This article is written by Anaya Jain, from NMIMS school of law, Bangalore. This is an exhaustive article in which case analysis of money laundering case of ICICI Bank v Videocon is done.
Table of Contents
Introduction
The ICICI Bank-Videocon case is about allegations of a quid-pro-quo deal between the Kochhars and the Videocon group. The head of the ICICI bank was Kochhar’s. The case rotates around a loan given by ICICI Bank to the Videocon group as a part of a State Bank of India (SBI) led consortium in 2012 and the change of ownership in a firm called NuPower Renewables Pvt Ltd, which was floated as an equivalent joint venture between Chanda Kochhar’s husband Deepak Kochhar and Videocon’s Venugopal Dhoot.
FactsÂ
Central Bureau of Investigation filed an FIR against Ms Chanda Kochhar, her better half Deepak Kochhar, leader of the Videocon group Venugopal Dhoot and ICICI Bank officials for sanction of credit facilities infringing upon rules, that caused a loss of â‚ą1,730 crores to the ICICI bank.Â
The investigating agency till 2nd February 2019 can’t seem to establish whether the loans were given in return for financial favours, a charge that is at the core of booking them for criminal conspiracy, cheating and corruption.
Kochhar committed the mistake of not revealing to the bank’s board about her husband other’s business associations with the Videocon group, which was a customer of the bank.Â
She kept on being a part of the advisory groups that sanctioned credit facilities to Videocon when she should have separated herself on-premise of conflict of interest.Â
The CBI inquiry report holds her responsible for violation of the bank’s “code of conduct, its system for dealing with conflict of interest and fiduciary duties, and the relevant Indian laws, rules, and guidelines.”
In spite of the fact that ICICI bank’s board has acknowledged the report, additionally choosing to pull back all bonuses paid to her since April 2009 and so forth however the board gave her a clean chit as of late as March a year ago.Â
It is difficult to accept that the board didn’t know about these turns of events, as an informant had made these allegations public in October 2016, yet at the same time, the board gave a clean chit to her.Â
Timeline of the facts
October 2016 – After an investor informant Arvind Gupta, an investor in both ICICI Bank and Videocon Group, raised questions via a blog, the topic of suspected loan irregularities comes to light. Gupta affirms that Chanda Kochhar influenced the Venugopal Dhoot-led Videocon group’s Rs 3,250-crore loan in 2012 in exchange for a contract with NuPower Renewables and Supreme Energy, a renewable energy business owned by her husband Deepak Kochhar. Gupta keeps in touch with the Prime Minister, the RBI Governor and a few different authorities requesting a probe. His complaint, however, accumulates no attention.Â
March 2018 –Â The case again comes in the spotlight when another anonymous informant grumbles against the bank and its top administration, including Kochhar, alleging an intentional delay in recognising hindrance in 31 loan accounts somewhere in the range of 2008 and 2016 to save money on provisioning costs. These charges led to probes by numerous agencies, including the Central Bureau of Investigation (CBI), enforcement directorate (ED) and Serious Fraud Investigation Office (SFIO), and furthermore questioning of Kochhar relatives.Â
March 28, 2018 –Â The bank expresses that it has reviewed internal procedures for credit approval and ‘found them to be strong’. The statement points out that the decision to give loan to Videocon Group was taken at the consortium level. Despite the fact that Kochhar was a part of the loaning advisory group that approved the loan, she didn’t have any personal stake in it. The bank’s board additionally communicates full confidence in Kochhar, denying any bad behaviour on her part and precluding any ‘irreconcilable situation’
March 31, 2018 – An initial enquiry is filed by the CBI. Later also, the investigating agency questioned Deepak Kochhar and his sibling Rajiv Kochhar.
April 3, 2018 – Coming to the defence of its CEO Chanda Kochhar, ICICI Bank Chairman M K Sharma said the board has full trust in her and precludes any quid pro quo as alleged in respect of the loan given to Videocon group.
“The board has arrived at the conclusion that there is no doubt of any quid pro quo or compensation/nepotism/conflict of interest as is being asserted in different rumours,” he tells reporters.Â
April 4, 2018 – The Serious Fraud Investigation Office (SFIO) is seeking the nod from the Ministry of Corporate Affairs to check the Rs 3,250 crore loan from ICICI Bank to the Videocon group in 2012.
