New Delhi: A special Central Bureau of Investigation (CBI) court Wednesday extended the custody of former chief executive officer (CEO) and managing director (MD) of ICICI Bank, Chanda Kochhar, her husband Deepak Kochhar, and Videocon founder-chairman Venugopal Dhoot till 29 December.
The three, arrested last week, are being probed in a case related to alleged cheating and irregularities in loans provided by ICICI Bank to Dhoot’s Videocon Group of companies between 2009 and 2011.
The CBI, which lodged an FIR in the case in January 2019, has alleged that Kochhar caused a loss of Rs 1,730 crore to ICICI Bank.
According to the CBI, in 2009, a sanctioning committee headed by Kochhar cleared a Rupee Term Loan of Rs 300 crore to Videocon International Electronics in contravention of rules and policies of the bank. The agency has alleged that a day after the loan was disbursed, Dhoot transferred Rs 64 crore to a company managed by Deepak.
The CBI has further said that from June 2009 to October 2011, ICICI Bank sanctioned six high-value loans to various Videocon Group companies. The agency has also alleged that a flat, valued at Rs 5.25 crore in February 1996, was transferred to the family trust of Kochhar for only Rs 11 lakh in 2016.
“Being a public servant, she (Chanda Kochhar) was entrusted with the bank funds for which she was liable to discharge such trust in accordance with the guidelines issued by the ICICI Bank,” the CBI has stated in its remand plea.
Kochhar has been booked under provisions of the Prevention of Corruption Act of 1988, along with charges of cheating and criminal conspiracy under the Indian Penal Code (IPC).
However, does the Prevention of Corruption Act apply to employees of a private bank?
The answer lies in a 2016 Supreme Court judgment, which ruled that the managing director and chair of a private bank are “public servants” under the provisions of the Act.
ThePrint explains.
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What does the law say?
The definition of a “public servant” is included in section 2(c) of the Prevention of Corruption Act, 1988. The definition includes “any person who holds an office by virtue of which he is authorised or required to perform any public duty”.
The Supreme Court in its 2016 judgment also referred to Section 2(b) of the Act, which defines “public duty” as “a duty in discharge of which the State, the public or the community at large has an interest”.
Further, Section 46A of the Banking Regulation Act, 1949, says that every chairman who is appointed on a whole-time basis, managing director, director, auditor, liquidator, manager and any other employee of a banking company shall be deemed to be a public servant for the purposes of Chapter IX of the Indian Penal Code, which lists offences related to public servants.
These include offences related to public servants disobeying the law, with the intent to cause injury to any person, and public servants disobeying any direction under the law.
What did the 2016 verdict say?
In its 2016 verdict, the SC bench comprising Justices Ranjan Gogoi and Prafulla C. Pant ruled that the managing director/chairman and executive director of a private bank are public servants under the Prevention of Corruption Act, 1988.
The judgment allowed an appeal filed by the CBI and permitted it to continue with cases against two accused employees of a private bank under the Act. This case related to the allegations against the Chairman-cum-Managing Director and Executive Director of the Global Trust Bank that they allegedly abused their position to siphon off the bank’s money.
The court looked into the statement of objects and reasons of the Prevention of Corruption Act, and noted that the legislation was intended to make the anti-corruption law more effective by widening its coverage, and widening the scope of the definition of “public servant”.
It then looked into whether the chairman, managing director or executive director of a private bank, operating under a licence issued by the Reserve Bank of India, holds an office and performs public duty, so as to attract the definition of “public servant”.
Answering the question in the positive, the court noted that after the Prevention of Corruption Act was introduced, the offences under Section 161 to 165A included in Chapter IX of the IPC were deleted from Chapter IX and engrafted under Sections 7 to 12 of the Prevention of Corruption Act.
It then said that since these provisions were deleted from Chapter IX of IPC and inserted in the 1988 law, Section 46A of the Banking Regulation Act, 1949, should also have been amended, so that banking officials are treated as public servants for Sections 7 to 12 of the Prevention of Corruption Act.
The court called it a “wholly unintended legislative omission which the court can fill up by a process of interpretation”.
Through the interpretation, the court read the provisions of the Prevention of Corruption Act and the Banking Regulation Act together, to rule that officers of a private banking company would fall under the definition of a “public servant” as defined in the Prevention of Corruption Act.
How is judgment used against bankers?
The 2016 SC ruling was cited by the CBI a year later in 2017, to justify its decision to carry out raids on the offices of NDTV and its promoters. The agency stated that it had registered a case based on the complaint of a shareholder of ICICI Bank and NDTV, on allegations relating to “wrongful gain of Rs 48 crore to NDTV promoters — Prannoy Roy, Radhika Roy, RRPR Holding Pvt Ltd — and a corresponding wrongful loss to ICICI Bank arising from their collusion and criminal conspiracy”. Radhika Roy Prannoy Roy (RRPR) Holding is a promoter of NDTV.
While NDTV had raised questions over the CBI’s jurisdiction when ICICI Bank was a private entity, the CBI relied on the Supreme Court judgment of 2016.
Last month, using the same interpretation of “public duty” and “public servant”, a Delhi court ruled that since the Dewan Housing Finance Ltd (DHFL) was discharging public duty — including taking deposits, giving loans and helping the government in various schemes by delivering houses to the public — its former CMD Kapil Wadhawan and ex-director Dheeraj Wadhawan were “public servants” under Section 2 of the Prevention of Corruption Act.
The brothers have been named in a chargesheet filed by the CBI for cheating a consortium of 17 banks led by Union Bank of India of Rs 34,615 crore. The action was initiated on a complaint filed by the Union Bank of India(UBI), leader of a 17-member lender consortium which had extended credit facilities to the tune of Rs 42,871 crore between 2010 and 2018.
(Edited by Nida Fatima Siddiqui)
Also read: ‘Sham loans, fabrication of books’: The Rs 35,000 cr DHFL case, ‘India’s biggest bank fraud’