Bombay High Court
Chanda Kochhar vs Icici Bank Limited on 3 May, 2023
Bench: K.R. Shriram, Rajesh S. Patil
2023:BHC-OS:3852-DB
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
APPEAL (L) NO.38843 OF 2022
WITH
INTERIM APPLICATION NO.5283 OF 2022
IN
APPEAL (L) NO.38843 OF 2022
Chanda Kochhar )
an Indian inhabitant, residing at 45, CCI )
Chambers, Dinshaw Vachha Road, Churchgate, )
Mumbai - 400 020 ) ....Appellant
V/s.
ICICI Bank Limited )
a company having its office at ICICI Bank )
Towers, Bandra Kurla Complex, Bandra (East), )
Mumbai - 400 051 ) ....Respondent
WITH
APPEAL (L) NO.38844 OF 2022
WITH
INTERIM APPLICATION NO.5286 OF 2022
IN
APPEAL (L) NO.38844 OF 2022
Chanda Kochhar )
an Indian inhabitant, residing at 45, CCI )
Chambers, Dinshaw Vachha Road, Churchgate, )
Mumbai - 400 020 ) ....Appellant
V/s.
ICICI Bank Limited )
a company having its office at ICICI Bank )
Towers, Bandra Kurla Complex, Bandra (East), )
Mumbai - 400 051 ) ....Respondent
----
Mr. Aspi Chinoy, Senior Advocate a/w. Mr. Rohaan Cama, Mr. Rohan
Dakshini, Mr. Vishesh Malviya, Ms. Deepa Shetty, Mr. Kyrus Modi and
Mr. Pranav Narsaria i/b. Rashmikant and Partners for appellant.
Mr. Darius Khambata, Senior Advocate a/w. Mr. Mustafa Doctor, Senior
Advocate, Mr. Aditya Mehta, Mr. Ali Antulay, Mr. Abhijit Joshi, Mr. Rahul
Dwarkadas, Ms. Silpa Nair, Ms. Juhi Bahirwani and Ms. Sanaya Contractor
i/b. Veritas Legal for respondent.
----
Gauri Gaekwad
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CORAM : K. R. SHRIRAM & RAJESH S. PATIL, JJ.
RESERVED ON : 19th APRIL 2023
PRONOUNCED ON : 3rd MAY 2023
JUDGMENT (PER K.R. SHRIRAM, J.) :
1 These appeals impugn a common order and judgment
pronounced on 10th November 2022 by a learned Single Judge of this Court
who dismissed appellant's Interim Application No.1014 of 2022 but granted
reliefs in Interim Application No.307 of 2020 filed by respondent.
The main issue raised by appellant in these proceedings is -
Whether respondent, having accepted appellant's request for early
retirement, could subsequently terminate appellant's services for cause with
effect from the date of acceptance of early retirement?
2 Appellant, in a suit filed by her, viz., Suit No.114 of 2022, is
primarily seeking relief with respect to specific performance of the letter
dated 4th October 2018 by which respondent accepted appellant's early
retirement and the benefits referred therein under the early retirement
scheme. Appellant is, inter alia, seeking reinstatement of her Employee
Stock Options ("ESOPs") under the Employee Stock Option Scheme
("ESOS").
3 As against appellant's claim, respondent in its Suit No.313 of
2020 has sought clawback of bonuses and revocation of retirement benefits,
including vested and unvested ESOPs. It is respondent's case that the
services of appellant was treated as "termination for cause" with effect from
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4th October 2018 for breach of good conduct during the course of her
employment.
4 As these appeals have been filed against an interim order, we
are giving only skeleton facts relevant for the purpose of present appeals.
Appellant joined respondent way back in 1984 as a Trainee
Officer. Appellant grew up in ranks over the years and on 1 st May 2009 was
appointed and from time to time re-appointed as Managing Director and
Chief Executive Officer of respondent. The term of last appointment was to
end on 31st March 2019.
5 During her employment with respondent, appellant accepted/
agreed to various policies of respondent which included Code of Conduct,
framework for dealing with conflict of interest, Deeds for Covenants and
clawback agreement. Appellant was also required to make various
disclosures in compliance with the provisions of the Companies Act, 1956,
the Companies Act, 2013, the Banking Regulation Act, 1949, the SEBI
(Listing Obligation and Disclosure) Regulations, 2015, RBI Master Circular
on Loans and Advances and RBI Guidelines on Compensation of Whole
Time Directors/CEO.
6 It is appellant's case that during the period April 2007 to March
2017 appellant was granted ESOPs. These ESOPs are granted considering
various factors that included appraisal of performance, good conduct, etc. In
July 2016, there was a news article that contained allegations against
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appellant with regard to loans granted to Videocon Group companies. There
were allegations that these loans were granted as a quid pro quo for
investments by Mr. Venugopal Dhoot of Videocon Group or his affiliates in
NuPower Renewables Pvt. Ltd. ("NRPL"). NRPL is a company promoted by
Mr. Deepak Kochhar, husband of appellant.
