IIM Bachmates To The Rescue of Madhabi Puri Buch

After some digging of facts and analysis, IIM Ahmedabad batchmates of the incumbent SEBI chief Madhabi Puri Buch have come to her rescue. Buch belongs to the class of 1988 IIM Ahmedabad. In her defence, her classmates have said that the narrative against her lacks truth and emphasized the significance of her role for credibility of SEBI. The allegations against Buch have implications not just for her personally but for the credibility of an “important democratic institution”, they said in a statement.

Read the full statement here:

What a little bit of effort on fact check showed on questions raised against Madhabi Puri Buch?

The last few weeks have seen numerous questions being raised about Madhabi Puri Buch. To us, a group of her IIM Ahmedabad classmates, the narrative did not ring true. We have known Madhabi for over 35 years and none of what was being said about her felt right. So we decided to do our own fact check on each of the questions.

We spoke to senior people who had been familiar and are currently familiar with the questions. We also examined certain publicly available documents. And not surprisingly, we found that the narrative being built around her, while rooted in data apparently sourced from her income tax returns themselves, is clearly false. Not just that, we found that it was not hard for us to ascertain the facts and realise that anyone who was interested in the truth, could have equally easily made the same enquiries and reached the same conclusions. It is unfortunate that that has not happened.

1. Q: How could ESOPs be exercised by her after so many years when the scheme allowed only 3 months?

A: Simple. The ESOP Scheme provisions for resigning employees and retiring employees of ICICI, were different.

1.1 Like many other senior employees of ICICI Group, Madhabi Puri Buch got ESOPs during her employment with them.

1.2 As per the ESOP Scheme, employees who resign from the bank are required to exercise their vested options within 3 months. However, employees who retire, are permitted to exercise their options up to 10 years after vesting. As already confirmed by ICICI Bank in its statement, Madhabi superannuated (i.e. retired) from ICICI Bank. Thus, she had 10 years in which to exercise her options. This is an extremely common feature of ESOPs of many companies.

2. Q: How can retiral benefits or pension amounts be uneven and with gaps in between

A: Simple. They were not.

2.1 Employees, including Madhabi were covered by a contributory Annuity Scheme from ICICI Prudential and these were consistent payments every month.

2.2 The uneven amounts for all retirees relate to their ESOPs. Depending on in which years she exercised various sets of options, based on the prevailing market price of the shares, the Perquisite value for those years would have been computed and declared. Accordingly, it could vary significantly from year to year and if, in a particular year, she did not exercise any ESOPs the value, would be zero and it would be reflected as a gap year. It is not a surprise that this appears as “salary” in her return since the Income Tax rules require this perquisite income to be filed under Salary both by ICICI Bank and by her. This is the law of the land.

3. Q: Why did ICICI Bank pay TDS on her behalf?

A: Simple. They did not.

3.1 Whenever the employees or ex-employees exercise their options, ICICI Bank collects Perquisite Tax (TDS) upfront from them and pays the tax authorities from this collection. ICICI Bank did not pay TDS from its own funds. Madhabi did.

4 Q: Was Madhabi permitted to hold ESOPs while being in SEBI? And transact in them? A: Yes, the guidelines permit SEBI Board members, including the Chairperson, to hold and to transact subject to disclosure and recusal.

4.1 This is abundantly clear from the Code of Conflict of SEBI in para 6 of their document on their website (see link https://www.sebi.gov.in/conf.html).

4.2 As part of our due diligence, we expect to very soon obtain confirmation that Madhabi had fully complied with all disclosure and recusal requirements.

4.3 Thus, we found that the relevant guidelines envisage such a situation and have provisions for holdings, disclosures, transactions and recusals.

5 Q: Was Madhabi moonlighting with a private equity firm while being employed with ICICI Bank?

A: Not at all. The Bank had approved the position with the full knowledge of the PE firm as well.

5.1 In 2011 Madhabi had moved to Singapore to join her husband. Since the expected length of stay there was not crystallised, the Bank gave her long leave (unpaid) to move to Singapore. While there, she requested, and was granted, permission by the Bank to Join a Private Equity Firm in Singapore since it was assessed as not having a conflict of interest with the Bank. In 2013, when it became clear to Madhabi that she was likely to stay on in Singapore, she communicated the same to ICICI Bank and superannuated in 2013. The Bank was fully aware of this and had approved her job with the Private Equity Firm. The PE firm, in turn, was also fully aware of the stand-still status with ICICI, i.e., all salary and benefits were zero.

5.2 As an aside, if she had been surreptitiously moonlighting, she would hardly have been likely to display the same on her Linkedin profile, in such a transparent manner.

What is happening today in the public space in terms of mud-slinging against a senior functionary of a democratic institution of the country, is unfortunate. If we, with just a little bit of effort on fact check could determine all of this, is it not sad that even this much effort is not being taken before sullying a person’s reputation?

We are continuing our fact checks on other questions that have been raised and will share our findings with you as we get them.