A lawsuit involving two former board members of Larsen & Toubro (L&T) was settled out of court after they agreed to return their employee stock option shares (Esops). The case in June before the Bombay High Court involved Life Insurance Corporation (LIC), General Insurance Corporation (GIC) and two of their nominee directors on L&T’s board who had accepted the shares despite directions by both the institutions that its nominees should not accept Esops. Both the LIC representative, Kranti Sinha, and the GIC nominee, BP Deshmukh, returned the shares.
Sinha allegedly obtained 20,000 equity shares at a rate of Rs35 per share (the market price is about Rs1,700 per share), despite objections from LIC. According to guidelines by the Securities and Exchange Board of India, nominees of institutional directors are not allowed to accept options or any other privileges as they hold office at the behest of the institutions.
Nitin Potdar, a partner with J Sagar Associates, acted on behalf of LIC.
“It is not the case of system failure, we have failed the system! SEBI guidelines are absolutely clear … about the eligibility of Esops. Question is who is interpreting and for whose benefit,” Potdar told the Economic Times.
