Sinha concealed UTI Esops from Sebi: Bhushan to SC

Sinha's counsel: Esops were allotted only in April 2008 and therefore could not have found a mention in a prospectus filed in January

Fresh charges were made today in the Supreme Court hearing in the public interest suit challenging the appointment (in February 2011) of U K Sinha as chairman of the Securities and Exchange Board of India (Sebi).

Senior advocate Prashant Bhushan told the court that Sinha had concealed the employee stock option plans (Esops) he had received in a draft prospectus filed with Sebi while being chairman of UTI Asset Management.

Bangalore-based lawyer Arun Agrawal has filed the suit, challenging Sinha’s appointment on grounds of several irregularities in the process.

The details of the allotment of Esops came out in the minutes of the AMC’s board meeting on April 12, 2008. Last week, the court had directed Sinha to file the document.

In an affidavit quoting the minutes, Agrawal said, “The HR and Compensation Committee at its meeting held on 27/12/07 had allotted Esops to Sinha on the usual terms and conditions applicable to other employees, subject to his getting market-linked compensation and perquisites from the shareholders and the Board.”

He added this allotment was not disclosed in the draft red herring prospectus (DRHP) filed by UTI AMC on January 9, 2008. Instead, the fund house had said in the DRHP that, “the company shall not grant Esops to a whole-time director, non-executive director and independent director, including chairman and managing director, which is U K Sinha”.

UTI had also said in the DRHP that it would grant 4.56 million options to 1,176 employees, including 10 key managerial personnel, and the latter did not hold any equity shares. The fund house had planned a Rs 2,500- crore Initial Public Offer in 2008 but shelved it due to poor market conditions.

Sinha’s counsel, Harish Salve, said the Esops were allotted only in April 2008 and, therefore, could not have found a mention in a prospectus filed in January. After the compensation committee sanctioned the Esops, shareholders of UTI approved the plan to give market-linked compensation to the chairman in March and the options were allotted in April.

Bhushan said these Esops would have been worth crores of rupees and these were wilfully concealed because two important processes were going on during the period. “First, there was the process of appointment of Sebi chairman, in which Sinha was a candidate. In this process, eventually, C B Bhave got appointed as a chairman. Second, Sinha’s own extension in UTI/voluntary retirement was also on the anvil.”

Had the huge nature of emoluments been disclosed, questions would have arised as to why the post was not advertised and why a bureaucrat was occupying a post with emoluments of Rs 4 crore per annum, Bhushan said.

Earlier, counsel for Omita Paul, advisor to the then finance minister, said his client did not hold the position of an officer but was only an advisor. He said Paul neither sought to influenced the appointment of the Sebi chairman; nor was she trying, as charged, to get her brother, Jitesh Khosla, appointed as UTI chief. “Khosla is an IAS officer and he had applied for the post based on his own qualifications,” the counsel said.