In a series of allegations that have raised questions about corporate governance, conflict of interest, and income tax compliance in India, Congress has flagged several concerns about the financial relationship between Madhabi Puri Buch, Chairperson of the Securities and Exchange Board of India (SEBI), and her former employer, ICICI Bank. The controversy centers on the non-uniformity of retiral benefits paid to Buch, the timing of these payments, and the exercise of Employee Stock Option Plans (ESOPs). This scrutiny extends beyond just compensation issues, touching on potential conflicts of interest given Buch’s current regulatory role and her husband’s advisory position at Blackstone Inc., a significant player in the Real Estate Investment Trust (REIT) market.
Congress Raises Questions on Retiral Benefits and ESOPs
The controversy began when Congress questioned the ICICI Bank’s assertion that it had not paid any salary or granted ESOPs to Madhabi Puri Buch after her retirement. The bank stated that the ₹5.03 crore received by Buch was part of her retiral benefits, accrued during her employment. However, Congress pointed out discrepancies in the frequency and amount of these payments, raising suspicions about their legitimacy.
Non-Uniform Retiral Benefits: According to Congress, the retiral benefits paid to Buch were inconsistent, both in frequency and amount, particularly during the period from 2016 to 2021. These payments averaged ₹2.77 crore per annum, a figure significantly higher than her salary during her employment, which was ₹1.30 crore per annum. Congress questioned how the retiral benefits could surpass the salary, calling for a thorough investigation into the matter.
Exercise of ESOPs: Congress also highlighted that while ICICI Bank claimed its employees, including retired ones, are allowed to exercise their ESOPs within ten years, the bank’s publicly available ESOP policy states that retired employees have a maximum of three months to exercise these options following their voluntary termination. Congress alleged that Buch’s ability to exercise her ESOPs eight years after her termination could indicate either a violation of the bank’s policies or undisclosed amendments to these policies, which could further undermine corporate transparency.
Income Tax Compliance: Congress Points to Potential Violations
Beyond the inconsistencies in retiral benefits and ESOPs, Congress also questioned ICICI Bank’s compliance with the Income Tax Act, particularly regarding the Tax Deducted at Source (TDS) on the payments made to Buch.
Non-Compliance with the Income Tax Act: Congress accused ICICI Bank of failing to offer the TDS amount paid on behalf of Buch as taxable income. The party argued that if the TDS was deducted on her ESOPs or other benefits, it should have been included in her income, and appropriate taxes should have been paid. This alleged non-compliance with the Income Tax Act raises serious concerns about the bank’s financial practices and transparency.
ICICI Bank’s Defense: In response to these allegations, ICICI Bank issued a statement clarifying that no salary or ESOPs were granted to Buch post-retirement, apart from her retiral benefits. The bank emphasized that all payments made to Buch were in accordance with the applicable policies during her employment phase. However, this explanation has not satisfied Congress, which continues to demand a more detailed account of the payments and an investigation into the potential breach of tax regulations.
The Broader Context: Conflict of Interest and Allegations Against the Buchs
The controversy surrounding Madhabi Puri Buch does not end with her financial dealings with ICICI Bank. Allegations of conflict of interest have surfaced, particularly concerning her husband, Dhaval Buch, and his advisory role at Blackstone Inc., a major player in the REIT sector.
Conflict of Interest Allegations: According to reports, Dhaval Buch was appointed as a senior advisor to Blackstone in 2019, despite having no prior experience in real estate or capital markets. During his tenure, SEBI, under Madhabi Buch’s leadership, proposed and approved several regulatory changes that significantly benefited REITs, including those sponsored by Blackstone. These regulatory changes have raised eyebrows, particularly because Blackstone decided to cash out its entire stake in Embassy REIT, India’s largest REIT, just months before the Hindenburg report was released, which accused the Buchs of holding stakes in offshore funds associated with the Adani Group—a claim both have denied as baseless.
ICICI Bank and Corporate Governance: Under the Microscope
The allegations against Madhabi Puri Buch and the scrutiny of ICICI Bank’s governance practices have broader implications for corporate governance in India. The controversy has shed light on potential gaps in the oversight of compensation practices, particularly concerning retiral benefits and ESOPs, and has raised questions about the transparency of corporate and regulatory processes.
Governance Practices at ICICI Bank: For ICICI Bank, this controversy has put its governance practices under intense scrutiny. The inconsistencies in the payment of retiral benefits and the exercise of ESOPs have prompted calls for a review of the bank’s policies to ensure they comply with both internal and external regulations. The bank may need to implement more stringent oversight mechanisms to restore confidence in its governance practices.
Impact on SEBI and Regulatory Integrity: The allegations against Madhabi Puri Buch could undermine confidence in SEBI’s ability to oversee India’s financial markets effectively. As the chairperson of the regulatory body, Buch’s actions are expected to be above reproach. However, the conflict of interest allegations, coupled with the controversy surrounding her compensation, have raised concerns about SEBI’s impartiality and the transparency of its regulatory processes. 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.
Recent Developments: Ongoing Investigations and Legal Repercussions
Since the controversy erupted, there have been several developments that have further complicated the situation for both Madhabi Puri Buch and ICICI Bank.
Ongoing Investigations: Reports indicate that both the Ministry of Finance and the Income Tax Department have initiated investigations into the payments made to Buch and the compliance with tax regulations. These investigations are expected to scrutinize the bank’s internal policies, the timing of the payments, and the potential violations of the Income Tax Act. If the investigations find any wrongdoing, it could lead to significant legal repercussions for both Buch and ICICI Bank.
Potential Legal Repercussions: Legal experts suggest that if ICICI Bank is found to have violated tax regulations or internal policies, it could face substantial fines and penalties. Additionally, Madhabi Puri Buch could be held accountable for any conflicts of interest that may have influenced her decisions as SEBI Chairperson. The ongoing investigations and potential legal repercussions could have a lasting impact on the reputations of both Buch and ICICI Bank, as well as on the broader regulatory environment in India.
Conclusion: The Need for Transparency and Accountability
The allegations against Madhabi Puri Buch and ICICI Bank highlight the critical importance of transparency and accountability in corporate governance and regulatory practices. As the investigations continue, it is imperative that both the bank and SEBI take proactive steps to address the concerns raised and to restore public trust in their institutions.
For ICICI Bank, this means reviewing its policies on retiral benefits and ESOPs to ensure they are transparent and compliant with all relevant regulations. For SEBI, it means conducting a thorough review of its conflict of interest policies and ensuring that all potential conflicts are disclosed and managed appropriately. Ultimately, the outcome of this controversy will serve as a litmus test for the integrity of India’s corporate and regulatory landscape.
Soumya Smruti Sahoo is a seasoned journalist with extensive experience in both international and Indian news writing. With a sharp analytical mind and a dedication to uncovering the truth, Soumya has built a reputation for delivering in-depth, well-researched articles that provide readers with a clear understanding of complex global and domestic issues. Her work reflects a deep commitment to journalistic integrity, making her a trusted source for accurate and insightful news coverage.
