The ongoing controversy surrounding Madhabi Puri Buch, Chairperson of the Securities and Exchange Board of India (SEBI), and ICICI Bank has sparked significant debate. The core of the issue revolves around the compensation she received post-retirement, which has led to questions from the Congress party about possible irregularities. This article delves into the allegations, the response from ICICI Bank, and the broader implications of this controversy.
The Allegations: Congress Raises Questions
On September 3, 2024, the Congress party questioned ICICI Bank’s assertion that it had not paid any salary or granted Employee Stock Options (ESOPs) to SEBI Chairperson Madhabi Puri Buch after her retirement. The bank claimed that the ₹5.03 crores received by Ms. Buch was part of her “retiral benefit.” However, the Congress found discrepancies in this explanation, particularly in the frequency and amount of the payments.
Pawan Khera, a Congress spokesperson, flagged these discrepancies, noting that while Ms. Buch had received the retiral benefit in 2014-2015, she continued to receive payments from 2016 until 2021. The Congress pointed out that her salary from 2007 to 2013-2014 was ₹1.3 crore per annum. In contrast, the retiral benefit she received from 2016-17 to 2020-21 averaged ₹2.77 crore per annum. This significant increase raised questions about how a retiral benefit could exceed her salary as an active employee.
Discrepancies in ESOPs
Another major point of contention is related to the ESOPs granted to Ms. Buch. ICICI Bank clarified that employees, including retirees, are allowed to exercise their ESOPs anytime within ten years of the vesting date. However, the Congress found this statement at odds with the ESOP policy mentioned on ICICI Bank’s website.
According to the policy, a retired employee can exercise their ESOPs within a maximum of three months following their voluntary termination.
According to I-Sec 2011-12 AR, Mrs Madhabi Puri Buch resigned on 12 April 2011. That year, her CTC was ₹ 1.64 crore.
According to ICICI Bank, the bank paid her “Retiral Benefits” of ₹ 2.13 cr in 2017-18, ₹ 4,73 cr in 2018-19, ₹ 1.23 cr in 2019-20 & ₹ 4.66 cr in 2020-21! + pic.twitter.com/Yv2QdyCqnD— Ravi Nair (@t_d_h_nair) September 3, 2024
Ms. Buch was able to exercise her ESOPs eight years after her termination, which led the Congress to question whether the policy had been changed without public disclosure. They also raised concerns about the possibility that the ESOPs granted to Ms. Buch might have been sourced from other employees, potentially violating their rights.
Concerns About Non-Compliance with the Income Tax Act
The Congress party also expressed concerns about possible non-compliance with the Income Tax Act. Specifically, they questioned why ICICI Bank did not report the Tax Deducted at Source (TDS) amount paid on behalf of Ms. Buch as taxable income.
The Congress argued that if the TDS was paid on her ESOPs, it should have been included in her income, and tax should have been paid accordingly. The failure to do so, they claimed, constituted a clear violation of the Income Tax Act.
ICICI Bank’s Response
In response to the allegations, ICICI Bank issued a statement clarifying that it had not paid any salary or granted any ESOPs to Madhabi Puri Buch after her retirement, apart from her retiral benefits.
The bank emphasized that Ms. Buch had opted for superannuation with effect from October 31, 2013, and that any compensation she received after her retirement was related to ESOPs and retiral benefits accrued during her employment.
The bank also stated that the compensation Ms. Buch received was in line with applicable policies, including the ESOP rules, which allow employees to exercise their options within ten years of the vesting date.
CLARIFICATION FROM ICICI BANK
On Alleged Payment Of Salary & ESOPs to Madhabi Puri Buch During Her Term At SEBI
▪️All the payments (ESOPs & retrial benefits) made to Buch post her retirement had accrued to her during her employment phase with the ICICI Group
EXPLANATION??… pic.twitter.com/wWRmd2Y5fy
— Yash Jain (@YashJain88) September 2, 2024
However, this explanation did not satisfy the Congress, which continued to question the legitimacy of the payments and the possible breach of both internal policies and tax regulations.
The Broader Context: Allegations of Conflict of Interest
The controversy does not end with the issues related to compensation. Madhabi Puri Buch and her husband, Dhaval Buch, have been under scrutiny following allegations by Hindenburg Research. The research firm accused the couple of holding stakes in offshore funds associated with the Adani Group, a claim that both Ms. Buch and her husband have denied as baseless.
In addition, the Hindenburg report raised concerns about a possible conflict of interest, given that Ms. Buch has been promoting Real Estate Investment Trusts (REITs) as a promising asset class without disclosing that her husband is an adviser to Blackstone Inc., a significant player in the REIT sector.
According to the report, Dhaval Buch was appointed as a senior advisor to Blackstone in 2019, despite having no prior experience in real estate or capital markets. The report suggests that during his tenure as an advisor, SEBI proposed and approved several regulatory changes that benefited REITs, including those sponsored by Blackstone.
The Congress has questioned why these potential conflicts of interest were not disclosed and whether Ms. Buch’s actions as SEBI Chairperson were influenced by her husband’s association with Blackstone. They also raised concerns about the timing of the regulatory changes and Blackstone’s decision to cash out its entire stake in Embassy REIT, India’s largest REIT, in December 2023, just months before the Hindenburg report was released.
The allegations against Madhabi Puri Buch and ICICI Bank have broader implications for corporate governance and regulatory integrity in India.
The controversy has highlighted potential gaps in the oversight of compensation practices, particularly in relation to retiral benefits and ESOPs. It has also raised questions about the transparency of regulatory processes and the importance of disclosing potential conflicts of interest.
For ICICI Bank, the controversy has put its governance practices under the spotlight, particularly its policies on retiral benefits and ESOPs. The bank may need to review and possibly revise its policies to ensure greater transparency and compliance with both internal and external regulations.
For SEBI, the allegations against its Chairperson could undermine confidence in the regulatory body’s ability to oversee India’s financial markets effectively. SEBI may need to take steps to address these concerns, including conducting a thorough review of its policies on conflicts of interest and ensuring that all relevant information is disclosed to the public.