7 In view of these allegations, respondent, on 26 th December
2016, appointed a reputed law firm to conduct independent enquiry into the
allegations appearing in these news articles. Appellant and her husband
participated in the enquiry and provided information and documents
indicating that there were no investments made by Mr. Venugopal Dhoot
and his affiliates in NRPL. Relying on the information provided by appellant
and her husband, the law firm submitted its report to respondent stating
that there was no merit in the allegations.
8 Thereafter, in April 2018, respondent received a whistleblower
letter primarily alleging abuse of position by appellant and the business
dealings between Videocon Group and Mr. Deepak Kochhar. Appellant by a
letter dated 20th April 2018 informed respondent that she made inquiries
with her husband and ascertained that he had business dealings with
Mr. Venugopal Dhoot/Videocon Group over many years. This was in
contradiction to what was stated to the law firm in December 2016.
Appellant of course stated that in her disclosures to respondent she has
disclosed the Directorships of her husband and there was no information
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available with her that either placed her in a position where she ought to
have even considered whether there was any scope for a potential conflict of
interest or that placed her in any difficulty in carrying out her functions. The
correspondence was exchanged between appellant and respondent
regarding disclosures of Mr. Deepak Kochhar of his business dealings with
Mr. Venugopal Dhoot/Videocon Group.
9 On 29th May 2018, the Board of Directors of respondent decided
to conduct an enquiry into the allegations against appellant. Disclosures
were also made to the Stock Exchange. The law firm, that was appointed
earlier in December 2016, was also informed that in the light of new
disclosures made by appellant, their earlier report will no longer be valid.
The Stock Exchange was also informed by respondent by a letter dated
30th May 2018 that it has decided to conduct enquiry into the allegations
made in whistleblower's complaint. Mr. Justice B.N. Srikrishna (retired) was
appointed on 6th June 2018 by the Audit Committee of respondent to
conduct an independent enquiry into the allegations against appellant. At a
Board meeting of respondent held on 18 th June 2018 appellant
communicated her decision to go on leave until the enquiry was completed.
This was accepted by respondent and necessary disclosures were also made
to the Stock Exchange.
10 While the enquiry was still pending, appellant addressed a
letter requesting the Board of Directors of respondent to grant her early
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retirement. Respondent, by its letter dated 4 th October 2018, intimated the
Board's approval and also referred to benefits under the Early Retirement
Scheme ("ERS"). An undertaking dated 19th July 2016 that was signed by
appellant was also enclosed. It is relevant to note that in the said
undertaking, appellant has stated that she has recognized and
acknowledged that all the above undertakings and commitments are
reasonable and part of her fiduciary duties and obligations to respondent as
its senior officer and that was in the interest of transparency and good
governance. It also noted that in the event of any breach, respondent shall
be entitled to seek such legal remedies including forfeiture of any benefits
appellant may be entitled to as adjudged in the sole and exclusive discretion
of respondent. There is reference to certain ESOPs not yet granted to
appellant in respondent's letter dated 4 th October 2018, which are pending
approval of RBI. It is also stated that grant of such ESOPs would be decided
by the Board only upon the conclusion of the enquiry.
11 Between the period October 2018 to January 2019, pending the
completion of the enquiry, appellant exercised 6,90,000 ESOPs and received
other benefits in accordance with the letter dated 4 th October 2018.
Appellant participated in the enquiry conducted by Mr. Justice B.N.
Srikrishna (retired) and in December 2018 also submitted oral and written
submissions.
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12 Mr. Justice B.N. Srikrishna (retired) submitted report of his
enquiry dated 27th January 2019 to respondent. The report highlighted the
conduct of appellant. In the enquiry report there are findings that appellant
had committed gross/serious violations of the Code of Conduct for extended
periods of time. The Board of Directors of respondent at their meeting
considered the findings of the enquiry report and the conclusions arrived
therein. In the light of the findings in the report on serious violations by
appellant, the Board unanimously resolved to treat the separation of
appellant from respondent as "termination for cause" under respondent's
internal policies, schemes and the Code of Conduct with all attendant
consequences (including revocation of all her existing and future
entitlements such as any unpaid amounts, unpaid bonuses or increments,
vested and unvested and unexercised stock options and medical benefits)
and clawback all bonuses paid from April 2009 until March 2018 and to
take further actions as warranted (including notifying or securing regulatory
approvals as required). Disclosures to the Stock Exchanges was also made
by respondent in this regard and the RBI was also immediately informed
about the findings.
13 Respondent addressed an email dated 30th January 2019 to
appellant informing about the decision taken by the Board of Directors of
respondent on 30th January 2019. Appellant was informed that the
communication as regards to early retirement benefits dated 4 th October
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2018 stands revoked. Appellant was also informed that the vested and
unvested ESOPs, which were earlier allotted to appellant, were revoked and
returned to the common pool of ESOPs in accordance with various policies
of respondent. Respondent by a letter dated 1 st February 2019 addressed by
Group Chief Human Resources Officer of respondent to appellant reiterated
that appellant's separation from respondent was treated as "termination for
cause". The bonuses paid by respondent to appellant during the period April
2009 to March 2018 was quantified at Rs.7,41,36,777/- and which was to
be clawed back from appellant on account of such termination for cause.
