The Videocon Loan case has been under the scanner since April 2018 and is making headlines since 2008. The case revolves the allegations against Former ICICI Bank Chief Chandra Kochhar regarding conflict of interest and lack of disclosure by the bank in the Videocon loan case.

The timeline

ICICI bank is known for its root in development Finance, with a wide exposure towards the infrastructure sector. The bank has seen a rise in it’s sour assets and falling profits in the recent quarters. Currently the bank is facing a lot of issues related to its credibility; courtesy to the recent Videocon loan case. Following is a timeline of the events:

2008: Deepak Kochhar, husband of Chanda Kochhar and Owner of Pacific Capital, alongside Venugopal Dhoot registered a company named NUPower Renewables Private limited(NRPL) in December 2008. Venugopal Dhoot also owned another company named Supreme Energy.

2009-2010: Dhoot resigned from the post of Director of NuPower in January 2009 and sold his shares worth of 2.5 lakhs to Deepak Kochhar. Later in March 2010, NuPower received a loan worth of Rs. 64 Crore from Supreme Energy.

2012-2013: As a result, Supreme Energy was now owner of 95% of the shares of NuPower Limited and the remaining 5% were held by Deepak Kochhar. Dhoot transferred his entire holding of Supreme Energy to his associate, Mahesh Pungaliya, who further transferred it to Pinnacle Energy Trust, which was formed and managed by Deepak Kochhar, for just Rs. 9 Lakh. These transfers took place between September 2012 and April 2013. This chain of transactions occurred to transfer the entire ownership of Supreme Energy in favour of Deepak Kochhar.

A conflict of interest arose when the entire shareholding of Dhoot’s Supreme Energy was transferred to a fund managed by Deepak Kochhar only six months after a loan worth Rs. 3250 crores was sanctioned to a group of companies belonging to the Videocon Group by ICICI Bank.

The Controversy: A consortium of 20 banks and financial institutions lead by SBI lent Rs. 40, 000 crore to the Videocon Group in 2012. ICICI Bank lent around Rs 3250 Crore, which amounts to around 10% of the total amount. 86% of this loan amount was unpaid and was declared as NPA by the ICICI bank in 2017. With Deepak Kochhar in the centre of a complex web of financial transactions, questions were raised regarding the credibility of Chanda Kochhar and the banking system of India.

Allegations: In 2016, whistle blower Arvind Gupta accused Chanda Kochhar of abusing her official position by lending large sums of money to the Videocon Group, including sanctions made in tax haven countries like Mauritius. Gupta expressed that the loan applications made by Videocon did not follow the appropriate protocols and were a clear case of ‘favouritism’. Gupta stated these points in a letter addressed to the Prime Minister’s office which eventually led to an investigation. Initially, as per an internal evaluation carried out by ICICI Bank’s Chairman M K Sharma, the bank refused refused any wrongdoing and officially backed Chanda Kochhar. They asked the public not to be misled by any such rumours.

In June 2018, another anonymous whistle blower filed a complaint against Kochhar for not adhering to the bank’s official code of conduct. This allegation eventually forced the bank to conduct a detailed probe into the matter. ICICI bank immediately instituted an independent enquiry system along with its auditors to look into the matter and prepare a comprehensive report. This independent panel was led by SC judge BN Sri Krishna.

The case under investigation included the loan sanctioned to Videocon group and the allegations against the family members of Chanda Kochhar. These allegations were related to the restructuring of the loan through Avista Advisory, run by Deepak Kochhar’s younger brother Ravi Kochhar.

In the meantime, SEBI started investigating the web of transactions against the allegations made for status-quid-pro and conflict of interest. The market regulator was scrutinising the hope for any possible disclosures and lapse related to corporate governance.

CBI takes charge

CBI registered a Preliminary Enquiry (PE) to probe the case on 31 March 2018. After collection of certain document and closely investigating the matter, the agency typically decides whether the PE must be converted into an a first information report (FIR) or not. This decision is generally taken in a period of 3 months, however, in this case, the matter took longer.

On January 24th 2019, CBI conducted raids across four locations within Mumbai. After the raid, CBI filed an official complaint against the Kochhars and Industrialist VN Dhoot. On 30th January, after the report by the independent enquiry panel was released, Chanda Kochhar was accused of criminal conspiracy and cheating the bank by misusing her official position.

ICICI Bank immediately revoked all her entitlements and decided to stop all her unpaid retirement benefits and bonuses since 2009. Chanda Kochhar, who served the bank for 34 years issued a statement in her defence expressing that she was immensely hurt by the allegations and the actions taken by the bank.

Transfer of CBI’s investigating officer

Sudhanshu Dhar, the CBI officer who filed the FIR against the Kochhar’s and the Dhoot family was transferred to the agency’s economic offices branch in Ranchi the very next day. Initially, he was a part of the Banking and Securities Fraud Cell of CBI in New Delhi.

This transfer points to the fact that the case is being deliberately delayed. There was a year long gap between the Preliminary Enquiry’s investigation and the filing of an FIR. According to the sources, this delay was due to the leaking out of pertinent information related to investigation of Kochhars.

Government sources although stated that they had no role to play in CBI’s decision and they are at an arm’s length in this issue but the finance Minister’s tweets and comments reveal a different story.

To bring back normalcy, ICICI bank has decided to appoint Sandeep Bakshi as the Chief Operating Officer (COO). Bakshi is currently the MD for ICICI Prudential life insurance sector and will take over as COO in June after all relevant induction procedures are processed.

Sources: BusinessLine, Indian Express, Firstpost, Livemint

Image Credits: The Indian Express

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