SAT Grants Religare Time to Comply with Sebi Order in Burman Family’s Open Offer Matter

The Securities Appellate Tribunal (SAT) has granted Religare Enterprises Ltd additional time until July 22 to comply with the Securities and Exchange Board of India’s (Sebi) order regarding the Burman Family’s open offer. This decision comes after Religare challenged Sebi’s order, which mandated the company to seek approval from regulatory authorities, including the Reserve Bank of India (RBI), for the open offer by July 12.

Sebi’s order had also asked Religare, its chairperson Rashmi Saluja, and five others to explain why they should not be barred from participating in capital market activities. A senior counsel aware of the matter stated that SAT has stayed the show cause notice and granted time to apply until July 22 without prejudice to all rights and contentions.

The Burman Family had initially held 21.54% shares of Religare Enterprises prior to September 2023. However, on September 25, 2023, they announced their intention to increase their stake by 5.27% in the company, taking their shareholding beyond 25%. This move would trigger an open offer, as per Sebi’s Substantial Acquisition of Shares and Takeovers, Regulations.

The Burman Family had proposed an open offer to buy 9 crore shares of face value ₹10 each, representing a 26% stake at ₹235 apiece for a total consideration of ₹2,115 crore. Since then, the Burman Family and Saluja have been at odds over the acquisition. The Burman Family claimed that Saluja was creating obstacles by objecting to the open offer, while Saluja dismissed these allegations and stated that the Burman Family was not “fit and proper” for the company’s acquisition.

Senior counsel Ravi Kadam, appearing for Religare, sought time to apply to the regulators until July 22 without prejudice to their rights and contentions. He argued that the acquirers (Burmans) have been accused in the Mahadev betting scam and were named in the FIR, therefore they did not fulfill the “fit and proper” criteria for acquisition. Religare has also approached the Delhi High Court seeking directions to Sebi to conduct an investigation into the Burman Group based on representations made by Religare to Sebi. The matter is pending and will be next heard on August 20.

In November 2023, the Mumbai police reportedly booked 32 individuals, including Dabur group director Gaurav Burman and chairman Mohit Burman in connection with an alleged betting scam. Sebi’s counsel stated that the company has little or no role to play in this matter and cannot claim that the acquirers are not appropriate shareholders and therefore place any kind of obstructions.

The acquisition was completed in January this year when the Burman Family informed in an official statement that they had acquired 25.18% in Religare Enterprises. Last year, Religare had written to Sebi objecting to the open offer on the grounds that the Burman Family was not “fit and proper” for the acquisition. Sebi responded by asking Religare to provide documents supporting any such allegations made by them.

According to the Sebi order, on May 31, the regulator disposed of Religare’s contentions and asked the company to apply to the relevant regulators within 15 days. The order also clarified that the “fit and proper” allegations against the Burman Family will be dealt with separately by each regulator once the applications have been filed. Religare responded to Sebi’s letter, stating that Sebi’s advice to make an application to RBI, IRDAI, and Sebi was unwarranted, without jurisdiction, and resulted in regulatory overreach, which clashed with the powers of the Board of Directors of REL and the exercise of regulatory discretion by other regulators.

Historical Context:

The Securities and Exchange Board of India (Sebi) was established in 1988 as a statutory body to regulate the securities market in India. Over the years, Sebi has been instrumental in promoting transparency, fairness, and efficiency in the Indian capital market. In recent years, Sebi has taken several measures to strengthen its regulatory framework, including the introduction of new regulations and guidelines to prevent market manipulation and ensure fair trade practices.

In 2020, Sebi introduced the Substantial Acquisition of Shares and Takeovers, Regulations, which requires companies to make an open offer to the public if they acquire a significant stake in another company. This regulation aims to ensure that shareholders have an opportunity to participate in the acquisition and prevent any potential manipulation of the company’s shares.

In 2023, the Burman Family, a prominent business family in India, announced their intention to increase their stake in Religare Enterprises Ltd, a healthcare company, by 5.27%. This move triggered an open offer, as per Sebi’s regulations. However, the acquisition was met with opposition from Religare’s chairperson, Rashmi Saluja, who claimed that the Burman Family was not “fit and proper” for the acquisition.

Summary in Bullet Points:

• The Securities Appellate Tribunal (SAT) has granted Religare Enterprises Ltd additional time until July 22 to comply with Sebi’s order regarding the Burman Family’s open offer. • Sebi’s order had asked Religare to seek approval from regulatory authorities, including the Reserve Bank of India (RBI), for the open offer by July 12. • Religare challenged Sebi’s order and sought time to apply to the regulators until July 22 without prejudice to their rights and contentions. • The Burman Family had proposed an open offer to buy 9 crore shares of Religare Enterprises, representing a 26% stake at ₹235 apiece for a total consideration of ₹2,115 crore. • The acquisition was completed in January this year when the Burman Family informed that they had acquired 25.18% in Religare Enterprises. • Religare had objected to the open offer on the grounds that the Burman Family was not “fit and proper” for the acquisition, citing allegations of involvement in a betting scam. • Sebi’s counsel stated that the company has little or no role to play in the betting scam and cannot claim that the acquirers are not appropriate shareholders. • The matter is pending in the Delhi High Court, where Religare has sought directions to Sebi to conduct an investigation into the Burman Group based on representations made by Religare to Sebi. • The next hearing in the Delhi High Court is scheduled for August 20.