Dr Rashmi Saluja, the executive chairperson of Religare Enterprises Ltd (REL), that has been in the news due to a hostile bid by the Burmans on the entity, and a counter bid by an Indian-American businessman, has thrown an interesting challenge to the regulators and the corporate experts after the declaration of the results of the voting conducted at the 40th annual general meeting (AGM) of REL a couple of days back.
The conduct of the AGM itself was in suspended animation, but the decks were cleared when the Delhi High Court dismissed the case and did not allow the conduct of the AGM to be stalled.
Dr Saluja litigated the need to be reelected in the AGM before the court on the grounds that her appointment as the executive chairperson was valid till 2028, a five-year tenure that commenced in 2023.
The journey of Dr Saluja at the helm of Religare complex is an interesting one.
Religare purged its board of the infamous promoters, the Malvinder and Shivinder Singh duo who had committed various financial irregularities.
In the process of the board being restructured, Dr Saluja joined initially as an independent director and chairperson. Her appointment was confirmed at the AGM held on 26 September 2019.
The board appointed her as an executive chairperson at its meeting held on 11 December 2019, subject to the approval of the Reserve Bank of India (RBI). This appointment was for a three-year period from 26 February 2020 and was confirmed by the postal ballot process that concluded on 28 May 2020.
The executive chairperson position was further extended for a five-year period in 2023, till February 2028.
While the remuneration and the position as the executive chairperson were approved for a fixed five-year period, she was a director liable to retirement by rotation as per the resolution passed, copied below, when appointed as the executive chairperson in February 2020.
Section 152 of the Companies Act, 2013, requires two-thirds of the directors, excluding the independent directors, to be directors liable to retirement by rotation and, in each annual general meeting, at least one-third of such directors should retire by rotation.
In Religare’s case, Dr Saluja is the sole non-independent director on the board. She has been retiring by rotation in each AGM, subsequent to her appointment as an executive chairperson in February 2020.
The last such reappointment as a director happened at the AGM held in September 2023. In fact, she was reappointed as a director with an overwhelming majority where only 1.43% of the votes went against the resolution.
The question that arises is whether she can stay in office after the declaration of the results of the poll on 9 February 2025, where her reappointment as a director was rejected by over 97% of the shares polled in the voting.
Under the law, upon the conclusion of the AGM and the voting on the resolution, if a director is not reappointed, there is no hiatus to leave the position.
It is like a batsman declared out in a game of cricket. At least, in that sport a review of the decision can be sought!
She has been a recalcitrant loser. As the writing was on the wall, she approached the court to defer or delay the conduct of the recently concluded AGM.
It is noticed that the company, while declaring the poll results, has not declared the cessation of her directorship which it should have.
One can refer to the case of Samir Modi of Godfrey Philips Ltd, when his re-election as a director was defeated in the poll, and the company immediately declared his cessation as a director.
Even in that case, the special resolution approving his appointment as an executive director and the remuneration that he could draw was for a period extending beyond the AGM where his reelection did not take place.
Dr Saluja cannot legally continue as a director, even if the resolution for her appointment to hold the position of the executive chairperson survives till 2028, since her right to such a position arises only if she validly remains a director on the board.
The issue then is of the independence of the remaining five directors.
Their failure to declare the cessation of the directorship of Dr Saluja appears to be in violation of the law.
The statement of Dr Saluja reported in the media, that she would remain in her post till the completion of the open offer currently underway, is quite anomalous as there is no such discretion with the board or with any other person for her continuance after the declaration of the voting results by the scrutiniser appointed by the board to conduct the poll.
She can be appointed to a position outside the board by the company, but that would fly in the face of the decision of the overwhelming majority of the shareholders.
While the shareholders could vote Dr Saluja out, they may have little ability to appoint a new chair for the company with the same ease. Given the procedures to appoint a new director on the board that needs the existing board to cooperate, the process has been found to be next to impossible in cases like Dish TV where, due to similar differences with the existing board, the key institutions keep defeating the candidates put up by them but are unable to break the deadlock to appoint their own person.
Dr Saluja seems to have moved the Court against Securities and Exchange Board of India (SEBI) on the open offer made by the Burmans. The battle may be quite entrenched and the shareholders voting her out of the directorship of the parent company may amount to little as Dr Saluja sits on the boards of all the subsidiaries, Religare Finvest Ltd, Care Health Insurance Ltd and Religare Broking Ltd which actually are the key operating entities contributing to the value of the holding company. Possibly at stake is the outsized stock compensation she enjoys which may need her continuity in the company to be encashed.
The legal battles may cost a fortune. Who foots the bill is the question! Can it be fought at the cost of the company?
There is no comparable instance of a director voted out cocking a snook at all involved, the shareholders, regulators and the courts! And in this case, there is the presence of all the possible regulators like RBI, the Insurance Regulatory and Development Authority of India (IRDAI) and SEBI. Her ability to woo justice may decide how effective the regulatory framework is in the country!
The events surrounding this intriguing battle should not result in the public believing that the regulators in the country deserve a tagline that reads ‘values that bend’!
(Ranganathan V is a CA and CS. He has over 44 years of experience in the corporate sector and in consultancy. For 17 years, he worked as Director and Partner in Ernst & Young LLP and three years as senior advisor post-retirement handling the task of building the Chennai and Hyderabad practice of E&Y in tax and regulatory space. Currently, he serves as an independent director on the board of four companies.)
