Approval for Chanda Kochhar termination as per law: RBI tells Bombay HC

The Reserve Bank of India (RBI) today submitted before the Bombay High Court that approval to the termination of Chanda Kochhar, former Managing Director and Chief Executive Officer of ICICI Bank, earlier this year was given as per law.

Rejecting claims of ‘post-facto’ approval to the termination of Chanda Kochhar, the Banking Regulator said that approval was given after it was carefully examined from a regulatory perspective under the Banking Regulation Act, 1949.

This came after a Division Bench of Justices Ranjit More and S P Tavade allowed Kochhar’s plea to implead RBI and asked the Banking Regulator to file an affidavit in reply in that regard.

Kochhar has moved the Bombay High Court challenging her termination and clawback of bonuses she received between April 2009 and March 2018

The RBI in its affidavit contended that Kochhar’s plea is devoid of any merit, both in law and there is no violation of fundamental or legal rights. It also said that the Banking Regulator does not involve itself in an employer-employee relationship.

Today, Senior Counsel Venkatesh Dhond for RBI informed the Court that ICICI Bank, in its letter of February 5 this year, had informed RBI that the Board of Directors had considered the Justice Srikrishna inquiry Report on Chanda Kochhar.

A Committee with Justice BN Srikrishna on Board had been appointed to investigate allegations that Videocon Industries was granted loans by ICICI Bank and, in quid pro quo, Videocon invested in Nupower Renewables, the company of Deepak Kochhar i.e. Chanda Kochhar’s husband.

In view of this, the ICICI Bank had concluded that petitioner Kochhar is guilty and reconsidered her early retirement request and treated separately as ‘termination of cause’.

The RBI opposed the plea and stated in its reply,

“The exercise of powers by RBI is within its jurisdiction, proper and in good faith. The said letter (by ICICI) was carefully examined by RBI from a regulatory perspective.”

It was further clarified by RBI that through its letter dated March 13, this year, the RBI accorded its approval to ICICI and advised that ‘termination of appointment’ of Kochhar would be as on October 4, 2018, that is, the last working day of the petitioner as MD and CEO of the Bank.

“The RBI has acted in accordance with statutory provisions and no malafide or arbitration can be attributed to it.”

The ICICI Bank had submitted that it had sought due approval from RBI under Section 35B (1) (b) of the Banking Regulation Act, 1949 for the ‘termination of appointment’ of Kochhar.

Section 35B (1) (b) of the Act states,

“No appointment or re-appointment or termination of appoint­ment of a chairman, a managing or whole-time director, manager or chief executive officer by whatever name called, shall have effect unless such appointment, re-appointment or termination of appointment is made with the previous approval of the Reserve Bank.”

In view of this, RBI argued that the word ‘previous’ referred to in the Act did not imply prior permission for termination but approval to the previous order of termination by the bank. Hence there was nothing wrong with the approval it granted and was not a mechanical exercise undertaken by them as alleged by Kochhar, RBI argued.

Moreover, during the pre-lunch hearing today, Senior Counsel Darius Khambata for ICICI Bank (briefed by Veritas Legal) challenged maintainability of the writ plea and argued,

“There is no public law element in enforcement of contracts under private law. Merely because RBI’s approval is required, the matter will not become amenable to the High Court’s jurisdiction. Every alleged breach of law cannot confer writ jurisdiction.”

To this, Senior Counsel Vikram Nankani and advocate Sujay Kantawala for Kochhar had argued that RBI’s approval was post-facto and in contravention of the Banking Regulation Act.

“It is a mechanical rubber-stamping by RBI without application of mind and giving lip service to the ICICI Bank.”

The Court has today allowed ICICI Bank to file additional affidavit on the merits of the plea and posted the matter for further hearing on January 13, 2020.