ICICI is a private body, not an instrumentality of State: Bombay HC dismisses Chanda Kochhar challenge to termination

The Bombay High Court today dismissed the petition filed by former ICICI Bank Chief Executive Officer and Managing Director Chanda Kochhar challenging her termination last year..While doing so, the Bench of Justices Nitin Jamdar and MS Karnik held that ICICI Bank was a private body, and that the service conditions of Kochhar are not governed by any statute..Kochhar had approached the Bombay High Court challenging the ‘termination for cause’ communicated to her by ICICI Bank in January last year..Chanda Kochhar moves Bombay HC against termination from ICICI, seeks to implead RBI.A Committee headed by former Supreme Court judge Justice BN Srikrishna 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..The Justice Srikrishna Committee ultimately indicted Chanda Kochhar last year. In turn, the Board of Directors of ICICI Bank terminated her employment after considering the inquiry report. As a result, on January 30, 2019, the Board informed Kochhar that it decided to treat her separation from the bank as ‘termination for cause’..Later, the bank revoked Kochhar’s retirement benefits. Her efforts to obtain existing and future entitlements, including unpaid amounts, stock options, medical benefits were refused..Thus, Kochhar approached the Bombay High Court challenging ICICI’s denial of her remuneration as Managing Director and Chief Executive Officer, as well as the order of termination..When the matter was heard on December 2 last year, Kochhar sought to amend her petition to challenge the communication of the Reserve Bank of India (RBI) under Section 35B(1)(b) of the Banking Regulation Act, by which it had approved her termination..It was claimed by Kochhar before the Bombay High Court that in October 2018, she had requested for early retirement and the same was accepted by the Board of Directors of the ICICI Bank..Before the Bombay High Court, counsel for ICICI Bank and the RBI raised objections as to the maintainability of the plea. The petitioners claimed that ICICI is not an authority under Article 12 of the Constitution of India. Further, it performs no public duty, and there is no public law element in its functioning. Thus, Kochhar’s invocation of the High Court’s writ jurisdiction was called into question..Counsel for RBI argued that the challenge to its order under Section 35B(1)(b) was not bona fide, and that it was filed only to create a case for maintainability for an otherwise contractual dispute..Kochhar’s lawyers claimed that her services are governed by a statute, more particularly Section 35B(1)(b) of the Banking Regulation Act. Further, the RBI’s grant of approval for her termination directly affected her rights, and therefore such order is justiciable in writ jurisdiction. Though ICICI Bank is not an authority under Article 12 of Constitution of India, it does not mean that writ jurisdiction cannot be invoked against the bank, it was contended..At the outset, the Court dismissed the contention of Kochhar that since the amendment challenging the order of Reserve Bank was allowed, the petition has to be heard on merits. Commenting on the invocation of writ jurisdiction in this case, the Bench held,.“A writ would not lie to enforce purely private law rights. Even if a body is performing a public duty and is amenable to writ jurisdiction, all its decisions would not be subject to judicial review…Before issuing any writ, particularly writ of mandamus, the Court has to satisfy that action of such authority, is in the domain of public law as distinguished from private law. For a function to be of a public character, the function must be closely related to functions performed by the State in its sovereign capacity.”.The Court then moved on to the arguments based on Section 35B(1)(b), which provides that appointment, reappointment and termination of the Chairman and the Managing Director of a bank, will not have effect unless it is with the previous approval of the RBI..The main questions before the Bench were, therefore, whether Section 35B(1)(b) can be said to govern the service conditions of Kochhar so as to impose a statutory duty on ICICI bank, and whether Kochhar could challenge the exercise under writ jurisdiction..To answer these questions, the Court confined its consideration to the fact situation of approval for termination. In this regard, it was held,.“The grant of approval by Reserve Bank does not mean that the action of termination is valid in terms of the service dispute. The approval is based on the opinion that no impact on the banking system is discernible. When the Reserve Bank grants approval to the termination, it has no lis between the employer and employee before it to determine.".Further commenting on the objective the provision seeks to achieve, the Bench held,.“The focus of scrutiny under this provision is not the rights of the employee. Section 35B(1)(b) is not a provision enacted to regulate the service conditions between the employer and employee……Unless a statute is enacted with a specific purpose of regulating the service conditions, it cannot be considered to be as one. A private organization is subject to various statutory enactments, but that cannot make its every activity amenable to the Writ Jurisdiction. Private contracts would not be subject to writ jurisdiction merely only because of the fact that they are structured by statutory provisions.”.Ultimately, the Court held that Kochhar’s termination falls under the ambit of a contractual relationship, and that her service conditions are not governed by any statue.."ICICI is a private body. It is not an instrumentality of the State. It receives no public funding. Service conditions of the Petitioner are not governed by any statute. The dispute raised in this Petition arises from a contract of personal service. The termination of the Petitioner is in the realm of contractual relationship.”Bombay High Court.With these observations, the Bench dismissed the petition.Chanda Kochhar was represented by Senior Advocate Vikram Nankani.Senior Counsel Darius Khambata and Mustafa Doctor appeared for ICICI Bank. They were briefed by a team from Veritas Legal.RBI was represented by Senior Advocate Venkatesh Dhond.Read Order