Legal review reveals ex-chairman's charges 'not substantiated': HDFC Bank

India’s largest private sector lender HDFC Bank said on Friday that an independent legal review it had commissioned into allegations made by former part-time chairman of the bank Atanu Chakraborty in his resignation letter were “not substantiated” by documentary evidence or witness interviews.

On March 18, Chakraborty had resigned as the part-time chairman and independent director of HDFC Bank, stating “certain happenings and practices within the bank were not in congruence with his personal values and ethics”, and termed this the reason for his resignation.

The review, conducted by Wilson Sonsini Goodrich & Rosati, P.C. and Wadia Ghandy & Co., said 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 the minutes of meetings attended by Chakraborty “were a product of a comprehensive drafting, review and approval process” that afforded him an opportunity to record any “happenings and practices” that purportedly were not in congruence with his personal values and ethics.

The law firms added that both HDFC Bank and the external law firms “repeatedly requested that Mr. Chakraborty speak with external law firms as part of the legal review, but ultimately the interview with Mr. Chakraborty did not occur.”

With the legal review giving a clean chit to the bank board, this could pave the way for the reappointment of HDFC Bank's MD & CEO Sashidhar Jagdishan, whose current term ends in October. The board is yet to decide on his extension as they were awaiting the legal review.

Jagdishan was appointed in 2020 for three years which was extended by another three years in 2023.

The legal review was initiated after the bank, on March 24, said it would evaluate whether any concern was evident as raised in Chakraborty’s resignation letter, whether he had recorded any dissent, and whether such dissent had been addressed. The terms of reference covered the two years preceding Chakraborty’s resignation. The review included, among other procedures, examining Board and committee meeting minutes and agenda papers, conducting interviews, and reviewing additional documents and information.

According to the bank, the external law firms reviewed the minutes and agenda materials of meetings of the board and relevant board committees during the reference period. They also interviewed each of the independent directors, including the chairpersons of the relevant committees, the managing director and chief executive officer, and senior management personnel heading certain control and assurance functions.

In a statement released 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 involved the review of thousands of documents and interviews of the Independent Directors and several members of senior management,” the bank said.

Referring to the “Dubai matter”, the law firms said, “Although Mr. Chakraborty referred to the Dubai matter in post-resignation public statements, no contemporaneous evidence was identified reflecting 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 connection with the Dubai matter (or any other matters that the board and those committees addressed).”

Chakraborty had cited concerns across a range of matters in an interview following his exit from the bank, 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 additional tier-I (AT-I) bonds of Credit Suisse to retail customers at the Dubai branch, where they were marketed to non-resident Indians (NRIs) as fixed-maturity bonds. These bonds were written off after Credit Suisse went bankrupt, and was taken over by another banking giant, UBS.

Summing up the review, the law firms said: “In sum, 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 of the external law firms has been submitted to its Board following the conclusion of the legal review.