Appellant, by a letter dated 4 th February 2019, responded to the email dated
30th January 2019 and the letter dated 1 st February 2019 from respondent
contending that once the Board of respondent having accepted appellant's
early retirement in October 2018, the relationship of employer and
employee between respondent and appellant ended.
14 Respondent addressed a letter dated 5 th February 2019 to RBI
seeking approval of RBI in terms of provisions of the Banking Regulation
Act, 1949 to treat the separation of appellant from respondent as
"termination for cause" with effect from 30 th January 2019. On 13th March
2019, RBI approved the request but directed that the termination would be
as on 4th October 2018, which was the last working day of appellant as MD
and CEO of respondent. RBI also advised respondent to follow its policies
and all applicable laws while dealing with termination of appointment.
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In the meanwhile, respondent also provided appellant with
relevant excerpts of the enquiry report issued by Mr. Justice B.N. Srikrishna
(retired) and appellant was advised that these were privileged and
confidential and were not meant for circulation.
Correspondences were exchanged between appellant and
respondent wherein respondent called upon appellant to pay back bonuses
paid to her during the period April 2009 until March 2018 and appellant
responded to these letters reiterating her stand seeking restoration of all
benefits allegedly granted to her under respondent's letter dated 4 th October,
2018.
15 In November 2019, appellant filed a writ petition against
respondent in this Court, being Writ Petition No.33151 of 2019, for a
declaration that the communication dated 4 th October 2018 issued by
respondent was valid, subsisting and binding on respondent and the email
dated 30th January, 2019 and the letter dated 1 st February 2019 from
respondent was illegal, non-est, void ab initio etc. The declaration was also
sought to declare the communication dated 13th March 2019 issued by RBI
as non-est, illegal and void ab initio. Various consequential reliefs were also
sought in the writ petition.
This writ petition came to be dismissed by this Court on
5th March 2020 on the ground that the dispute raised was a contractual
dispute and not amenable to writ jurisdiction. The SLP challenging this
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order also came to be dismissed on 1 st December 2020 for the reason that
the only controversy in the proceedings is whether the resignation of
appellant having been earlier accepted, the later termination could take
place or not and that would fall within realm of contractual relationship
between appellant and respondent, a private Bank.
16 In February 2020, the Enforcement Directorate had filed a
complaint against appellant and her husband under the provisions of the
Prevention of Money Laundering Act. Those proceedings are still pending.
17 During the pendency of the writ petition, respondent filed Suit
No.313 of 2020 against appellant.
18 Appellant thereafter filed Suit No.114 of 2022 and also took out
Interim Application No.1014 of 2022. The plaint, it appears, came to be
lodged sometime on or about 28th January 2022, just two days before the
suit being barred by limitation. It is averred in the plaint that the cause of
action arose on 30th January 2019 when respondent addressed an email to
appellant terminating the services of appellant and revoking all her
entitlements/benefits.
19 The reliefs sought by appellant in Interim Application No.1014
of 2022 are as under :
(a) stay the operation and effect of the Defendant Bank's
email dated 30th January 2019 and letter dated 1st February
2019;
(b) injunct the Defendant Bank from acting upon and acting
in furtherance of its email dated 30 th January 2019 and letter
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dated 1st February 2019 addressed to the Plaintiff and from
any manner treating the Plaintiff as having been terminated
for cause.
(c) direct the Defendant Bank by an interim order and
injunction of this Hon'ble Court to forthwith treat all the
16,63,750 unvested stock options as per para (e) of the said
acceptance letter of the defendant bank dated 4 th October
2018 as having duly vested.
(d) order and direct the Defendant Bank to earmark the
1,42,06,500 stock options (i.e. 1,25,42,750 unexercised stock
options in terms of para (c) and the said 16,63,750 stock
options as per para (e) of the Bank's acceptance letter dated
4th October 2018) for the entitlement of the Plaintiff in terms
of the said letter dated 4th October 2018 and to be further
restrained by an order of injunction from assigning or
transferring or treating as lapsed any of the said 1,42,06,500
stock options.
(e) appoint a Court Receiver under XL Rule 1 of the Code of
Civil Procedure, 1908 and direct the Defendant Bank to place
1,42,06,500 shares (equivalent to the said 1,42,06,500 stock
options) in the custody of the Court Receiver by opening a
demat account, and the said shares be purchased by the
Plaintiff on disposal of the Suit at prices equivalent to the
respective specified exercise price for the said stock options
as detailed in Exhibit RR hereto.
