Author : M.S.RaghuTeja.T, student at Dr.B.R.Ambedkar College of Law,Andhra University,Visakhapatnam

To the point: 

The head of the ICICI Bank has in her carrying capacity of loan giver, has unlawfully granted loans in return of huge favours from the videocon company which allegedly amounted to huge loss of Rs 3250 cr to bank.In return, the Videocon group invested in the company of Deepak Kochhar,the husband of Chandana Kochar. The issue of scam came to limelight when the loan granted to the Videocon group was later declared as a Non-Performing Asset (NPA).CBI  arrests the sleuth  of accused Mr & Mrs .Kochar and for alleged kickback of Rs.64 crore received from videocon.

Key words: Money laundering,illegal conspiracy,Fraud,code of conduct,conflict of interest,fiduciary duties

Proof:As per Reserve Bank of India(RBI) Report, 34% of scams in the banking industry are on account of inside work due to poor lending practices (2022).

Abstract:

BACKGROUND:

ICICI is one of the largest private sector bank offering wide range of banking products and financial services for corporate and retail customers.The alleged scam revolves around operations carried out by the persons Chandana Kochar,Deepak Kochar, Arvind Gupta and Mahesh Chandra Pungalia in relation to the ICICI Bank embargo.

About Chanda Kochhar: Chandana Kochar played a pivotal role in building ICICI Bank from scratch from the field of retail sector to expand its operations.She went on to become MD and CEO of the ICICI Bank.

About Deepak Kochhar: Deepak Virendra Kochhar is one of the co-founder and chief executive officers of NuPower Renewable Private Limited (NRPL), formed in 2008 . NRPL was started as a joint venture (JV) between Videocon Group’s Venugopal Dhoot family, the Kochhars and Advani families. 

About Arvind Gupta:

 He is a whistleblower of the ICICI-Videocon loan fraud case.All the claims were publicly revealed in October 2016.Investigations began in 2018  

FACTS : 

 The following are the facts:

•   In September 2008, Mr Deepak Kochhar and Mr Venugopal Dhoot, the chairman of Videocon Group, set up a company called “NuPower Renewable Private Limited” (NRPL), in which both held similar shares. 
• In January 2009, Dhoot resigned from Nupower and transferred upto 25,000 shares to Deepak Kochar for 2.5 Lakh rupees.
• In March 2010,Nupower got a loan from a private company called supreme power private limited,which is owned by venugopal Dhoot.
• A series of transfer of shares happened from Dhoot to Venugopal Kochar and from Dhoot’s relative company Pacific Capital to supreme energy.                                                            After that supreme energy became a 94.9 % shareholder in Nupower.
• In November 2010,a few months later,Dhoot transferred his shares in the supreme Energy to his associate Mahesh Chandra Pungalia.
• In 2012,Punglia transferred his holding to “Pinnacle Energy” where Deepak Kochar was a Managing Trustee.The transaction value of this transfer was a meagre Rs.9 Lakhs. 
• It turned out that Supreme energy gave a loan of Rs.64 crores to Nu-power and within 3 years of that it got subsumed by the pinnacle energy.with merely 6 months after the whole transfer took place videocon got a loan of Rs.3250 crore rupees from ICICI Bank.A Huge share of 86% of this loan i.e.Rs.2810 crore remains unpaid.
• In 2017,Videocon account was declared a Non-performing Asset by ICICI Bank.
• In 2018, WhistleBlower asserts that between 2008 and 2016, there was a purposeful delay in reporting depletion of some bank credit to save money on provisioned expenses. As a result, agencies like CBI ,ED initiated investigations and questioned Chanda Kochhar’s relatives. 
• In January 2020, Chandra Kochhar and her family’s assets were provisionally attached by the enforcement directorate. 

Issues:

The ICICI Bank-Videocon case, involving Chanda and Deepak Kochhar, exposed a ₹1,875 crore transaction raising questions of conflict of interest. It has eroded investor trust, prompting scrutiny of corporate governance practices. The Legal proceedings on the alleged scam highlight the importance of stringent measures to prevent financial fraud,thehe fragility of trust and the imperative of upholding integrity in banking and corporate affairs.

