Religare's Rashmi Saluja accused of tampering with REL AGM agenda

MUMBAI/NEW DELHI: Religare Enterprises Ltd (REL) investors accused executive chairperson Rashmi Saluja of hijacking the company’s annual general meeting (AGM) on Friday to avoid having to step down as director by deleting the relevant item from the agenda. This comes after two high courts—that of Madhya Pradesh and Delhi—had ruled that the AGM should proceed. The Delhi High Court had rejected Saluja’s legal attempts to block the resolution regarding her retirement by rotation and reappointment.

Elsewhere on the same day, the Supreme Court kept alive a competing bid for Religare Enterprises shares by US-based investor Danny Gaekwad Developments & Investments, rivalling that of the Burman family’s open offer, which is at the centre of the struggle for control of the finance company. As part of this, the Supreme Court extended the Burman family's open offer for an additional 26% stake in the company from public shareholders till Wednesday (February 12). The open offer was to have closed on Friday.

The top court asked Gaekwad to deposit Rs 600 crore in cash or bank guarantees as stipulated by Securities and Exchange Board of India (Sebi) regulations on or before February 12, while coming down heavily on the market regulator for not allowing the rival offer.

Religare’s company secretary and four independent directors didn’t respond to queries on the events at the AGM.

At the AGM, Saluja abruptly dropped the agenda item on her retiring by rotation and reappointment as director, disallowing live voting on the resolution, according to shareholders present at the meeting. The Companies Act mandates retirement by rotation for executive directors but Saluja has insisted that her term runs until 2028. Proxy advisories had recommended against her reappointment at the AGM over governance concerns.

“What’s happening is unprecedented. Never before in corporate India has someone like Rashmi Saluja so brazenly defied the regulations of Registrar of Companies to cling to power, making a total mockery of the established law,” said Sameer Kamdar, founder and CEO of Smart Money and also an investor in the company. “This farce must end if the rule of law is to prevail, otherwise, corporate takeovers in India will become impossible.”

According to the shareholders, Saluja interrupted the discussion on agenda item number 2–her reappointment–stating that she was not liable to retire by rotation and said the resolution should be ignored. The live e-voting option was also deactivated at this time and, as a result, shareholders present at the meeting could not vote, said persons aware of the matter.

The live voting process is different from remote e-voting. The latter process concluded on February 6 for three resolutions—the adoption of audited results for FY24, Saluja’s reappointment, and the appointment of statutory auditors. The results—adding up the live and remote votes--are to be reported to the stock exchange on February 9. However, as mentioned above, live voting on the second resolution didn’t take place at the AGM.

An independent director present at the AGM contested Saluja’s move, asserting that the agenda item had been lawfully included and should proceed to a vote. Saluja dismissed the intervention and concluded the meeting, while stating that the remarks of the independent director should be taken on record, said the shareholders who spoke to ET.

The Burman family, which runs Dabur, had made an open offer to buy REL shares at Rs 235 apiece in September 2023. A successful conclusion to that would have taken the Burman family’s 25% holding to 51%. The REL management led by Saluja, after initially welcoming the Burman offer, turned against it, saying it undervalued the stock. Gaekwad made a surprise rival offer worth Rs 275 per share on January 27, which was turned down by Sebi on the grounds that it was “time-barred.” This was challenged by the US investor in the high court and then the Supreme Court. Gaekwad made a fresh application on February 4 by appointing a merchant banker and this is currently pending approval by the market regulator.

The Delhi High Court had earlier this week refused to stay the Burmans’ open offer, but had asked Sebi to decide “within shortest possible time” on Gaekwad’s application to reconsider its competing offer for REL. The HC direction had come on a petition by Bangkok-based minority investor Sapna Govind Rao, who wanted a direction to Sebi and the Reserve Bank of India to evaluate Danny Gaekwad Developments & Investments’ “significantly higher” offer of Rs 275 per share, a premium of 17% to the Burman family's offer of Rs 235 per share

Gaekwad had also moved a separate application seeking exemptions from Sebi for its competing offer.

The two-member Supreme Court bench of chief justice Sanjiv Khanna justice Sanjay Kumar asked Sebi why Gaekwad’s better offer was not considered and why the regulator had not exercised greater caution as shareholders were being asked to accept prices prevailing in September 2023.

“As a regulator you have to be cautious of that... Is that the role of regulator? Look at the consequences. Their (Danny Gaekwad) amount is higher. If you (Sebi) are not going to consider Danny's offer, we will do it our way and that will affect your market. Find a way out,” the apex court told solicitor general Tushar Mehta, appearing for the market regulator.

According to Amit Tandon, founder and CEO of proxy advisory Institutional Investor Advisory Services (IiAS), Rashmi Saluja is to retire by rotation as per the law, notwithstanding her contractual obligations. “In the 2022 and the 2023 AGM, she retired by rotation and was reappointed,” he pointed out.

The developments at the AGM raises corporate governance concerns, said lawyers.

“While companies do have discretion in managing their AGMs, such actions, especially without valid justification, undermine shareholder rights and transparency,” said Ketan Mukhija, senior partner, Burgeon Law. “The way forward lies in regulatory scrutiny by SEBI and potential legal recourse by affected shareholders to ensure that corporate decisions are made in a fair and accountable manner.”

On February 4, the Delhi High Court rejected Saluja’s petitions to block the resolution and emphasised that her contractual claims to a fixed term until 2028 did not override Section 152(6) of the Companies Act, which mandates retirement by rotation for executive directors. Saluja appealed against the order and on Thursday the divisional bench of the Delhi High Court refused to grant any relief.

Three leading proxy firms--IiAS, Stakeholders Empowerment Services and Ingovern—had recommended voting against the resolution pertaining to the reappointment of Saluja citing governance concerns and excessive Esop allocations.

In August last year, the company deferred its AGM by three months, moving it from September to December. The AGM had been postponed to February 7 after the Madhya Pradesh High Court stayed the AGM.