(f) restrain the Defendant Bank by an order and injunction
from withholding or denying to the Plaintiff any of the rights
and benefits to which the Plaintiff is entitled under the Bank's
said acceptance letter dated 4th October 2018 including in
particular the said 1,32,32,750 vested stock options and
16,63,750 unvested stock options (as per para (c) and (e)
respectively thereof) and medical insurance as per para (d)
thereof.
(g) pass an order of temporary injunction restraining the
Defendant Bank, its employees/ servants/ agents or any
other persons from dealing with and/or alienating in any
manner whatsoever and/ or allowing to lapse the said
1,25,42,750 unexercised vested stock options in terms of
para (c) and the said 16,63,750 stock options as per para (e)
of the Bank's acceptance letter dated 4 th October 2018;
totaling to 1,42,06,500 stock options that were granted to
the Plaintiff by the Defendant Bank's said acceptance letter
dated 4th October 2018.
20 The prayers in Suit No.114 of 2022 filed by appellant are as
under :
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(A) This Hon'ble Court be pleased to declare that :
(i) the Plaintiff retired from the Bank on 4 th October 2018
and is entitled to the rights, benefits and entitlements set out
at paras (a) to (e) in the Bank's letter of acceptance of
Plaintiff's retirement dated 4th October 2018, and
(ii) the Defendant Bank's purported subsequent termination
for cause of the Plaintiff's "Employment" on 30 th January
2019 four months after her retirement as communicated by
its email dated 30th January 2019 and the letter dated
1st February 2019 is null and void and of no legal and binding
effect and in breach of contractual obligations/commitments
flowing from the Bank's acceptance letter dated 4 th October
2018.
(B) that the Defendant Bank be restrained by a permanent
injunction from acting in breach of its contractual obligations
flowing from its acceptance of the Plaintiff's request/offer for
early retirement as detailed in its acceptance letter dated
4th October 2018, or from acting on the basis that the
Plaintiff's employment was terminated for cause on
30th January 2019.
(C) the Defendant be ordered and decreed to specifically
perform its contractual obligations under its said acceptance
letter dated 4th October 2018 accepting the Plaintiff's request
for early retirement and stipulating the rights, benefits and
entitlements to which the Plaintiff is entitled pursuant to
such early retirement and for that purpose do all such acts,
deeds and things as may be necessary.
(D) the Defendant Bank be ordered, directed and decreed to
forthwith treat all the said 16,63,750 unvested stock options
as per para (e) of the Bank's acceptance letter dated
4th October 2018 as having duly vested as per the original
vesting schedule;
(E) the Defendant be ordered and directed to restore the
Plaintiff to the same position as on 29 th January 2019 with
the same right, entitlements, benefits and equivalent time
period to exercise the said stock options as would have been
available to the Plaintiff on that day for the exercise of the
1,25,42,750 stock options in terms of para (c) of the said
letter dated 4th October 2018 (ie. 1,32,32,750 vested stock
options as or 4.10.2018 less 6,90,000 stock options exercised
between October to December 2018) and the said 16,63,750
stock options as per para (e), both totalling to 1,42,06,500
stock options at the given exercise price in Exhibit RR; and in
furtherance thereof, this Hon'ble Court be pleased to declare
that the period from 30th January 2019 till the date of
decree/disposal of this Suit be excluded in computing the
equivalent time period permissible for exercising the said
1,42,06,500 stock options.
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(F) In the alternative to Prayer E, if for any reason this
Hon'ble Court decides that specific performance of the letter
dated 4th October 2018 ought not to be granted, the
Defendant be ordered and directed to compensate the
Plaintiff for damages pertaining to the said stock options in
the sum of Rs.1732,48,60,755/- as set out in Exhibit SS;
(G) pending the hearing and final disposal of the Suit, this
Hon'ble Court be pleased to stay the operation and effect of
the Defendant Bank's email dated 30th January 2019 and,
letter dated 1st February 2019;
(H) pending hearing and final disposal of the Suit, this
Hon'ble Court be pleased to injunct the Defendant Bank from
acting upon and acting in furtherance of its email dated
30th January 2019 and letter dated 1 st February 2019
addressed to the Plaintiff and from any manner treating the
Plaintiff as having been terminated for cause.
(I) pending the hearing and final disposal of the suit the
Defendant Bank be directed by an interim order and
injunction of this Hon'ble Court to forthwith treat all the
16,63,750 unvested stock options as per para (e) of the said
acceptance letter of the defendant bank dated 4 th October
2018 as having duly vested;
(J) pending the hearing and final disposal of the present Suit,
the Defendant Bank be ordered and directed to earmark the
1,42,06,500 stock options (i.e. 1,25,42,750 unexercised stock
options in terms of para (c) and the said 16,63,750 stock
options as per para (e) of the Bank's acceptance letter dated
4th October 2018) for the entitlement of the Plaintiff in terms
of the said letter dated 4th October 2018 and to be further
restrained by an order of injunction from assigning or
transferring or treating as lapsed any of the said 1,42,06,500
stock options;
(K) pending the hearing and final disposal of the present
Suit, this Hon'ble Court be pleased to appoint a Court
Receiver under XL Rule 1 of the Code of Civil Procedure,
1908 and the Defendant Bank be directed by this Hon'ble
Court to place 1,42,06,500 shares (equivalent to the said
1,42,06,500 stock options) in the custody of the Court
Receiver by opening a demat account, and the said shares to
be purchased by the Plaintiff on disposal of the Suit at prices
equivalent to the respective specified exercise price for the
said stock options as detailed in Exhibit RR.
