SAT suspends Irdai share order after Saluja stock options are cancelled

Esops stands for employee stock option plan.

The SAT district court in Mumbai, while restraining Saluja from exercising the stock options, asked Care Health to deposit 50% ₹Penalty amount of Rs 1 crore in interest-bearing account till the completion of hearing.

The SAT in its order stated that “the applicant… Dr Rashmi Saluja shall neither have any disposal over the 75,69,685 shares of Care Health nor shall she maintain status quo in respect of such shares nor exercise options in respect of unvested and/or unvested options in respect of Care Health shares, if any.”

A bench headed by Justice Dinesh Kumar was hearing a petition filed by Care Health challenging Irdai’s order imposing penalty ₹1 crore on Care Health citing violations of norms. Saluja had also filed a separate application stating that she never received any notice or hearing from the regulator in this regard.

On July 23, the insurance regulator in its orders ordered the company to buy back over 7.5 million shares allocated to Saluja ₹$45.32 per share, while also stopping the health insurer from granting Esops to Saluja as a non-executive director of the company.

On July 24, Irdai said that of the 22.7 million Esops, Saluja had already utilised 7.57 million.

Care Health has been ordered to cancel and revoke the stock options granted to Saluja

“Further, the insurance regulator has directed Care Health to cancel and withdraw the stock options granted to Saluja, which are unvested, and at the same time assured that no further shares will be granted to her. Compliance and termination is required to be done within 15 days,” Ravi Kadam, senior counsel appearing for Care Health, pointed out during the hearing.

Kadam also noted that any decision of the board of an insurer, including payment of remuneration, perquisites or any other monetary or other benefit to a director, managing director and chief executive officer, can be implemented only after obtaining prior approval from Irdai.

Disappointed by the regulator’s order, the health insurer approached SAT with a request to stay the order. However, Irdai opposed the stay.

Darius Khambata, senior legal counsel representing Irdai, argued: “The position has been extremely clear that no remuneration, including giving Esops, can be given to any non-executive member without the express consent of Irdai.”

Khambata informed the bench that in December 2021, Care Health had approached Irdai for permission to grant Esops to Saluji. The regulator rejected the proposal, however, the company still issued Esops to Saluji in June 2022.

Explaining the rationale behind the need for regulatory approval, the Irdai lawyer said the need is felt internationally. When directors get Esops, they have a vested interest in the profits of the company. Historically, this has led to risk-taking and is an international phenomenon for which regulatory approval is required, he said.

As for non-executive directors, they are the gatekeepers or safeguards for the board’s risk-taking. They should not be getting ESOP at all, otherwise it could be a conflict of interest, he added.

On June 14, Irdai sent a letter to Care Health requesting an explanation as to why Care Health should not face legal consequences for granting stock options to Saluja despite Irdai’s rejection of the application.

The court, while accepting the application of Care Health and Saluja, asked Irdai to file its response in the matter within four weeks.

Meanwhile, before September 2023, the Burmans held 21.54% of Religare Enterprises. In fact, on September 25, the Burmans had announced under Sebi’s Substantial Acquisition of Shares and Takeovers Regulations that they were to increase their stake by 5.27% in Religare, taking their stake to over 25% in the non-banking financial services company, which would essentially trigger an open offer.

Burmans has made an open offer to purchase 90 million equity shares with a nominal value ₹10 each, which is 26% of the shares at the price ₹235 for the total amount ₹2,115 crores.

Since then, the Burmans and Saluja have been at odds over the takeover. The Burmans claimed that Saluja had obstructed the deal by opposing the open offer. However, Saluja dismissed the allegations and instead said that the Burman family was not “fit and proper” to take over the company.