Chanda Kochhar’s liability under IPC Section 409 – The RMLNLU Law Review Blog

Chanda Kochhar’s liability under IPC Section 409 – The RMLNLU Law Review Blog

By- Prasun Nabiyal


On 14th January 2023, Industrial Credit and Investment Corporation of India (hereinafter ‘ICICI’) Bank’s former MD Chanda Kochhar was charged with an aggravated form of “Criminal Breach of Trust” under Section 409 of the Indian Penal Code (hereinafter ‘IPC’) She was accused of defrauding the ICICI bank of 1730 crores by approving loans to Videocon in violation of its regulations. This post uses relevant legal principles and case laws to ascertain the foreeable stance to be taken by the courts in determining Chanda Kochhar’s liability under section 409. It then highlights the importance of this case as an opportunity moment for the courts to reconstruct the jurisprudence surrounding section 409.


The aggravated charge under section requires the accused to commit a breach of trust concerning the property which is entrusted to them in their capacity as any one of the classes of people as listed under section 409.

The “Entrustment” Question

The ICICI bank is a non-natural person and thus needs an authorized individual to conduct its business. Hence, in light of Jaswantrai Manilal Akhaney v. The State of Bombay, property entrusted to the ICICI bank will be treated as if it were entrusted to its employees. In particular, as demonstrated in State By CBI v. K. Sadananda ShettyChanda Kochhar must be attributed to the entrustment of “the power of sanctioning loans to the bank’s customers”.

The “Breach of Trust” Question

As observed in State by CBI v. Shri. R. Chitharanjan Das, when entrustment is established, the burden of proof is shifted to the accused. Thus, Chanda Kochhar will have to prove that she did not commit a “Criminal Breach of Trust” with the entrusted property. A plain reading of Section 405 of the IPC reveals that “Criminal Breach of Trust” is said to be committed an entrusted property is dishonestly used/disposed in violation of either “any direction of law prescribing the mode in which such trust is to be discharged ” or “any legal contract, express or implied, which he has made touching the discharge of such trust”. in Mir Nagvi Askari v. CBI, the Supreme Court included “directions, instruments and circulars issued by any authority entitled there for” under “direction of law”. As confirmed by the Bombay HC in Chanda Kochhar v. ICICI Bank Ltd., Chanda Kochhar did not disclose her husband’s involvement in various Videocon-owned companies and his relationship with VN Dhoot. This act of non-disclosure by Chanda Kochhar was in blatant violation of RBI’s Master Circular guidelines. Precisely, this act of non-disclosure is in violation of guideline of RBI’s Master Circular which requires a bank’s Chairman/M. D/any director who is directly or indirectly involved/interested in any proposal to disclose such information to the Board when that proposal is discussed. Chanda Kochhar’s act of non-disclosure was thus clearly in violation of the “direction of law” as provided for under section 405. Hence, in light of the existent legal framework surrounding section 409, the court’s verdict will foreseeably be in the favor of holding Chanda Kochhar guilty under section 409.


In addition to addressing Chanda Kochhar’s liability under section 409, this case also offers the courts an opportunity to develop a more individualized jurisprudence surrounding section 409. The courts can achieve this through the window of “zero ultimate loss”. In particular, the question of “zero ultimate loss” caused to the ICICI Bank has been a prominent point of dispute between both parties in the current case. Contrary to the prosecution, Chanda Kochhar contends that the impugned loans were repaid on time, thus, causing the ICICI Bank “zero ultimate loss”.

To Borrow or To Avoid?

The current position of the courts on this question is that “zero ultimate loss” is irrelevant for determining conviction under section 409. This position can be traced back to Dagadu Shamrao Deshmukh v. State of Maharashtra. Here, the courts clarified that “zero ultimate loss” does not protect people from conviction section 409. The same judicial attitude can be noticed in Jeewan Kumar v. State of Punjab. Here, the courts held that “criminal intention” in “Criminal Breach of Trust” does not depend on the repayment factor. finally, in R. Venkatakrishnan v. CBI, the court upheld the general position regarding “zero ultimate loss”, although with an added twist. Unlike the previous case, Venkatakrishnan justified the position using the framework of section 405. The courts justified their stance by stating that “entering an illegal transaction” and “causing unlawful gains to a private person” are jointly-sufficient conditions for conviction under section 405.

