When a Bank-Fraud Probe Touches an Employee: HR's Termination Checklist

When the Enforcement Directorate was conducting searches at 11 premises in Kolkata in connection with a Rs 290-crore alleged bank fraud case against Kohinoor Power Pvt Ltd, the question for HR was not how to solve the case. It was how to avoid becoming a second investigator.

The searches covered premises of the group's promoters Prashant and Vijay Bothra, along with other directors and auditors, including office premises. For a manager, that detail matters: an external probe can touch people, buildings, and reputation at once.

The company had availed bank loans for a 66-MW power plant in Jharkhand, but the loans were allegedly siphoned off to other group entities and for personal use. The searches were aimed at gathering evidence and tracing the money trail in a money-laundering case under the Prevention of Money Laundering Act. That is the kind of fact pattern where HR can drift into territory it should not own.

The problem is that an allegation is not a finding. A manager who hears about a probe may assume the employee is guilty, the office is contaminated, or the company must act immediately. None of those assumptions is a lawful decision. The law does not usually require HR to investigate criminal conduct. The legal risk is that adverse action must rest on documented, employment-relevant facts. Keeping the probe quiet is good practice and keeps the file clean.

What HR can ask

Start by separating the external probe from the internal employment issue. The external probe belongs to the authorities. The internal issue belongs to the employer: whether the employee's conduct, performance, or policy compliance affects the job. If the employee is a director, officer, or finance person, the employment question may be whether the employee can continue to handle money, systems, or customer relationships. If the employee is ordinary staff whose only connection is that the office was searched, the employment question may be narrower.

Ask only questions that connect to the employee's role. You may ask what the employee did, what the employee knew, what documents the employee handled, and whether any company policy was breached. You may ask the employee to explain a discrepancy in records, a missing approval, or a conflict of interest. Do not ask the employee to reconstruct the criminal case, identify co-conspirators, or prove innocence. If the employee is represented, or the questions sound like a criminal interview, stop and get counsel.

Good practice is to write down the employment-relevant facts before the conversation. What was the employee's job? What systems did the employee access? What approvals were required? What did the employee actually do? What was the business impact? This is not a transcript of the external probe. It is the file you would show a court, regulator, or new manager if the decision is challenged.

What HR must keep quiet

Confidentiality is not optional when an external probe is live. The company should limit knowledge to the people who need it to make an employment decision or protect the business. That usually means a small group: HR, legal, the employee's direct manager, and perhaps a finance lead. Everyone else should hear only what is necessary for their own work.

Do not discuss the probe in open meetings, group chats, or hallway conversations. Do not ask colleagues to watch the employee as if the employee is a suspect. Do not let managers speculate about the probe, the alleged fraud, or the employee's personal life. If the employee asks, answer narrowly: the company is reviewing employment-relevant matters and will follow its normal process.

There is a difference between protecting the investigation and protecting the employee's dignity. The employee is entitled to a workplace that is not a rumor mill. If the probe is public, the company still controls what it says internally. A short, neutral statement is better than silence: the company is aware of an external matter, is cooperating where appropriate, and is handling employment issues separately.

How to make a termination defensible

A termination is defensible when the reason is employment-based, documented, and not speculative. The allegation itself is not enough. If the employee is accused of fraud, the company still needs an employment reason: a documented policy breach, a failure to follow controls, a performance problem, a loss of trust tied to the role, or a direct conflict of interest. The reason should be explainable without referring to the criminal case.

Use a five-step checklist before acting:

1. Confirm who is actually under investigation. A director, auditor, promoter, or office being searched does not make every employee a suspect. Get the scope from counsel, not from rumor.
2. Ask only employment-relevant questions. Tie each question to the employee's duties, access, approvals, or policy obligations. If a question does not help you decide an employment issue, do not ask it.
3. Wall off investigation details. Keep the external probe separate from the internal file. Do not copy regulator materials into the personnel file unless counsel says it is appropriate and necessary.
4. Document conduct, performance, and policy breaches separately. The file should show what happened at work, when it happened, who knew, and what the company did about it. It should not be a summary of the external case.
5. Terminate only on documented, non-speculative grounds with legal review. If the only reason is that the employee's name appeared in a probe, the decision is weak. If the reason is a documented employment issue, the decision is stronger.

The goal is not to protect the company from the truth; it is to keep the employment decision honest. If the employee is guilty, the authorities will handle that. If not, the company should not have punished them for a rumor. Either way, the file should stand on its own: what the employee did, what the company knew, and why the employment decision followed.