Madhya Pradesh HC stays Religare Enterprises’ AGM in response to PIL

In a significant legal development, the High Court of Madhya Pradesh at Jabalpur has issued an order staying the Annual General Meeting (AGM) of Religare Enterprises Limited (REL), which was scheduled to be held on December 31, 2024. The HC order comes amid an ongoing legal tussle between the Burman family and Religare Enterprises' management, headed by chairperson Rashmi Saluja.

The court's decision was in response to a public interest litigation filed by Madhya Pradesh-based advocate Vijayant Mishra, aimed at protecting the interests of Religare’s minority shareholders over the fairness of an ongoing acquisition by the Burman family-controlled entities. The matter has been listed for hearing after four weeks.

The writ petition cited potential adverse effects on minority shareholders. At the core of the dispute is the proposed acquisition of REL by entities linked to the Burman family, which was first announced in 2023. According to the petition, the acquisition has sparked volatility in the stock and unrest among shareholders, especially those holding small stakes. The petitioner claims that if the deal proceeds, it would consolidate control among 399 large shareholders, while undermining the rights and interests of 73,623 smaller investors.

The petition highlights several critical issues, including the marginalisation of minority shareholders, as the petitioner asserts that the acquisition unfairly favours a concentrated group of shareholders while sidelining the collective interests of smaller stakeholders. It also raises questions about corporate governance, calling for an independent Commission of Inquiry under the Commissions of Inquiry Act, 1952, to oversee and evaluate the acquisition process. Furthermore, concerns about market integrity have been brought to light, emphasising the need to maintain transparency and ensure that such acquisitions are conducted in a more equitable and inclusive manner.

In its order, dated December 18, the HC observed the seriousness of the petitioner’s claims and issued an interim stay on the AGM stating: "Till further Orders, the notice dated 09.12.2024 and the Annual General Body Meeting of Respondent No. 7 which is scheduled to be held on 31.12.2024 shall remain stayed."

Interestingly, the Reserve Bank of India (RBI) had granted conditional approval for the acquisition on December 9, 2024. Among the conditions outlined by the central bank was the need for compliance with regulatory norms and the consolidation of control among the respondents involved in the deal. However, the petitioner contends that these conditions fall short of protecting the rights of minority shareholders and do not adequately address the broader implications for the public market. The proposal, incidentally, has already been cleared by other regulators such as the Insurance Regulatory and Development Authority of India, the Competition Commission of India, and the stock exchanges.

This ruling effectively halts all proceedings related to the AGM, leaving REL’s strategic decisions in a state of uncertainty.

In a regulatory filing to the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE), REL acknowledged the court’s directive and assured stakeholders of its commitment to legal compliance. The company also attached copies of the High Court’s order and the RBI’s conditional approval letter for transparency. “We are committed to adhering to the court’s decision and will ensure all stakeholders remain informed of further developments,” said Vinay Gupta, Company Secretary & Compliance Officer at REL.

The legal dispute between the Burmans and Religare’s management started after the promoter family of Dabur proposed an open offer to get control of Religare Enterprises. The Burmans have also made an open offer to acquire an additional 26% stake, which has reportedly been cleared by the Sebi.

The Burman family, which started acquiring stakes in RBL in 2018, is currently the single largest shareholder in the company and holds around 25% stake through its four group entities - M.B. Finmart, Puran Associates, VIC Enterprises, and Milky Investment & Trading Company.

In September last year, the Burman group-owned entities proposed an open offer to acquire additional 26% equity stake in the diversified financial services group at a floor price of ₹235 per share, amounting to ₹2,116 crore, payable in cash. All the four entities had jointly announced an open offer to acquire up to 90,042,541 fully paid-up equity shares of the Mumbai-based firm. This was largely aimed at getting majority control in the company.

However, the Religare management raised concerns regarding the offer, questioning the "fit and proper" credentials of the Burman family and criticised the offer price, which was significantly lower than then current market price. Burmans, on the other hand, alleged that the Religare management was obstructing it from acquiring more stakes.