Chairman revealed before legal review
India’s largest private sector lender HDFC Bank on Friday said an independent legal review was conducted into the allegations made by the bank’s former part-time chairman Atanu Chakraborty in his resignation letter, which were “not corroborated” by documentary evidence or witness interviews.
On March 18, Chakraborty had resigned from the post of part-time chairman and independent director of HDFC Bank, saying that “certain incidents and practices within the bank were not in line with his personal values and ethics”, citing this as the reason for his resignation.
The review, conducted by Wilson Sonsini Goodrich & Rosati, PC and Wadia Gandhi & Co., said that the contemporaneous evidence reviewed was “inconsistent with Mr. Chakraborty’s statement” and that it “did not identify any basis for the statement.”
Setting out their findings, the law firms said that the minutes of meetings attended by Chakraborty “were a product of an extensive drafting, review and approval process” which gave him the opportunity to record any “incidents and practices” that were allegedly not in line with his personal values and ethics.
The law firms said that both HDFC Bank and external law firms “repeatedly requested that Mr. Chakraborty speak to the external law firms as part of the legal review, but ultimately an interview with Mr. Chakraborty did not occur.”
The clean chit given to the bank board in the legal review could pave the way for the reappointment of HDFC Bank MD and CEO Shashidhar Jagadeesan, whose current tenure ends in October. The board has not yet decided on his extension as they were awaiting legal review.
Jagadishan was appointed for three years in 2020 which was extended for another three years in 2023.
The legal review was initiated when on March 24 the bank said it would evaluate whether any concerns raised in Chakraborty’s resignation letter were justified, whether he had recorded any disagreements, and whether such disagreements had been addressed. The terms of reference included the two years preceding Chakraborty’s resignation. The review included examining board and committee meeting minutes and agenda papers, conducting interviews, and reviewing additional documents and information, among other processes.
According to the Bank, external law firms reviewed the minutes and agenda materials of the meetings of the Board and related Board committees during the reference period. They also interviewed each independent director, including the chairmen of their respective committees, the managing director and chief executive officer, and senior management personnel leading certain control and assurance functions.
In a statement issued by the bank, the law firms said they conducted a “thorough and objective review” of Chakraborty’s statement. “The legal review was conducted over a three-month period and included a review of thousands of documents and interviews with independent directors and numerous members of senior management,” the bank said.
Referring to the “Dubai matter”, the law firms said, “Although Mr Chakraborty mentioned the Dubai matter in public statements following his resignation, no contemporaneous evidence has been identified indicating that he raised any concerns about his personal values and ethics, or that he disagreed with any decisions made by the Board or relevant Board committees in relation to the Dubai matter (or any other matters addressed by the Board and those committees).”
In an interview after his exit from the bank, Chakraborty had cited concerns over a number of matters, including the mis-selling of AT-1 bonds in Dubai. Two days after Chakraborty’s resignation, the bank had asked three of its executives to leave due to misselling concerns. The decision to ask the executives to leave was reportedly linked to the mis-selling of Credit Suisse’s Additional Tier-I (AT-I) bonds to retail clients at its Dubai branch, where they were marketed as fixed-maturity bonds to non-resident Indians (NRIs). These bonds were written off after Credit Suisse went bankrupt and was taken over by another banking giant, UBS.
Summarizing the review, the law firms said: “In summary, the contemporaneous evidence reviewed was inconsistent with Mr. Chakraborty’s statement, and the external law firms’ review did not identify any basis for the statement.”
HDFC Bank said the report by external law firms has been submitted to its board following the conclusion of the legal review.