May 23, 2018 –Â The Securities and Exchange Board of India (SEBI) shall inform ICICI Bank CEO and MD Chanda Kochhar of the lender’s dealings with the Videocon Group and NuPower Renewables, an organization supported by her friend Deepak Kochhar. The market regulator asked Kochhar and the bank to present their responses till June 7 according to a 12-page show-cause notice it served to ICICI Bank and Kochhar on May 23.Â
May 30, 2018 –Â An autonomous probe starts at the ICICI Bank board.
June 2018 – The bank appoints retired Supreme Court judge BN Srikrishna to head the independent panel set up by the board of ICICI Bank.
June 8, 2018 – ICICI Bank and Chanda Kochhar are looking for more time to respond to the market regulator SEBI ‘s show-cause notice.
July 5, 2018 – Kochhar is asked by SEBI to answer to the show cause notice over alleged infringement 0f listing disclosure standards by July 10. The deadline of 7th July had been missed by Kochhar and the bank and looked for more opportunity to respond to the notification because of the absence of documentary proof that helped the claims.Â
October 4, 2018 –Â The ICICI Bank board acknowledges and accepts Chanda Kochhar’s request to seek early retirement. The bank says that the enquiry established by the board will stay unaffected and certain advantages will be dependent upon the result of the enquiry.Â
January 24, 2019 – The CBI files an FIR against Chanda Kochhar, her husband Deepak Kochhar, and Videocon group MD Venugopal Dhoot over alleged loan defaults granted to the company by the bank in 2012.
January 30, 2019 – In the Videocon loan case, a panel headed by Justice BN Srikrishna found that Kochhar infringed the code of conduct of the bank. After the survey, the board of the bank says that it will view her separation as a ”termination for cause’ under their internal policies.
The case
The Enforcement Directorate has enrolled a criminal case of money laundering against past ICICI Bank Chief Executive Officer Chanda Kochhar, her significant other Deepak Kochhar, Videocon Group advertiser Venugopal Dhoot and others to test claimed irregularities and corrupt practices in sanctioning of Rs 1,875 Crore advances or loans by the bank to the corporate groups, said by authorities. They said the central investigation agency documented an Enforcement Case Information Report under the Prevention of Money Laundering Act, taking a notice of a Central Bureau of Investigation’s complaint recorded on the issue a couple of times prior. An ECIR is a thing that could be contrasted with a police FIR.
The accused list in the ED(enforcement directorate) case is equal to that of the CBI. The CBI had named Chanda Kochhar, Deepak Kochhar, and Dhoot and his organizations Videocon International Electronics Ltd and Videocon Industries Ltd in the list. The list in the ED case has additionally been named Supreme Energy, a company established by Dhoot, and Nupower Renewables, a company controlled by Deepak Kochhar, in the FIR.
The Central Bureau of Investigation on Jan. 22, 2019 filed a first information report against ICICI Bank Ltd’s. former managing director and CEO, Chanda Kochhar, her better half that is Deepak Kochhar and VN Dhoot who is a managing director of Videocon Industries Ltd. over alleged inconsistencies in transactions between the lender and private entities.Â
The FIR details the loan exchanges between ICICI Bank and companies related to the Videocon Group. It begins with giving the timeline over which companies engaged with the exchanges were set-up. The CBI at that point proceeds to clarify the loan transactions, including one which builds up the alleged quid pro quo between Chanda Kochhar, Deepak Kochhar and Venugopal Dhoot and their companies.Â
The entities involvedÂ
On July 3 2008, Supreme Energy Pvt Ltd. was incorporated, and the first directors were VN Dhoot (9990 shares) and Vasant Kakade (10 shares).Â
On Jan. 15 2009, To the Pinnacle Energy Trust, managed by Deepak Kochhar. Between this time, Nupower Renewables was founded on 24 December 2008 and the company’s first directors were Deepak Kochhar, VN Dhoot and Saurabh Dhoot.
