The directorate of enforcement (ED) has withdrawn a summons issued to senior advocate Arvind Datar in connection with its ongoing investigation into an employee stock option plan (ESOP) granted to Dr Rashmi Saluja by Care Health Insurance Ltd, a wholly-owned subsidiary of Religare Enterprises Limited (REL). The move comes amid heightened scrutiny over alleged regulatory violations tied to the contentious ESOP scheme.
Senior counsel Datar, a widely respected jurist known for representing the Securities and Exchange Board of India (SEBI) in high-stakes cases like the Sahara fundraising saga, had been summoned by ED for providing a legal opinion that supported the ESOP issuance.
According to reports, Mr Datar, citing professional privilege and confidentiality of legal advice, informed ED officials that lawyers cannot be compelled to appear in investigations concerning their clients.
Following this, ED informed the senior counsel that his presence was no longer required, effectively withdrawing the notice. The summons had formed part of a broader inquiry into the legal and structural basis of the ESOP grant made to Saluja, who was then the non-executive chairperson of REL and a director on the board of Care Health Insurance.
The ESOPs in question—22.71mn (million) options valued at more than Rs250 crore, were granted to Dr Saluja, allegedly in violation of guidelines issued by the Insurance Regulatory and Development Authority of India (IRDAI). In a significant regulatory intervention in November 2023, IRDAI found that Care Health Insurance had breached sector-specific norms that cap compensation to non-executive directors at Rs10 lakh without prior approval.
Its findings highlighted that Care Health Insurance had continued to grant ESOPs to Dr Saluja despite being specifically instructed by IRDAI in May 2022 not to do so. The 2018 circular from IRDAI had mandated prior regulatory approval for any form of remuneration to non-executive directors who also serve on the board of insurance intermediaries—conditions that applied to Dr Saluja’s dual role across REL and Care Health Insurance.
On the heels of IRDAI’s regulatory action, ED launched a money laundering probe based on a complaint filed by the Mumbai Police's economic offences wing (EOW). In August 2024, the agency conducted search operations and froze ESOP shares allotted to Dr Saluja and several other executives of Care Health Insurance.
ED’s inquiry focused not only on the alleged financial irregularities but also on the legal opinions used to justify the ESOP grants. This prompted the controversial summons to senior counsel Datar, raising concerns within legal circles over the potential chilling effect such actions might have on legal representation and professional independence.
Although ED has now stepped back from seeking Mr Datar’s deposition, it remains unclear whether other legal advisors connected to the ESOP scheme may still come under scrutiny.
The ESOP saga is unfolding amid a larger corporate battle for control of Religare Enterprises between the Burman family, promoters of Dabur India, and the former management led by Dr Saluja. The Burmans, who collectively hold a significant stake in REL through various entities, had announced an open offer in September 2023 to acquire up to 26% of REL for around Rs2,116 crore.
In response, Dr Saluja mounted a legal challenge in the Delhi High Court (HC) in December 2024 to block a resolution at REL’s 40th annual general meeting (AGM) that proposed her removal as a director. She argued that the resolution violated both the Companies Act, 2013, and a directive issued by the Reserve Bank of India (RBI) on 9 December 2024, which barred changes in REL’s management.
Despite her objections, the HC declined to stay the AGM, and shareholders subsequently voted to remove her from the board. Dr Saluja has since filed a suit seeking to restrain the Burman family from exercising voting rights on shares acquired through the open offer, alleging violations of SEBI’s takeover code.
The withdrawal of the summons to senior counsel Datar may ease tensions between the legal fraternity and investigative agencies, but the underlying issues remain far from resolved. With IRDAI standing firm on its directives and ED pressing forward with its probe, the focus will likely remain on accountability within financial institutions and the checks on executive compensation.
Furthermore, the regulator’s rebuke of Care Health Insurance’s defence—that ESOPs were granted as part of a broader employee incentive programme—suggests that insurers will face greater scrutiny in navigating the delicate balance between rewarding leadership and complying with sector-specific governance norms.
For now, the legal opinion that briefly thrust one of India’s top lawyers into the spotlight appears no longer central to the investigation. However, the deeper questions surrounding regulatory compliance, corporate governance and shareholder rights continue to simmer beneath the surface.
