ICICI Bank's woes just seem to keep multiplying. Yesterday, the big news was that the market watchdog Securities and Exchange Board of India (Sebi) planned to get a forensic examination done on the financial statements and disclosures made by ICICI Bank in the last few years amid the controversy over alleged conflict of interest involving the lender's CEO Chanda Kochhar and her husband, Deepak Kochhar.
Today, a report by The Economic Times claims that probe agencies are now examining whether ICICI Bank should have declared three companies - Pacific Capital Services, Supreme Energy Private Ltd (SEPL) and Pinnacle Energy - as related parties. All these companies were involved in transfers of shareholdings in NuPower Renewables Private Limited (NRPL), the company owned by Deepak Kochhar.
The big question is whether such non-declaration violates the provisions of Section 184 of the Companies Act, 2013. The latter stipulates that every director of a company (both public and private) shall disclose their interest in third parties. That is what the probe agencies want to look into. Multiple agencies from the Central Bureau of Investigation (CBI) to the Income Tax Department are already looking into whistleblower Arvind Gupta's allegations. He claimed that Deepak amassed wrongful personal gains from his association with businessman Venugopal Dhoot, whose Videocon Group is a large debtor to ICICI Bank. The latter's Rs1,730 crore loan to the Videocon Group in 2012 was linked to a quid pro quo that Dhoot allegedly had with NRPL. This company was set up by Dhoot and Deepak in 2008.
Where do the three companies mentioned above fit in? Take Pacific Capital, a company owned by Deepak's father and Chanda's brother's wife, Neelam Advani. According to the daily, while Dhoot owned a 50 per cent stake in NRPL, the balance was held by Deepak and Pacific Capital. Subsequently, by March 2010, Dhoot-owned SEPL emerged as a 94.99 per cent shareholder in NRPL. This came about after a transfer of shares from Dhoot to Deepak and then from Pacific Capital and Deepak - who held the remaining 5 per cent stake - to SEPL. In November 2010, Dhoot transferred his entire holding in SEPL to his associate and former Videocon employee, Mahesh Chandra Punglia.
Interestingly, the report adds that Punglia went on to become a director in NRPL. After Dhoot transferred his SEPL holding to Punglia, the latter, in turn, transferred it to Pinnacle Energy, a trust where Deepak was the managing trustee. To remind you, Punglia has been quizzed twice by the CBI which has initiated a preliminary enquiry (PE) in the case.
The Reserve Bank of India (RBI) had undertaken a detailed scrutiny in mid-2016 to probe the quid pro quo allegations referred to it by the Prime Minister's Office. Though it found no proof of any "quid pro quo" or reciprocal benefits, the daily claims that the RBI's report made an interesting observation about the above-mentioned three companies. In October 2015, ICICI Bank declared NRPL as a related party, but prior to that, "only Deepak Kochhar, CEO of NRPL, was being declared as a key relative of MD and CEO (Chanda Kochhar)".
The apex bank further noted that ICICI Bank "had not declared Pacific Capital Services Private Limited, SEPL and Pinnacle Energy as related parties". To be sure, it made clear that NRPL, Pacific Capital, SEPL and Pinnacle Energy "have" no banking relations with ICICI Bank.
ICICI Bank's board, too, has twice dismissed accusations of nepotism and corruption in the sanctioning of loans to Videocon Group companies. ICICI Bank Chairman MK Sharma in an internal inquiry conducted two years ago had also cleared CEO Chanda Kochhar of any wrongdoing in the case. But the "coincidences" are mounting up.
Recently, the CBI questioned Deepak's brother Rajiv Kochhar, the founder of Avista Advisory which is alleged to have got the mandate to restructure foreign currency denominated debt deals worth over USD 1.7 billion of seven companies, all of which had taken loans from ICICI Bank at the same time.
The Mint earlier this month reported that Chanda and 6 other members of her family had invested in a previously unheard of firm called Credential Finance Ltd at a time when Videocon International Ltd had held a 17.74 per cent stake in it. Punglia, incidentally, was another shareholder, holding 0.8 per cent.