LIC moves HC to restrain from selling Esops

MUMBAI: Life Insurance Corporation (LIC) has sought an injunction from the Bombay High Court restraining its nominee director on the board of Larsen & Toubro from dealing in shares of L&T acquired under an employee stock option scheme.

The law firm representing LIC said that the court had passed an order restraining Kranti Sinha, nominee director of LIC on L&T, from dealing on the shares. An application was made by Ravi Kadam, advocate general of Maharashtra, instructed by Nitin Potdar, partner, J Sagar Associates, on behalf of LIC before the Bombay High Court.

LIC had objected to Mr Sinha obtaining 20,000 equity shares at a rate of Rs 35 per share (the current market price is around Rs 1,700 per share). LIC has said that the acceptance of stock options was in contravention of directions given by LIC to its nominee directors.

In the past there have been several instances of firms granting stock options to independent directors, who were specialists in the areas they operated in. Nominees of institutional directors, however, are not expected to accept options or any other privileges as they hold office at the behest of the institutions. In many cases, LIC has investment agreements with companies which allows the corporation to depute nominees on their board.

The whole issue is expected to generated a big debate over the issue of Esops to directors. “It is not the case of system failure, we have failed the system! Sebi guidelines are absolutely clear and need no extra explanation about the eligibility of Esops. Question is who is interpreting and for whose benefit.” said Mr Potdar. LIC officials did not comment since they were yet to receive an order.