The Bombay High Court today restrained Kanti Sinha, nominee-director of Life Insurance Corporation (LIC) on the Larsen & Toubro (L&T) board, from dealing with L&T employee stock options (Esops) that he received. The ex-parte order came after LIC moved court today.
General Insurance Corporation (GIC) is also planning to move court shortly, seeking a similar restraint on BP Deshmukh, its nominee-director on the L&T board.
GIC's and LIC's nominee-directors received Esops worth Rs 4.5 crore and Rs 3.5 crore, respectively, from L&T under its 2003 stock option scheme. Both directors exercised the shares by March this year.
Instead of transferring the shares in favour of the financial institutions, the two directors transferred the shares to their personal demat accounts, which was contrary to the instructions and directions of both GIC and LIC, the financial institutions said.
An application was made today by Ravi Kadam, advocate general of Maharashtra, instructed by Nitin Potdar, partner, J Sagar Associates, on behalf of LIC, before the Bombay High Court against Sinha, who received 20,000 shares at a discounted rate of Rs 35 per share. L&T shares closed at Rs 1,694 on the Bombay Stock Exchange today.
LIC argued that an institutional nominee-director was not an "employee" of L&T to be entitled to such a benefit and a financial institution nominee certainly could not acquire these under the Sebi Employee Stock Option Guidelines 1999, according to which Esops are intended only for people who are in the employment of the listed companies, namely whole-time directors, officers, or employees. LIC's application requested that these shares be returned to L&T and extinguished.
The judge orally observed that the obtaining of this kind of benefit by any such nominee-director raised an important question of morality and, equally, of law.
When contacted, Sinha declined to comment, saying he has not received any communication from the court or from LIC yet.
