Two Religare directors criticise haste in revealing Gaekwad bid; Saluja moves high court

Two independent directors on the Religare Enterprises Ltd board have criticized the company's haste in publicizing a late bid from Danny Gaekwad, even as chairperson Rashmi Saluja moved the High Court to block a shareholder vote which would decide her continuance at the conglomerate's helm.

Praveen Tripathi and Malay Sinha on 26 January wrote to Religare’s company secretary Vinay Gupta about the Gaekwad proposal, which was returned by the market regulator on Tuesday. While Tripathi said it was "injudicious" on Gupta's part to forward letters without verifying the sender's identity, Sinha said Gupta acted despite an instruction to seek approval from a committee of independent directors on matters related to the open offer.

Mint has seen copies of both emails.

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Over Friday and Sunday, Gaekwad proposed to make a competing offer worth ₹5,000 crore, countering the Burmans' ongoing offer for an additional 26% stake. Religare forwarded both letters to stock exchanges.

Emails sent to Sinha, Tripathi and Religare did not elicit any response.

While criticizing Gupta’s actions, Sinha said in his email, “In this background I completely agree with PK Tripathi that for the CoID (committee of independent directors) to remain, appear and function in an unbiased and fair manner, as mandated by the regulators, this letter from the acquirers (four Burman family associates) should also be released to the stock exchanges."

The two directors, part of Religare's six-member board, said the company secretary should have also forwarded a letter that Burmans sent in response to the Gaekwad offer. Religare’s six-member board has five independent directors—Sinha, Tripathi, Ahmed, Ranjan Dwivedi and Preeti Madan, plus executive director Saluja.

Failure on due diligence 

The Burmans' letter to Religare, which is yet to be disclosed on exchanges, said the company's failure to exercise due diligence before publicizing Gaekwad's offer is concerning as it is solely aimed at creating confusion among public shareholders during the open offer. "Those involved in the senior management/ board of directors of REL in publishing these disclosures (Gaekwad's letters) have engaged in a calculated act of manipulative, fraudulent and unfair trade practice," said the Burman family.

The Burmans said Gaekwad's plan is invalid and fraught with "inconsistencies and absurdities". The company's failure to scrutinize Gaekwad's credentials and his letters, "reeks of connivance, deceit and gross recklessness", which interferes with the ongoing tendering period, the letter added. Mint has seen a copy of the letter.

Meanwhile, Saluja on Wednesday filed an urgent petition in the Delhi High Court to stop a 7 February shareholder vote on her continuance as executive chairperson, less than 12 hours after Sebi declined to accommodate Gaekwad’s proposal. In her petition, Saluja sought permission to remain as chairperson until 25 February, 2028, and asked the court to restrain the Religare board from taking up any such agenda. The petition said the original resolution appointing her as executive chairperson did not specify that she has to "retire by rotation," and hence, the resolution on her reappointment as director is illegal, and should be declared null and void.

Also read |  Danny Gaekwad’s open offer for Religare unlikely to pass muster with Sebi

While hearing Saluja's counsel Mukul Rohatgi, the judge questioned whether such a case can be even heard in the High Court, bypassing specialized forums such as the National Company Law Tribunal (NCLT). Rohatgi argued that under the Companies Act, no other civil court was authorised to address Saluja’s grievances, prompting her to seek immediate relief from the High Court.

While the independent directors’ counsel Nalin Kohli contended that the suit was 'almost collusive' in nature and pointed to ongoing investigations concerning Saluja, the Burman family’s counsel Abhishek Manu Singhvi and Mahesh Jethmalani sought to intervene in the hearing, arguing any board decision would impact them. The court will hear the matter again on 4 February, 2025.

Bankok investor's move

On 29 January, Mint reported that a Bangkok-based investor has sought the Delhi High Court’s intervention to halt the Burman family’s open offer.

Criticizing Gupta’s actions, Tripathi wrote that Gupta should have awaited Sebi’s response to Gaekwad’s letters before releasing them on the bourses. “The least we can now do to save ourselves from the charge of being unfair to the acquirers is to forward the letter from Abhay Agarwal on behalf of the acquirers (Burmans), to the stock exchanges with the same speed as was done in forwarding the purported letters received from Danny."

To be sure, this is not the first time independent directors have expressed discontent. On 13 January, Mint reported that these directors have taken a favourable view of the Burmans' open offer. This came after Religare's group compliance head Goda Mallikarjun quit, stating that there had been an “inexplicable change in the stance of some of the independent directors" regarding regulatory correspondence.

Also read |  Who is Danny Gaekwad—the US tycoon taking on Burmans’ open offer for Religare?

Still, the change in stance is recent. In 2023, the Religare board had rejected the Burman family’s open offer, terming it too low and accusing the Burmans as not “fit and proper" to run a financial services firm. In an interview with The Economic Times in November 2023, independent director Ahmed had termed the timing of Burmans' offer fishy and that the merits of the offer were “not very good".