Esops refers to employee stock options plan.
The Mumbai bench of the SAT, while restraining Saluja from exercising the stock options, asked Care Health to deposit 50% of the ₹1 crore penalty amount in an interest-bearing account until the pendency of the hearing.
SAT in its order held that “the appellant…Dr Rashmi Saluja shall not deal with the 75,69,685 shares of Care Health in any manner and maintain status quo in respect of these shares, and shall not exercise option in respect of unexercised and, or unvested stock options of Care Health if any.”
A bench led by presiding officer Justice Dinesh Kumar was hearing a plea filed by Care Health challenging the Irdai order that imposed a penalty of ₹1 crore on Care Health citing violations of norms. A separate application has also been filed by Saluja stating that she was never given any notice or any hearing by the regulator in the matter.
On 23 July, the insurance regulator in its orders had directed the company to buy back over 7.5 million shares allotted to Saluja at ₹45.32 per share, while restraining the health insurer from allotting Esops to Saluja as the company’s non-executive director.
On 24 July, Irdai said of her 22.7 million Esops, Saluja has already exercised 7.57 million.
Care Health told to cancel and revoke stock options given to Saluja
“Moreover, the insurance regulator has directed Care Health to cancel and revoke stock options given to Saluja which remain unexercised while also ensuring that no further shares were granted to her. Compliance and completion needs to be done in 15 days,” Ravi Kadam, senior counsel appearing for Care Health, pointed out during the hearing.
Kadam further cited that any decision by the board of the insurer, including remuneration payment, perquisites or any other benefit monetary or otherwise, to any board member, managing director and chief executive officer should only be implemented after receiving prior approval from the Irdai.
Aggrieved by the regulator’s order the health insurer moved the SAT seeking a stay on the order. Irdai, however, resisted any stay in the matter.
Darius Khambata, senior counsel representing Irdai, argued, “The position was extremely clear that any remuneration including giving Esops cannot be given to any non-executive member without Irdai’s express approval.”
Khambata informed the bench that in December 2021, Care Health had sought Irdai’s approval to grant Esops to Saluja. The regulator had rejected the proposal, however, the company still issued the Esops to Saluja in June 2022.
Explaining the rationale for the need of the regulatory approval, Irdai counsel clarified that the need is felt internationally. When directors receive Esops then they take personal interest in the profits of the company. Historically, this leads to risk-taking and is an international phenomenon for which regulatory approval is needed, he said.
As far as the non-executive directors are concerned, they are the watchdogs or safeguards in terms of management taking risks. They are the ones who shouldn’t be getting Esop at all, otherwise it can be a conflict of interest, he added.
Irdai, on 14 June, sent Care Health a show-cause letter asking for an explanation on why Care Health should not face legal repercussions for giving Saluja stock options in opposition to Irdai’s rejection.
The bench while admitting Care Health and Saluja’s plea asked Irdai to file its reply in the matter within four weeks.
Meanwhile, before September 2023, the Burmans held 21.54% shares of Religare Enterprises. In fact, on 25 September, the Burmans under Sebi’s Substantial Acquisition of Shares and Takeovers Regulations announced that they were to increase their stake by 5.27% in Religare, taking their shareholding beyond 25% in the non-banking financial services firm, which essentially would trigger an open offer.
Burmans had proposed an open offer to buy 90 million equity shares of face value of ₹10 each, representing 26% stake at a price ₹235 for a total consideration of ₹2,115 crore.
Since then, the Burmans and Saluja have been at loggerheads over the acquisition. The Burmans claimed that Saluja was creating a hindrance by objecting to the open offer. Saluja, however, dismissed the allegations and has instead said the Burman family was not ‘fit and proper’ to acquire the company.