(L) that pending the hearing and disposal of the Suit the
Defendant Bank be restrained by an order and injunction
from withholding or denying to the Plaintiff any of the rights
and benefits to which the Plaintiff is entitled under the Bank's
said acceptance letter dated 4th October 2018 including in
particular the said 1,32,32,750 vested stock options and
16,63,750 unvested stock options (as per para (c) and (e)
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respectively thereof) and medical insurance as per para (d)
thereof.
(M) Pending the hearing and disposal of the present Suit, this
Hon'ble Court be pleased to pass an order of temporary
injunction restraining the Defendant Bank, its employees/
servants/ agents or any other persons from dealing with
and/or alienating in any manner whatsoever and/or allowing
to lapse the said 1,25,42,750 unexercised vested stock
options in terms of para (c) and the said 16,63,750 stock
options as per para (e) of the Bank's acceptance letter dated
4th October 2018; totaling to 1,42,06,500 stock options that
were granted to the Plaintiff by the Defendant Bank's said
acceptance letter dated 4th October 2018.
The interim application, if granted basically would decree the
suit.
21 Elaborate submissions were made by Mr. Chinoy and
Mr. Khambata.
Mr. Chinoy submitted :
(a) appellant's offer of early retirement on 3rd October 2018 and
respondent's acceptance thereof by its letter dated 4th October 2018 resulted
in a contract/agreement for retirement on the terms mentioned in the said
letter of acceptance. This contract of retirement resulted in cessation of the
employer - employee relationship of appellant with respondent;
(b) upon the cessation of the employer - employee relationship
(under the Retirement Agreement of 4th October 2018), respondent could
thereafter not take any disciplinary procedure or action against appellant,
nor purport in January 2019 to terminate appellant's employment, non
existent, for cause;
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(c) reliance by respondent on the preliminary enquiry report to
justify its decision to treat appellant's retirement as "termination for cause"
and reliance upon the findings of the enquiry report is misplaced, wrongful
and unwarranted. Respondent could not have relied upon the preliminary
enquiry report to prejudice any right or entitlement of appellant;
(d) the preliminary enquiry, which was a fact finding exercise/
internal investigation, could not have been continued after appellant's
retirement from service under the Retirement Agreement dated 4 th October
2018 and the consequent cessation of the employer - employee relationship
could not have resulted in the initiation of a disciplinary proceeding;
(e) the enquiry conducted by Mr. Justice B.N. Srikrishna
(retired) was only a fact finding exercise/internal investigation provided for
in respondent's Code of Conduct and the report of such an enquiry was only
to enable respondent to decide whether to start disciplinary proceedings.
Appellant's solitary meeting with Mr. Justice B.N. Srikrishna (retired) in
December 2018 was not as part of an adjudicatory/disciplinary procedure
but was only an one-on-one discussion with the concerned employee
contemplated as part of such initial fact finding exercise/internal
investigation under respondent's Code of Conduct;
(f) therefore, even if there had been no early retirement under
the Code of Conduct of respondent, the only action that could have been
taken by respondent on receipt of the preliminary fact finding/internal
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investigation report was to initiate/commence a disciplinary procedure.
Such a fact finding exercise/internal investigation report could not by itself
be used to affect any right or benefit of appellant and could never justify or
be the basis for respondent terminating appellant's services/employment for
cause or revoking any retirement benefits;
(g) since the enquiry report itself says it was a privileged and
confidential document and was protected by attorney client privilege, the
enquiry report was made only for respondent in order to enable respondent
to take a decision re-initiation of disciplinary proceedings;
(h) the learned Single Judge's findings that there was no merit
in the submission that the enquiry was a preliminary enquiry or it could not
result in disciplinary procedure or action taken against appellant etc. is
erroneous;
(i) Respondent by accepting/agreeing to appellant's early
retirement during the pendency of the fact finding enquiry, resulting in a
cesser of the jural relationship of employer and employee, precluded itself in
law from thereafter initiating any disciplinary proceedings against appellant
on the basis of the enquiry report;
(j) respondent's reference to or reliance on the conclusions in
the internal/confidential, untested enquiry report as "findings" against
appellant is contrary to law, unfair and malafide;
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(k) merely because appellant was the MD and CEO and MD and
CEO was the Appellate Authority under the Code of Conduct disciplinary
procedure stipulated in the Code of Conduct could not enable respondent to
depart from the procedures and safeguards provided in the Code of Conduct
for taking any disciplinary action. Though modification in the stipulated
procedure/authorities would be required having regard to appellant's status
as CEO and MD and as being the Appellate Authority under the Code of
Conduct, this could not result in the basic procedural safeguards and
processes being jettisoned/departed from;
(l) the contention of respondent that even assuming that the
termination for cause dated 30 th January 2018 was not valid in law, even on
an early retirement, respondent was entitled to revoke the retirement
benefits and in particular, the ESOPs on the ground of appellant's non
compliance with good conduct is baseless in fact and also incorrect. This is
because respondent by its letter dated 30 th January 2019 and 1st February
2019 purported to revoke the retirement benefits including the ESOPs only
as an attendant consequence of its purported decision of termination for
cause of appellant's employment, which was by then non existent.
