Takeover twist: Now, Rashmi Saluja sues Religare

Religare Enterprises Ltd CEO and chairperson Rashmi Saluja has sued the conglomerate she heads to thwart a potential takeover and extend her tenure, pitting herself against four of the company’s five independent directors, in arguably one of the first such instances in a public company.

On Tuesday, Saluja filed a case against Religare in the Delhi High Court, seeking the court’s intervention to stop the annual general meeting (AGM) scheduled for 7 February. One of the resolutions shareholders will vote on is Saluja’s reappointment as director.

The billionaire Burman family, promoters of Dabur Ltd, has a little over 25% stake in Religare and has offered to buy 26% more from minority shareholders through an open offer at ₹235 a share. Saluja runs the risk of being ousted, as her reappointment needs to be approved by at least half of the shareholders. Earlier this month, proxy advisor InGovern Research Services recommended that shareholders vote against the reappointment.

“This is a fight between the CEO and the majority of the board members. This is an absurd situation where a board member and CEO (Rashmi Saluja), without informing the other directors of the board or sharing the petition, has sued the company, and in a sense, sued herself,” senior Supreme Court lawyer Nalin Kohli said.

Kohli represents the four independent directors — Praveen Tripathi, Malay Sinha, Ranjan Dwivedi and Preeti Madan. Mint could not independently ascertain the stance of the fifth independent director, Hamid Ahmed. The court will hear the matter on 4 February.

“I am not aware of such a situation happening in a publicly listed firm in India, where a CEO and sitting board member has sued the company,” said Kohli.

“The question that any shareholder may ask is, what is the intention of the CEO behind all this? Can the shareholders now be expected to have confidence in someone acting against the company’s interests and her fiduciary duty towards protecting the interests of the shareholders? This relevant question will confront shareholders when the AGM is held.”

Two independent directors, Dwivedi and Sinha, declined to comment, while Ahmed, and Madan could not be reached for comment. An email sent to Religare seeking comment went unanswered.

Surprised by case

Religare director P.K. Tripathy told Mint he was surprised that Rashmi Saluja filed a case against her own company, which she was served only to the company, and not the individual board members. He noted that four out of the six directors (including Saluja) agreed that an AGM should be held as a matter of shareholder rights, which is why they appeared in court through their counsel, to ensure the company was represented. Tripathy said the fifth director held a differing opinion from the majority at present, but could potentially change stance and align with others directors later.

“It is a shareholder’s right to hold an AGM, which is why the four of us deemed it necessary to appear in court to represent the company, even though we were not served the petition,” Tripathi added.

Differences between Saluja, who joined Religare in 2018, and the board members, came into public view when the independent directors put their weight behind the Burman family’s open offer, as Mint reported first on 13 January. Less than 10 days later, Indian-born US citizen Digivjay Danny Gaekwad proposed to make a ₹5,000 crore offer to buy up to 55% of Religare shares. This revised bid came less than 24 hours before Burman’s open offer started on Monday. Subsequently, the Securities and Exchange Board of India returned Gaekwad’s letter as it did not conform to the regulator’s exemption application rules under the country’s takeover code.

However, at least two independent directors, Sinha and Tripathi, expressed their unhappiness over Religare’s selective disclosures made to the exchanges, including releasing Gaekwad’s letter to the exchanges, Mint reported on 30 January.

“Sharing the counteroffer letter by Digvijay “Danny” Gaekwad with the exchanges without the company doing due diligence, getting a minority shareholder holding 500 shares to file a suit in the Delhi High Court to halt the Burman’s open offer, and then filing a case in the Delhi High Court by Rashmi Saluja shows her desperate bid to remain in power,” said Shriram Subramanian, founder and managing director of InGovern said. “It is becoming farcical and absurd that a company’s chairperson and managing director would not take the board of directors into confidence and is suing the company itself. All corporate law norms have been flouted.”

“All this is being done under the garb of protecting the interests of minority shareholders while the management bandwidth and company resources are being utilized to fight the incoming acquirer,” said Subramanian.

In a note earlier this month, InGovern said, “The ongoing scrutiny of Religare raises questions about the effectiveness of governance under her leadership, which reflects poorly on her oversight and governance capabilities. There are also concerns about her compensation practices and adherence to regulatory guidelines regarding executive remuneration,” recommending investors to vote against Saluja’sreappointment.

Rao’s plea rejected

On Thursday, the Delhi High Court, in a separate case, rejected the Bangkok-based investor’s plea to halt the Burman family’s open offer and stop the AGM. Sapna Govind Rao, who claimed to own 500 shares in Religare, sought the high court’s intervention, arguing that public investors should be allowed a chance to evaluate Gaekwad’s higher proposed offer to buy shares at ₹275 a share.

The battle for Religare has witnessed a series of dramatic turns ever since the Burman family announced their plans to own the company that controls India’s second-largest private health insurance firm, Care Health Insurance Ltd, and other broking and non-bank subsidiaries.

The Burman family had first expressed interest in acquiring a controlling stake in Religare in September 2023. They have also been pushing for the removal of Religare chairperson Rashmi Saluja.

Saluja has voiced her dissatisfaction with the Burman family’s open offer price, and the company’s annual general meeting has already been delayed by six months. In December, an investor from Madhya Pradesh sought another court’s intervention for a stay order on the shareholder meeting. Subsequently, the court quashed the appeal.

“It is settled law from the landmark LIC versus Escorts case that courts will not stay AGM proceedings because, by doing that, it amounts to impeding corporate democracy,” said Kohli.