SAT stays Irdai order against Religare's Saluja, Care Health in ESOP case

However, chairperson Saluja prohibited from exercising pending ESOPs

The Securities Appellate Tribunal (SAT) on Friday granted a stay on Insurance Regulatory and Development Authority of India's (Irdai’s) order against Religare Enterprises' (REL) executive chairperson, Rashmi Saluja, and its subsidiary, Care Health Insurance, in a matter related to the allotment of employee stock ownership plans (ESOPs).

The stay will remain in effect until a final decision is made.

However, the tribunal has imposed restrictions on Saluja, prohibiting her from exercising any pending ESOPs allotted by Care Health or diluting her shares until the final decision.

"Rashmi Saluja shall not deal with the 75,69,685 shares of CHIL 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 CHIL, if any," said SAT. 

The court has also directed the firm to deposit 50 per cent of the penalty amount within four weeks.  

Additionally, Care Health has been directed not to issue any further ESOPs to Saluja.

The SAT is hearing the matter in an appeal filed by Saluja and Care Health against an Irdai order issued in July. The order imposed a penalty of Rs 1 crore and directed the company to buy back 7.66 million shares allotted to Saluja at Rs 45.32 per share within 30 days.

The order also directed Care Health to cancel and revoke unexercised stock options granted to Saluja and prevent any further grants or allotments.

Saluja's counsel argued that she was not provided a hearing or notice before the Irdai order was issued.

He also stated that the remuneration committee of Care had granted the ESOPs to Saluja as an employee of the holding company, and that it was later approved by shareholders.

The counsel noted that several executives of REL had received ESOPs from Care between 2014 and 2020, and that Irdai had not levelled any allegations against Saluja.

The Irdai representative argued that the regulator's orders were intended to protect the interests of Care and its policyholders.

He stated that Irdai prohibits equity-linked benefits for non-executive directors of the promoter company, as it would create a conflict of interest and encourage excessive risk-taking.

The counsel alleged that while Irdai had first rejected the earlier application by Care for issuing ESOPs to Saluja, the firm ‘circumvented’ the directive.

The counsel further stated that approximately 7.5 million ESOPs had already been converted into shares, raising the possibility that these shares could be sold in the market.

Additionally, Saluja had already received the first lot of allotments, with the second lot scheduled to vest in September 2024. The third lot, the counsel noted, would likely vest when Care Health goes public.

The SAT has provided four weeks for reply and two weeks for rejoinder.  The matter is scheduled for next hearing on September 27.