Respondent has not purported to revoke the benefits and ESOPs dehors or
independent of its purported termination for cause. Respondent has not
purported to revoke the ESOPs on any ground of non compliance with good
conduct;
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(m) moreover, the ESOS does not enable respondent to revoke
appellant's retirement benefits/ESOPs on any ground of general non
compliance with good conduct during the period when appellant was in
employment;
(n) the reference to compliance with the undertaking of good
conduct is evidently a reference only to the undertaking for good conduct
dated 19th July 2016 which was annexed to the Retirement Agreement dated
4th October 2018 which placed certain limited obligations/restrictions on
appellant's post retirement;
(o) the finding of the learned Single Judge that compliance
with the Code of Conduct, i.e., good conduct, was mandatory and non
compliance thereof would result in the review by respondent of the vesting
and exercise of options is ex-facie and demonstrably incorrect;
(p) records indicate that respondent has not even purported to
revoke/rescind appellant's Retirement Agreement under the contract
because respondent's email dated 30 th January 2019 and letter dated
1st February 2019 merely state that the Board of Directors has decided to
treat appellant's separation from respondent as "termination for cause"
under the respondent's internal policies, schemes and the Code of Conduct
with all attendant consequences (including revocation of all her existing and
future entitlements such as any unpaid amounts, unpaid bonuses or
increments, vested and unvested and unexercised stock options and medical
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benefits) and accordingly communication as regards early retirement
benefits to appellant dated 4th October, 2018 stands revoked with immediate
effect;
(q) in short, what appellant says is by virtue of appellant's offer
of early retirement dated 3rd October 2018 and respondent's acceptance
thereof by its letter dated 4th October 2018 resulted in a contract/agreement
for retirement on the terms mentioned in the said letter of acceptance and
resulted in cessation of the employer - employee relationship, respondent
cannot rely on the enquiry report of Mr. Justice B.N. Srikrishna (retired) or
any other Code of Conduct and appellant should be granted a summary
decree.
22 Mr. Khambata submitted :
(a) the reliefs sought by appellant are in the nature of final
reliefs and any grant of such reliefs would amount to decreeing appellant's
suit at the interim stage;
(b) in any event, the ESOPs claimed by appellant have already
been cancelled in 2019 and subsequently, added to the common pool from
which they have been distributed to other eligible employees of respondent.
The relief sought by appellant in effect is a mandatory order directing a
fresh issue of ESOPs at this interlocutory stage;
(c) any grant of the interim reliefs would cause irreparable
injury and prejudice to respondent in as much as even if appellant's suit is
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ultimately dismissed, respondent would then be required to seek recovery of
the shares acquired by appellant and/or monetary equivalent of the same;
(d) the balance of convenience is completely in favour of
respondent since it is a public listed company;
(e) the appeals seek re-appreciation of material considered in
the impugned order;
(f) it is well settled that the Court should not hold a mini-trial
at the stage of grant of temporary injunction;
(g) ESOPs contract and the contract of employment are two
separate contracts. Contract of employment is governed by appellant's
appointment letter, Board approvals and RBI approvals for her appointment
as MD and CEO, Deeds of Covenants and ICICI Bank's policies, whereas
ESOPs are governed by a separate and independent contract, the terms of
which are contained in the ESOS of respondent and the various award
confirmations and vesting confirmations issued to appellant from time to
time;
(h) appellant had an obligation to ensure good conduct under
both the contract of employment and ESOPs contract;
(i) the letter dated 4th October 2018 is not a new contract and
cannot and does not put to an end to the rights and obligations of the
parties under the subsisting contracts;
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(j) reference to good conduct in the contracts is not a reference
to the undertaking dated 19th July 2016 signed by appellant;
(k) the benefits listed in the letter dated 4 th October 2018 were
not unconditionally granted;
(l) revocation of the letter of 4 th October 2018 was made only
after concrete findings against appellant came to the knowledge of
respondent from the enquiry report;
(m) even assuming appellant's contract of employment was not
validly terminated for cause, ESOPs can be withdrawn/denied;
(n) appellant was given adequate opportunity to be heard by
Mr. Justice B.N. Srikrishna (retired) and appellant and her husband has
made oral as well as written submissions running into 66 pages which in
fact have been extensively referred to and relied upon in the enquiry report.