On Jan. 15, 2009 – Out of Nupower VN Dhoot and Saurabh Dhoot resigned. Prior to departure, V.N. Dhoot issued Deepak Kochhar 19,97,500 warrants at the rate of Rs 10 for each warrant, on an initial payment of Rs 11 for each warrant.Â
On June 5, 2009, 24,996 shares of Nupower Renewables held by VN Dhoot and Deepak Kochhar group (Pacific Capital Services Pvt Ltd) were moved to Supreme Energy Pvt Ltd., which transformed into Nupower Renewables’ 95 per cent shareholder.
The loan transactionsÂ
The loan transactions detailed took place from June 2009 till October 2011. Chanda Kochhar took over as CEO of ICICI Bank on May 1, 2009. As indicated by the FIR, six “high value” loans to different Videocon Group companies were given during this period.Â
On June 30 2009, a rupee term loan of Rs 175 crore was sanctioned to Millennium Appliances India Ltd – a Videocon Group company.Â
On August 26 2009, Videocon International Electronics Ltd received a Rs 300 Crore loan. The CBI said this was in contravention of the standards and policy by the sanctioning committee however didn’t specify which rules were violated.Â
On November 17, 2010, Rs 240 crore was sanctioned to Sky Appliances Ltd.Â
On November 17, 2010, Rs 110 crore was sanctioned to Techno Electronics Ltd.Â
On May 30, 2011, Rs 300 crore loan was sanctioned to Applicomp India Ltd.Â
On October 31, 2011, Rs 750 crore loan was sanctioned to Videocon Industries.Â
According to the FIR, the loans sanctioned to Sky Appliances, Techno Electronics and Applicomp India were to empower them to reimburse the unsecured loan availed by these organizations from Videocon Industries. Further, a loan was additionally sanctioned to Videocon Industries for refinancing the current loans of the organization.
Such loans have converted NPA (non-performing assets) into unfair losses for ICICI Bank and unfair profits for lenders and accused individuals.
The alleged quid pro quoÂ
The supposed remuneration or alleged quid pro quo, detailed by the CBI, is on account of the Rs 300 crore loan given on Aug.26, 2009 to Videocon International Electronics Ltd (VIEL). Chanda Kochhar was one of the individuals from the sanctioning committee.Â
- On September 7, 2009, this loan was dispensed to VIEL.Â
- On the following day, September 8, 2009, VN Dhoot transferred Rs 64 crore to Nupower Renewables, managed by Deepak Kochhar.Â
- The loan was transferred to Nupower Renewables from Videocon Industries, through Supreme Energy.Â
- This, as per the CBI, was the first major capital received by Nupower Renewables to get its first power plant.
Consequently, through her significant other half from Videocon Industries Ltd/VN Dhoot, Chanda Kochhar got unlawful gratification/undue preferred position for endorsing Rupee Term Loan of Rs 300 Crore to VIEL.Â
FIR against Chanda Kochhar – what the CBI alleges
The CBI has slapped sections of the Indian Penal Code relating to criminal conspiracy, cheating and the Prevention of Corruption Act provisions on all accused persons. It had also carried out raids in the event. Dhoot is alleged to have invested in the Nupower organization of Deepak Kochhar through his company Supreme Energy, a compensation or quid pro quo for loans cleared by ICICI Bank following Chanda Kochhar took over as the CEO of the bank on May 1, 2009.Â
Nupower and Supreme Energy’s ownership has changed hands through an intricate trap of shared exchanges between Deepak Kochhar and Dhoot, the CBI claimed.
During its preliminary inquiry, the CBI found that six loans worth Rs 1,875 crore were issued between June 2009 and October 2011 to the Videocon Group and its related companies in alleged violation of ICICI Bank ‘s policies, which had then become part of the investigation.Â
In 2012, the loans were declared non-performing assets which caused the bank to lose Rs 1,730 crore, alleged CBI.
Conclusion
This case raises questions over the guidelines of corporate administration at one of India’s biggest banks. The ICICI Bank scene is just one among a few examples of governance lapses in corporate India as of late. It highlights the need for regulators to keep up a severe vigil on the functions of corporate boards in a period of corporate misadministration.
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