Kochhar challenges RBI decision to terminate her; HC seeks bank's response

Former ICICI Bank MD & CEO Chanda Kochhar
Chanda Kochhar, former managing director and chief executive officer of ICICI Bank, on Monday challenged the Reserve Bank of India’s (RBI) approval in terminating her. She said the move was illegal and had no legal base.

The central bank on March 13 gave its consent to the bank management on Kochhar’s termination, after the bank fired her on January 31. Kochhar is now contesting that the bank should have secured the RBI’s permission first before terminating her services.  

Kochhar had originally moved against the bank, but decided to file an amended petition, making the central bank party to the case. Following the amended petition on Monday, the Bombay High Court served notice to the RBI, seeking its response. The case will be next heard on December 18. The amended petition argued that the bank wrote to the RBI on February 5, days after serving her the termination letter on January 31. The RBI subsequently approved the move on March 13.

“The RBI issued the alleged approval without due and proper application of mind and in colorable exercise of powers, by mechanically accepting the mala fide request of the respondent bank (ICICI) without disclosing contents thereof to the petitioner (Kochhar) and contrary to the provisions of Section 35B (1)(b) of the Banking Regulations Act,” Kochhar said in her petition. 

The Banking Regulation Act says that the prior approval of the RBI is required to terminate the contract of a bank’s chairman or managing director. 

“The requirement of prior approval is mandatory and cannot be granted post facto and the non-fulfilment thereof is incurable and an afterthought,” Kochhar’s petition read. 

However, the bank questioned the maintainability of Kochhar’s writ petition arguing that “they are a private banking company and the writ petition seeks to contest what are purely private contractual terms.” Hence, the bank argued that Kochhar’s writ petition did not have a legal basis.   

Senior counsels Vikram Nankani and Sujay Kantawala are representing Kochhar in the case, while ICICI Bank is being represented by senior counsel Darius Khambata and law firm Veritas Legal. Despite Kochhar’s lawyers serving notices on the RBI, the central bank did not appear in the case. But it will have to now as the court has sought its response. 

Kochhar alleged that the bank had accepted her early retirement request on October 4, 2018, with immediate effect, and only certain benefits were made subject to the outcome of the pending enquiry. The appointment of Sandeep Bakshi as successor of Kochhar was done after securing an approval of the RBI. 

Hence, when she was not functioning as the CEO of the bank there was no question of her termination, Kochhar’s lawyers argued. Despite arguing that the petition filed by Kochhar is not maintainable, the bank in its reply to Kochhar’s petition said, “the petitioner has alternate remedies available to her to seek any reliefs in relation to the private contractual terms”.

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel