the needs of management officials. In India, the problem is that the officials are even spared from the aftermath of corporate governance violations. We thus need more laws and regulations to punish them. Corporate governance does not protect the stakeholders nor does it address issues like nepotism, favouritism, conflict-of-interest, lack of transparency and accountability, etc. It should focus on maintaining comprehensive compliance with the laws, rules, and regulations that govern our business promoting a culture of accountability, transparency, and ethical conduct, and making changes in the laws along with time. There should be efforts to improve the risk management and internal controls that would lead to fruitful results in a future scenario. Rules exist at their own place, but corporate governance should be done based more on principles. The bank must effectively be able to protect the interest of related party transactions.

The case was heavily criticized by the public, especially the shareholders, because of the fact that the amount that was granted to Mr Dhoot was ultimately the money of the shareholders that they have kept in the bank and the amount getting NPA indicates that the money of the shareholders is lost. Separating the roles of the CEO and other officials could be a strategic step to quell the conflict. Recently we can see that corporate governance failure has been a growing issue and more cohesive actions should be taken to address the issue. It seems that the bank has wilfully given the money without taking into consideration the principle and rules that they need to follow and adhere to. Management makes a bank run but governance ensures that it is run properly. The effectiveness of corporate governance should be ensured and kept in check. Not denying the fact that the bank had a strong consumer franchise, but the reputation of the bank was in tatters after the case. The case sparks a doubt if such instances have taken place in the past too but due to the whistleblower in this incident, the facts and mismanagement of the bank came into the public’s knowledge of the public. The same situation can be seen in several other Indian companies that are dominated by professionals rather than promoters.


Corporate governance can be understood as the relationship between the shareholders, stakeholders, and the employees of a company. Through the discussions in the article, we have seen how the functioning of corporate governance has failed despite the existence of various legislations governing it. This case has been a perfect example of how internal management can at times be harmful to the interest of the other parties. Despite the introduction of the Companies Act 2013, there have been corporate governance failures. There is a requirement for amending the law related to the Companies Act 2013 to reduce the number of corporate governance failures. It highlights the need for regulators to keep up a strong vigil on the functions of corporate boards in a period of corporate mis-administration.

Recently, private sector banks have started laying emphasis on better and more effective corporate governance. It’s a curious case of executives and top-level management laundering the money for themselves at the cost of the shareholders who put in their hard-earned money, and all of this happening in the absence of a majority promoter. In any case, if the loan, its conditions, or if the arrangement was supported, the deal clearly has a serious conflict of interest. This sort of a deal should have been immediately red-flagged. Every board meeting should include a serious review of concerns about the CEO since it’s ultimately up to board members to oversee and prevent long-term damage to the company.

It can be said that privatization won’t be a feasible and beneficial solution because the bank would be ultimately run by the people whose duties and actions go unchecked therefore coaxing corruption. To make the banking sector more transparent, measures can be taken to reduce conflict of interest. What can be done is that proper voting should be taken into account which would ensure if any directors have disagreed or agreed to the proposal and based on which further investigation shall be done. It must ensure that the internal control mechanism is properly structured and the rights of the shareholders are not trampled upon. 



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