Appellant never asked for any further hearing and instead only stated that
she would be available for any further discussions/clarifications that
Mr. Justice B.N. Srikrishna (retired) may want. Appellant has not pleaded or
contended as to what additional material, facts or submission she would
have made in the event she was given any further hearings and any such
prejudice ought to be pleaded and proved;
(o) upon respondent coming to know after receipt of the
enquiry report that appellant had, for extended periods of time, failed to
make various disclosures to respondent as required under the Code of
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Conduct and the applicable laws and suppressed various facts from
respondent, the Board revoked the letter dated 4 th October 2018 and treated
the separation of appellant as termination for cause. It is immaterial
whether respondent has suffered any loss. It is settled law that when an
employee has acted in violation of the rules of conduct, then the fact that it
has resulted in no loss to the employer does not make the action of the
employee any less illegal. The Bank's employee holds a position of trust
where honesty and integrity are the sine qua non and it would never be
advisable to deal with such matters leniently;
(p) the interim reliefs granted in favour of respondent by the
learned Single Judge pertaining to 6,90,000 shares were correctly granted
and were in accordance with the RBI' directions dated 13 th March 2019. RBI,
by its letter dated 13th March 2019, has specifically directed respondent to
make the termination effective from appellant's last working day, i.e., from
4th October 2018. Since appellant exercised the 6,90,000 ESOPs only after
4th October 2018, such ESOPs were vested but unexercised as on
4th October 2018. Therefore, there is nothing wrong in the interim relief
being granted;
(q) appellant has not approached the Court with clean hands
and false statement with respect to ERS Scheme and vesting confirmation
have been made in the suit and the affidavits filed;
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(r) appellant has not challenged the enquiry or the enquiry
report by Mr. Justice B.N. Srikrishna (retired). Though appellant has sought
leave under Order II Rule 2 of the Code of Civil Procedure, 1908 to omit to
sue and that it would file a separate leave application under Order II Rule 2
to sue for reliefs other than those claimed in the plaint, no such application
has been filed.
23 The learned Single Judge, after hearing the parties extensively,
by a detailed judgment pronounced on 10 th November 2022, dismissed the
Interim Application No.1014 of 2022 filed by appellant and allowed
respondent's Interim Application No.307 of 2020 by passing the following
order :
(i) Mrs. Kochhar is restrained by an order of injunction from
dealing with any of the 690,000 ESOPs already exercised by
her during the period from 4th October, 2018 to 30th January,
2019.
(ii) Mrs. Kochhar shall disclose if she has sold or dealt with
any of such shares as well as disclose her gain from such sale
which shall be by way of Affidavit of Disclosure to be filed by
her within six weeks from uploading of this Order.
Our View :
24 Though both Mr. Chinoy and Mr. Khambata made extensive
submissions, what is to be noted is that the reliefs sought by appellant are in
the nature of final reliefs and grant of such reliefs would amount to
decreeing appellant's suit at the interim stage. Infact appellant has indicated
during the oral arguments as well as in the pleadings that she seeks interim
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reliefs for exercising the ESOPs in order to be able to sell the share during
the pendency of her suit. In paragraph 7 of the Interim Application No.5286
of 2022 in Appeal (lodging) No.38844 of 2022, appellant herself has
pleaded that on the exercise of the stock options, appellant would be
entitled to receive shares of respondent, a listed company, at the specified
exercise prices, which appellant would thereafter be able to sell at a time
when the price of the shares is most favourable. Any grant of the interim
reliefs as sought by appellant would cause irreparable injury and prejudice
to respondent, in as much as if respondent were to succeed in its suit and
appellant was to lose in her suit, respondent would then be required to seek
recovery of the shares acquired by appellant and/or monetary equivalent of
the same. Appellant is an individual and respondent is a Bank whose shares
are listed in the Stock Exchange.
25 Whether appellant's offer of early retirement on 3rd October
2018 and respondent's acceptance thereof by its letter dated 4 th October
2018 resulted in a contract/agreement for retirement on the terms
mentioned in the said letter of acceptance or it resulted in cessation of the
employer - employee relationship that would preclude respondent from
taking any disciplinary procedure or action against appellant or terminate
appellant's employment for cause in January 2019 are all matters of trial
which cannot be decided at the interim stage. Whether the letter of
4th October 2018 puts an end to the rights and obligations of the parties
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under the subsisting contracts or whether the letter dated 4 th October 2018
constitutes a new contract thereby putting an end to the rights and
obligations of the parties under the subsisting contract or whether benefits
listed in the letter dated 4th October 2018 were unconditionally granted are
also matters of trial. Whether reference to good conduct in the contracts is
not a reference to the undertaking dated 19 th July 2016 signed by appellant
is also a matter for trial. Whether respondent, in view of the serious findings
in the enquiry report by Mr. Justice B.N. Srikrishna (retired), could clawback
the benefits that appellant derived during her employment between 2009
and 2018 is also a matter of trial. Whether ESOPs can be revoked or
whether ESOP is a separate contract are also matters for trial.
