Burman family calls for ouster of Care Health chair amid ED probe

The Burman family, the largest shareholder in Religare Enterprises Ltd, has called for removing its chairperson Rashmi Saluja from the board of subsidiary Care Health Insurance Ltd, ahead of the insurer's annual shareholders' meeting on Monday.

In a 27 September letter to the board of Care Health citing the insurer's Articles of Association, the Burman family wrote that a recent Enforcement Directorate (ED) investigation against Saluja makes her unsuitable for the post of director. These articles define an unsuitable person as someone facing investigation by government agencies or someone who has been charge-sheeted and can face more than six months in jail.

Also read | Religare upsets investors by delaying AGM

On 6 September, the ED filed a first information report against Saluja for allegedly filing false cases against the Burman family. The charges against Saluja are listed under Sections 420 (cheating) and 120B (criminal conspiracy) of the Bharatiya Danda Samhita (formerly the Indian Penal Code).

For checks and balances

The Burmans wrote that “Care must implement the checks and balances mechanism so established by its shareholders and thus is duty bound to remove Rashmi Saluja from her position as non-executive chairperson of Care forthwith."

The Burmans' letter has no legal standing, said Pratap Venugopal, additional non-executive independent director on the Care board. "Based on legal advice received, (it) has no standing as investigation by ED and/or Sebi would not automatically disqualify a director from being reappointed," he said. "The AGM is to decide the reappointment, not the board of Care Health."

Saluja's reappointment as a Care director comes up at Monday's annual general meeting.

Religare owns close to 64% stake in Care, private equity firm Kedaara Captal around 16%, employees about 10% and Union Bank of India 5%.

Despite owning more than 25% stake in REL, the Burmans are not represented on REL board. It is unclear how their move to dismiss Saluja from the Care board will pass.

Saluja, Care Health Insurance, Kedaara Capital, Religare Enterprises and the Burmans did not respond to requests for comments on Sunday.

Also read | SAT stays Irdai order on cancellation of Saluja's stock options

The Care AGM comes in the wake of its parent Religare moving the Registrar of Companies in August to postpone its own AGM to December, a development which has upset shareholders, Mint reported.

Care Health, seen as Religare's crown jewel, is expected to go public later. The company is worth at least ₹10,000 crore, based on the price of its shares at ₹110 in its last rights issue in 2022. It underwrote a premium of ₹6,864.5 crore in 2023-24, recording a 33-51% year-on-year growth.

Irdai fined Care Health

The Insurance Regulatory and Development Authority of India (Irdai) fined Care Health last month for ignoring its previous order and issuing Esops to Saluja. In December 2021, Care had sought the regulator's permission to grant 22.7 million stock options to Saluja. In May 2022, the regulator rejected the proposal, but the company still issued them in June 2022 after taking legal opinion from former Irdai chairman J. Hari Narayan and advocate Arvind P. Datar, Mint reported last month.

Also read | Care throws a challenge—and an apology—to insurance regulator on Saluja’s Esops

In July, the insurance regulator cancelled the Esops granted to Saluja in Care Health.

Care’s argument was that Saluja had been issued stock options in her capacity as a Religare employee, which was dismissed by Irdai on the grounds that the regulator's prior approval for remuneration to non-executive directors of insurers such as Saluja was still needed. Irdai prohibits equity-linked benefits for non-executive directors, as it could encourage excessive risk-taking. Securities Appellate Tribunal (SAT) has stayed this Irdai order until a final decision is taken.