December 5, 2020 In

SUPREME COURT REJECTS MS. CHANDA KOCHHAR’S APPEAL AGAINST THE TERMINATION OF HER SERVICE BY ICICI BANK

A Two-Judge Bench of the Supreme Court comprising of Justices S.K. Kaul and Dinesh Maheshwari, by its recent order dated 01.12.2020 in the case of Chanda Deepak Kochhar vs. ICICI Bank Ltd and Anr. [SLP NO.13651/2020] arising out of the final judgement and order in WPL. No. 3315/2019 passed by the High Court of Bombay in Chanda Deepak Kochhar vs. ICICI Bank Ltd and Anr, [2020 SCC OnLine Bom 374] rejected Ms. Chanda Kochhar’s SLP against the Bombay High Court’s order pertaining to her termination as the Managing Director and CEO of the ICICI Bank.

Background of the Case

A Petition was filed by Ms. Kochhar in the Bombay High Court under Article 226 of the Constitution of India. It was the case of Ms. Kochhar (the Petitioner) that the conversion of her early retirement cum resignation into a Termination Order in pursuance of an independent Inquiry Committee Order, BN Krishna Committee Report, was arbitrary and against the law on two grounds – firstly, she was not provided a copy of the Committee Report on the grounds of privileged information and that the such report had nothing to do with her retirement. Secondly, the fact that no prior approval was obtained from the RBI before ordering her termination and only a post facto approval was taken was in violation of Section 35B (2) of the Banking Regulation Act,1949 (The Act). In furtherance of this, it was also asserted by her that the ICICI Bank performs public duty as an in charge of public funds and such duty also extends to the employment of its Managers. Hence, Section 35B (1)(b) of the Act shall govern the relationship between the petitioner and the ICICI Bank. (the Respondent)

The Reserve Bank joined the Respondents in raising the issue of maintainability and also contended that while approving termination of a Managing Director, the Reserve Bank of India does not enter into employer-employee dispute.

The Bombay High Court while examining the merits of the case explained that the scope of Article 226 is quite wide. It includes within its ambit not only a State or an instrumentality of the state but also private bodies discharging public duty or positive obligations of public nature.

In the present case, the ICICI is a private bank, it is administered by its Board of Directors and is not established under any statutory instrument. It receives no funds from the Government. Relying upon the case M/s. Ruchi Soya Industries Ltd. & Ors. v/s. IDFC Bank Ltd. & Ors., [(2017) SCC OnLine Bom. 4252] wherein another private bank, Standard Chartered Bank, was has held not amenable to Writ jurisdiction, the Court held that  ICICI is not an Authority under Article 12 of the Constitution of India.

On the scope of Section 35B of the Act, the Court held that its role is limited. The function of RBI as a bankers’ bank is only regulatory in nature i.e. all the banks have to work under the supervision of the Central Bank so as to ensure that their activities are in consonance with the larger economic policies of the nation. The Banking Regulation Act,1949 was enacted to supervise and regulate commercial banking. Through the Act the Reserve Bank of India was empowered to oversee that the banks function in accordance with the National Banking Policies. It was nowhere the intent of the legislature to make this Act a tool via which it could control the day to day affairs of the banks. Hence, reading Section 35B (1)(b) within the scope of such objectives implies that, when a proposal for termination of employee is received from the employer bank, the Reserve Bank looks at it from the perspective of its impact on general banking. Neither does it scrutinize it in context of a service contract nor does it uphold or, adjudicate or decide the rights of the parties. The only  focus is upon the consequences of the proposed action. The grant of approval by Reserve Bank does not mean that the action of termination is valid in terms of a service dispute. The approval is only  based on the opinion that no impact on the banking system is discernible.

Further, the fact that instead of prior, a post facto approval was sought by the Reserve Bank may be regarded as a procedural lapse, an issue, the objection to which, can be taken up by the RBI with the bank itself.  

The Supreme Court refused to entertain the Special Leave Petition filed by Ms. Kochhar or interfere with the Order of the Bombay High court citing that  the ICICI Bank is a private bank which has its own code on Business Conduct and Ethics that deals with issues such as conflicts of interest, workplace responsibilities, disciplinary procedures etc. and has the freedom to conduct its own day to day affairs. Hence, the service conditions of the bank are not governed by any statute. Therefore, the dispute in hand is a contract of personal service which comes within the realm of the internal affairs of the Bank.

Pooja Singh

Student at National University of Singapore

Intern at The Indian Lawyer & Allied Services

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