26 Appellant is seeking a summary decree. The impugned order is
a detailed order passed by the learned Single Judge in exercise of his
discretionary powers and after hearing the parties at length. It is well
settled, as held in Wander Limited and Anr. V/s. Antox India P. Ltd. 1, that an
Appellate Court ought not interfere with such exercise of discretion except
where such exercise has been shown to be arbitrary, capricious or perverse.
Further, the Appellate Court ought not reassess the material and seek to
reach a conclusion different from the one reached by the Court below if the
one reached by that Court was reasonably possible on the material. It is also
settled law that the Appellate Court would normally not be justified in
interfering with the exercise of discretion under appeal solely on the ground
1. 1990 (Supp) SCC 727
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that if it had considered the matter at the trial stage, it would have come to
a contrary conclusion. If the discretion has been exercised by the Trial Court
reasonably and in a judicial manner, the fact that the Appellate Court would
have taken a different view may not justify interference with the Trial
Court's exercise of discretion. Paragraph 14 of Wander (Supra) reads as
under :
14. The appeals before the Division Bench were against the
exercise of discretion by the Single Judge. In such appeals,
the Appellate Court will not interfere with the exercise of
discretion of the court of first instance and substitute its own
discretion except where the discretion has been shown to
have been exercised arbitrarily, or capriciously or perversely
or where the court had ignored the settled principles of law
regulating grant or refusal of interlocutory injunctions. An
appeal against exercise of discretion is said to be an appeal on
principle. Appellate Court will not reassess the material and
seek to reach a conclusion different from the one reached by
the court below if the one reached by the court was
reasonably possible on the material. The appellate court
would normally not be justified in interfering with the
exercise of discretion under appeal solely on the ground that
if it had considered the matter at the trial stage it would have
come to a contrary conclusion. If the discretion has been
exercised by the Trial Court reasonably and in a judicial
manner the fact that the appellate court would have taken a
different view may not justify interference with the trial
court's exercise of discretion. After referring to these
principles Gajendragadkar, J. in Printers (Mysore) Private Ltd.
v. Pothan Joseph :
... These principles are well established, but as has been
observed by Viscount Simon in Charles Osention & Co.
v. Johnston the law as to the reversal by a court of
appeal of an order made by a judge below in the
exercise of his discretion is well established, and any
difficulty that arises is due only to the application of
well settled principles in an individual case.
The appellate judgment does not seem to defer to this
principle.
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27 There is nothing to indicate that the discretion exercised by the
learned Single Judge is arbitrary or capricious or perverse or unjustified in
law. The Trial Court has exercised its discretion reasonably and in a judicial
manner. The observations made by the learned Single Judge on the conduct
of appellant, though not conclusive, are very serious in nature. If the interim
reliefs sought by appellant is granted, that would cause irreparable injury
and prejudice to respondent. The balance of convenience is completely in
favour of respondent, since it is a public listed company, and if appellant
succeeds in her suit, respondent can at that stage be directed to purchase
shares from the stock market or to pay an amount equal to their value to
appellant. Per contra if appellant's suit is ultimately dismissed, respondent
would then be required to seek recovery of the shares acquired by appellant
and/or monetary equivalent of the same. Appellant is an individual,
whereas respondent is a public listed company. It is also well settled that it
is not appropriate for a Court to hold a mini-trial at the stage of grant of
temporary injunction as held in Zenit Mataplast Private Limited V/s. State of
Maharashtra & Ors.2
28 We should also note that appellant has approached this Court
just two days before the expiry of the three year limitation period from the
date of cause of action. The delay in approaching the Court would itself
disentitle respondent from seeking any interim relief as prayed for.
Considering the prayers, the suit is for specific performance and appellant is
2. 2009 (10) SCC 388
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seeking specific performance at the interim stage, which cannot be granted
particularly in view of the reasons recorded above.
29 Therefore, in our view, no interference is called for. Both
appeals are required to be dismissed and are hereby dismissed. Costs to be
cost in the suit. All interim applications also stand disposed.
30 All rights and contentions of the parties are kept open. Any
findings made in this judgment or by the learned Single Judge against
appellant are only prima facie findings and not conclusive.
31 Counsel state that writ of summons have been served in both
suits. Written statement to be filed and copy served on or before
30th June 2023.
32 Parties to file their respective affidavits of documents by
15th July 2023 and complete discovery and inspection and also exchange
statements of admission and denial with reasons for denial by 31 st July
2023.
33 Suit be listed on 4th August 2023 for issues, subject to the
convenience of the learned Single Judge, at which time parties shall go with
agreed draft issues and a separate list of issues on which they are unable to
agree.
(RAJESH S. PATIL, J.) (K. R. SHRIRAM, J.)
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