This practice encourages a narrow interpretation of Section 409 which limits its essence to merely the “commission of an offense under Section 405 by a particular class of people”. Such an interpretation of section 409 does not account for its distinct nature, glimpses of which can be witnessed in both R. Venkatakrishnan and Dagadu Shamrao. For instance, the courts in Dagadu espoused that the duties of public servants under section 409 are “at least co-extensive with that owed by private citizens, if not more”. This focus on the comparative nature of duties is further witnessed in more detail in Venkatakrishnan. Here, the courts noted that the Section 409 class of people carry duties which are distinct in nature. The court places this distinctness on the difference in the degree of confidentiality and control involved concerning the entrusted property. The court thus explains that the classification under section 409 is based on the severe public and private damage that can be caused on the commission of “Criminal Breach of Trust” by such individuals. However, while the court acknowledged the distinct nature of section 409 in Venkatakrishnan, its interpretive exercise did not reflect the same understanding and acknowledgment. Irrespective of its statement on the “public and private damage” line of reasoning, the court refrained from dwelling on the same while answering the legitimate question of “zero ultimate loss” being caused to the public or otherwise.

This unaccommodating attitude of the judiciary also manifests itself in more subtle ways. For example, the judiciary often tends to avoid the larger question of Section 409’s distinct nature while facing the question of “zero ultimate loss” in Section 409 cases. It often does so by strictly limiting the discussion to the factually specific question. This can be witnessed in multiple cases like this Vishwa Nath v. State of Jammu & Kashmir, Manoj Kumar Singh v. The State of Bihar, Purnanand Jha v. The State of Bihar etc. Although the courts in these cases were able to solve the concerned legal query, in their quest of providing a specific remedy, the courts time and again missed perfectly valid opportunities to answer the question of “zero ultimate loss” in the context of Section 409’s distinct nature and thus develop a richer jurisprudence for the provision.


The courts can thus use Chanda Kochhar‘s case to take forward the tradition that began in Dagadu Shamrao and continued in Venkatakrishnan. The court must, first, acknowledge the distinct nature of section 409. Then, the court must bridge the gap left by Venkatakrishnan by incorporating this understanding and acknowledgment in its interpretive exercise.

In particular, the courts can use this as an opportunity to define the extent to which borrowing from section 405 jurisprudence is reasonable for answering questions involving section 409. The point of distinction between the 2 provisions— ie: nature of duties, concern for the public and private damage— must act as an anchor to determine “reasonable borrowing” and “unreasonable borrowing”. For example, in answering the question of “zero ultimate loss”, any such act of borrowing must fall under “unreasonable borrowing”. In this specific instance, the categorization under “unreasonable borrowing” flows from the fact that “zero ultimate loss” being caused to the public has a different degree of significance in the framework of section 409. This section, unlike section 405, puts due emphasis on the ability of the accused to cause immense public and private damage. Thus, even if the distinct jurisprudence of Section 409 leads to the same conclusion —disallowing “zero ultimate loss” as a valid defense—the reasoning applied and the concurrent justification for the same must be different from that of Section 405. In this manner, sections 405 and 409 can be harmonized and prevent the erosion of Section 409’s distinct character.


In conclusion, the author submits that Chanda Kochhar‘s case is a golden opportunity for the courts to kickstart a more individualized jurisprudence for section 409. In other words, the courts must revisit section 409 jurisprudence and incorporate the acknowledgment of its distinctness from section 405 in the interpretive exercise. It needs to cultivate the tradition that is put into motion Dagadu and Venkatakrishnan by harmonizing the general provision of section 405 with section 409’s unique characteristics. Such a harmonized construction of section 409 must serve as the foundation for the judicial weighing of all factors which are considered relevant in assessing liability under section 409.

(Prasun Nabiyal is a law undergraduate at the National Law School of India University, Bangalore. The author may be contacted via email at [email protected]).

Cite as: Prasun Nabiyal‘Chanda Kochhar’s liability under IPC section 409’ (The RMLNLU Law Review Blog31 March 2023) date of access.

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