ICICI Bank grappling with Rs 18168 crore litigations

ICICI Bank is faced with litigations amounting to Rs 18,168 crore, according to the bank's red herring prospectus.

Bulk of the amount is against the bank involving Rs 10,500 crore from 311 litigations. This amount was the cumulative sum of claims from borrowers and other related parties.

It is also faced with seven litigations involving Rs 5,631 crore against its directors and another Rs 2,037 crore of disputed tax demand that are pending.

The bank in its prospectus for the forthcoming public issue has mentioned the vast majority of these cases arose in the normal course and did not involve risk of a material adverse impact on the bank's financial position, or shareholders' fund.

Where the bank has assessed a material risk of loss, it as a matter of policy made provision for the loss. However, ICICI Bank did not make provisions where in its assessment the risk was not material.

The bank stated it did not make any provision for an arbitration proceeding in London, brought against the bank by certain foreign lenders in relation to a dispute under an inter-creditor agreement in connection with a power project. Damage claimed against the bank and other Indian lenders is around $534 million.

"Any final judgment awarding material damages against us in the aforesaid funds and the price of our equity shares. We cannot guarantee that the arbitration will be concluded in a manner favourable to us and should our assessment of the risk change, our stance towards provisions will also change," the bank prospectus said.

With regards to the tax assessment, the bank said that it has appealed each of these tax demands. The bank feels that the tax authorities are unlikely to substantiate their income tax, wealth tax and sales tax assessment in view of favourable judicial decisions.