Justice Srikrishna Committee:

Head of ICICI internal Inquiry committee(HOE) Mr.Justice B.N.Sri Krishna indicated Ms.Chandana Kochar for violating code of conduct. of the bank based on which she was sacked from all official Positions of ICICI.All bonuses paid to her from April 2009 till March 2018are revoked.

 Investigation By CBI: 

The CBI named Chanda Kochhar, Deepak Kochhar, and Dhoot, as well as respective companies Videocon International Electronics Ltd and Videocon Industries Ltd.On January 22,2019,CBI filed FIR  for possible irregularities in the lender’s dealings with private corporations with specific mention of loan transactions between Icici Bank and Videocon Group firms .CBI investigations into loan transactions proves a mutually beneficial deal within their respective enterprises. Chandana Kochar was found guilty under Section 120-B(Criminal conspiracy) and Section 420 of IPC,1860 under which a charge sheet was filed by CBI.

Investigation By ED:

The ED accuses named Chanda Kochhar, Deepak Kochhar, and Dhoot, as well as respective companies Videocon International Electronics Ltd and Videocon Industries Ltd for round tripping and embezzlement of funds.

 The FIR in the ED case also names Supreme Energy, a company founded by Dhoot, and Nupower Renewables, a business headed by Deepak Kochhar under Prevention of Money Laundering Act(PMLA),2002.Later,Chanda Kochhar and Deepak Kochhar were arrested under the PMLA Act in September 2020.

Analysis:

Though First FIR was registered under registered against Kochars in 2019,they were summoned only in 2022 which raises serious questions.Despite the gravity of offences,the delay in the investigation creates scope for evidences to be withered away and also change of stances of witnesses involved in the alleged loan Scam.  

Chanda Kochar has failed to follow proper disclosure procedures for authorising the loans with respective committee.It stands out against fair trade practices of corporate governance.

Kochhar failed to disclose her partner’s business ties with the Videocon company, that was a financial client, to the company’s board of directors.She remained a member of the advisory panels that authorised  credit to videocon and  failed to  recused herself leading to a possible conflict of interest. 

 The provisions of company’s act which are violated includes:

• Section 2(76) of companies Act:It mentions about Related party barring relatives of directors and key managerial personnel, as well as firms and companies, etc to hold a stake or interest in functioning of company and no person is allowed to advice the manager or director to act in his favour.
• As per section 177,the Audit Committee must audit or modify any related party which is rarely carried out.
• Section 188 of company’s act: It prohibits the company from entering into any contract or arrangement in respect of a given list of transactions.
•  Section 189 which stipulates  company to maintain a register of all entered contracts and transactions has not been followed 
•  Section 184 obligates a director to disclose his interest in any transaction that the company undertakes. Every such transaction must be referred to in the Board’s Report to the shareholders, along with a justification for such a transaction which is not followed in reality.

Conclusion:

The Economic liberalisation and deregularisation has brought huge opportunities to the firms and companies benefiting them to expand their core area of services beyond borders.But due to individual preferences and vested interests, genuine corporate governance practices has taken a back seat.The corrupt and Illegal practices of consortium of individuals has lead to quid-pro-quo benefitting .Thus,In globalised era, there needs to complete overhaul of Business banking trasactions to include transparency and accountability . 

FAQ

1.What is quid-pro-quo?

• It is a latin term, Which means exchange of goods or services, in which one transfer is contingent upon the other i.e favour for a favour.

3.What is the role of Serious Fraud Investigation office(SFIO)?

• It is a statutory agency in India which deals with cases of corporate fraud.

3.What is a Related Party Transaction?

• It is a two party contract which is accompanied by pre-exisiting business for mutual transfer of resources.

4.What is corporate Social Responsibility(CSR)?

• It is a business practice which helps to contribute for the benefit of society

5.Where does the Burden of Proof Lies in PMLA,2002?

• In PMLA,2002 the burden of proof lies on the accused who has to prove that alleged proceeds the attached property is lawfully obtained.