Quid Pro Quo or not?
In today's Finshots, we talk about all the things that led up to Deepak Kochhar's arrest.
The Story
Act 1: From pioneers to Defaulters
In 1986, three brothers started a company — Adhigam Trading. For the most part, they restricted themselves to selling paper tubes. But then, they began diversifying rapidly — manufacturing TV sets and washing machines. In fact, they were the first Indian company to acquire a license to manufacture colour TVs. But they didn’t stop there.
By 1990, the company was adding products like air conditioners, refrigerators, and home entertainment systems to their offerings. In 1991, they rebranded to Videocon, and the company became one of the most iconic consumer electronics brands in the country.
But the brothers had bigger dreams.
They began exploring uncharted territories and set up businesses in Oil and Gas, Telecom, Retail and DTH services. Unfortunately, these new businesses didn’t work out all too well. They were capital intensive and didn’t generate a lot of money. The firm’s debt began to spiral out of control. And finally, Videocon was admitted to the bankruptcy court (NCLT) in 2018. The claims against the group’s companies, Videocon Industries and Videocon Telecommunications, added up to a whopping ₹88,000 crore. It was India’s largest bankruptcy case ever.
Act 2: The ICICI connection
Between June 2009 and October 2011, ICICI Bank sanctioned six high-value loans to the tune of ₹1,875 crores. These loans were made out to companies in the Videocon group. Chanda Kochhar was the acting CEO at the time and a member of the sanctioning committee that approved the loan. In 2012 however, these loans were declared as non-performing. Meaning Videocon’s financial conditions were so bad that there was very little chance of ever recovering this money. ICICI eventually had to take a hit of ₹1730 crores.
An error in judgement perhaps?
Perhaps…
Act 3: Quid Pro Quo
A few days after the loans were approved, Venugopal Dhoot, the founder and Managing Director of Videocon transferred ₹64 crores from his group companies to Nupower Renewables Private Limited (NRPL) calling it a capital infusion. The only problem — Nupower was jointly owned by Dhoot and Deepak Kochhar, Chanda Kochhar’s husband. And after a few months, Dhoot transferred all of his holdings to Deepak Kochhar.
I am not sure if you’re putting two and two together here. But here’s Chanda Kochhar’s husband receiving a massive capital infusion from Dhoot right after she approves a loan made to Videocon. That does look a bit suspect. And soon enough, a whistleblower complaint alleged that Miss Chanda Kochhar had okayed the extension of loans at ICICI in gross violation of company norms. She was eventually fired from the bank and the CBI registered a case against all three parties.
So this is an open and shut case, no?
Well… Not quite.
The nature of Quid Pro Quo
While the phrase does carry a negative connotation, quid pro quo’s aren’t always illegal. The original Latin phrase simply alludes to an exchange — “Something for something”. All kinds of barter are examples of quid pro quos. You give me an apple, I give you some money. That’s quid pro quo right there. The only problem emerges when there is a circumvention of rules. So it’s imperative to prove that Ms. Kochhar had in fact received ‘illegal gratification and undue benefit through her husband.’
Ergo, connecting the dots and presuming guilt won’t make your case. You have to have compelling evidence. And on that front, it wasn’t quite obvious how the CBI was going to make its case.
For starters, when the original whistleblower complaint was forwarded to the RBI, they dismissed the proposition altogether. Their claim was that ICICI bank loaned the money alongside a consortium of banks. There were many different entities involved. So they had no reason to suspect that the loan extension was anything out of the ordinary. They further added that the capital infusion was ‘an unrelated event’ outside the banking domain and thus, beyond its regulatory purview. They said the MCA or SEBI could look at it.
And they did have a point. Two parties can transact with each other without it being a sham arrangement. But a couple of days back the Enforcement Directorate arrested Deepak Kochhar, after confronting him with new evidence suggesting that there is indeed a case of illegal gratification.
Why Deepak Kochhar and not Chanda Kochhar? We don’t know yet. What’s the nature of this evidence, you ask? No clue. Will this finally implicate the duo? We can’t say for sure.
All we know is that an individual is innocent until proven guilty.
So really, until then…
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When Robots tell stories
We are a content startup. So naturally, we are looking at all the new developments in the industry to see where we are headed. But yesterday, we did come across something that made us feel a bit uneasy. We won’t say much. Except we can’t urge you enough — DO READ THIS!!!
A robot wrote this entire article. Are you scared yet, human? — an essay published in The Guardian.
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Correction: We erroneously reported the name of Videocon’s founder as Venkatesh Dhoot in one of our earlier drafts. The error is regretted