External Legal Review Clears HDFC Bank of Concerns Raised by Ex-Chairman

HDFC Bank has said an independent legal review conducted by two external law firms found no evidence to substantiate concerns raised by former chairman Atanu Chakraborty in his resignation letter or subsequent public statements.

The bank said the review, announced on March 24, examined whether any concerns flagged by Chakraborty were evident from the records, whether he had recorded any dissent during his tenure, and whether such dissent, if any, had been addressed.

Chakraborty resigned as chairman of the country's second biggest lender, HDFC Bank, citing ethical concerns. This was the first time that a part-time chairman of HDFC Bank left mid-way, raising concerns over its functioning.

"Certain happenings and practices within the bank, that I have observed over the last two years, are not in congruence with my personal values and ethics. This is the basis of my aforementioned decision," he said in his resignation letter dated March 17.

The review was carried out by Wilson Sonsini Goodrich & Rosati, P C and Wadia Ghandy & Co over a three-month period, HDFC Bank said in a regulatory filing on Friday.

The law firms reviewed Board and committee meeting minutes and agenda papers covering the two years preceding Chakraborty's resignation, examined thousands of documents, and conducted interviews with independent directors, including committee chairpersons, the Managing Director & Chief Executive Officer, and senior executives heading key control and assurance functions, it said.

The external law firms repeatedly requested Chakraborty to participate in the review, but the interview did not take place.

"Having now completed an extensive legal review, external law firms found that Chakraborty's statement and its implications were not substantiated by the record and witness interviews," it said.

The review found that the minutes of board meetings attended by Chakraborty followed a comprehensive drafting, review and approval process that gave him the opportunity to record any dissent or concerns, it said.

It also found no contemporaneous evidence in Board or committee records, meeting materials or communications supporting the issues raised in his statement, it said.

Further, witness interviews did not corroborate Chakraborty's allegations, the bank said.

The law firms also examined references made by Chakraborty to the "Dubai matter" in his post-resignation public statements and found no contemporaneous evidence showing that he had raised concerns relating to his personal values and ethics or disagreed with decisions taken by the Board or its committees on that issue or any other matter.

On March 20, HDFC Bank terminated the services of three employees for gaps in client onboarding at its Dubai International Financial Centre (DIFC) branch.

Following the allegations of mis-selling, the local regulator -- Dubai Financial Services Authority -- barred HDFC Bank from onboarding new customers at its DIFC branch last September.

"In sum, the contemporaneous evidence reviewed was inconsistent with Chakraborty's statement, and the external law firms' review did not identify any basis for the statement," HDFC Bank said, quoting the findings of the legal review.