Corporate governanace and it’s challanges
Corporate governance is a labyrinth where legal complexities, shareholder rights, and regulatory oversight intersect. The Religare Enterprises Ltd. (REL) case serves as an exquisite example of the formidable governance challenges in India’s corporate landscape. It unfolds as gripping contention between promoters and management, a trenchant courtroom drama, and a stark reminder of the precarious equilibrium that defines shareholder democracy.
In December 2024, a Public Interest Litigation (PIL) was filed in the Madhya Pradesh High Court, expressing concerns over the Burman family’s attempt to acquire an additional 26% stake in Religare Enterprises Limited (REL). The petitioner argued that this move would consolidate control over approximately 73,000 minority investors, potentially leading to corporate governance challenges. In response, the court temporarily stayed the Annual General Meeting (AGM) and the Reserve Bank of India’s (RBI) approval of the acquisition to safeguard minority shareholders’ rights and mitigate governance risks.
However, in January 2025, the court dismissed the PIL, stating that the petitioner, Advocate Mishra, lacked locus standi as he was not a shareholder in REL. Additionally, the court determined that jurisdiction over this matter should reside in Delhi rather than Madhya Pradesh. This dismissal cleared the way for the AGM to proceed and allowed the regulatory approvals for the Burman family’s offer to remain valid.
The Burman family, known as the promoters of Dabur India, already held a 21.3% stake in REL before launching an open offer in September 2023. Through this offer, they sought to acquire an additional 26% stake at ₹235 per share, amounting to a total investment of ₹2,116 crore. This acquisition would grant them majority control over REL. The Securities and Exchange Board of India (SEBI) and the RBI approved the open offer, facilitating the Burman family’s increased stake in the company.
However, REL’s management, led by Chairperson Rashmi Saluja, opposed this move, arguing that the offer undervalued the company and questioning the Burmans’ “fit and proper” status—a key regulatory requirement in the financial sector.
Complicating matters, U.S.-based investor Digvijay “Danny” Gaekwad proposed a competing offer at ₹275 per share. However, the Securities and Exchange Board of India (SEBI) rejected Gaekwad’s proposal due to procedural deficiencies, leaving the Burmans as the primary contenders for control.
At REL’s Annual General Meeting (AGM) in February 2025, controversy arose over the agenda item concerning Saluja’s retirement by rotation, as mandated under Section 152 of the Companies Act. Saluja refused to step down, asserting that her contractual term extended until 2028 and that she was not subject to retirement by rotation.
This move faced criticism from corporate governance advisory firms, which recommended against her reappointment. Subsequently, 97% of shareholders voted against her continuation in the role. The Delhi High Court ruled that statutory provisions regarding retirement by rotation took precedence over contractual claims, reinforcing that Saluja was required to step down as per legal mandates.
At the heart of this saga lies the Burman family’s open offer to acquire a controlling stake, a PIL that sought to thwart this acquisition, and an AGM controversy that ultimately reshaped REL’s leadership. As this case underscores the significant corporate governance and legal challenges in India, I will analyze its implications for shareholder rights, regulatory oversight, and the evolving landscape of corporate control.
The PIL and Its Outcome: An Intruder in Corporate Affairs?
In December 2024, a PIL was filed before the Madhya Pradesh High Court by advocate Vijayant Mishra, questioning the Burman family’s attempt to acquire an additional 26% stake in REL. The crux of the petition was the potential marginalization of over 73,000 minority shareholders, a concern that ostensibly resonated with the fundamental principles of shareholder democracy.
The court, albeit momentarily swayed, issued a stay on the AGM and the Reserve Bank of India’s (RBI) approval of the Burmans’ acquisition. This faint victory for the petitioner, however, was short-lived. In January 2025, the court dismissed the PIL, citing a lack of locus standi—ipso facto, Mishra was not a shareholder and had no enforceable interest in REL. Moreover, the court held that jurisdiction for such corporate matters rightly lay with the courts in Delhi. With this dismissal, the path was resoundingly cleared for the Burman family’s takeover bid.
This judicial intervention illustrates a fundamental tenet of corporate law: minority shareholders cannot wield unbridled power over corporate decisions unless they have a direct, legally recognized stake in the matter. The courts, while indulgent in safeguarding minority rights, refrain from intervening in boardroom battles unless statutory violations or fiduciary breaches are palpable.
The Burman Family’s Open Offer: Hostile Takeover or Strategic Investment?
The Burman family, luminaries of the Indian corporate sphere and promoters of Dabur India, already held a 25.12% stake in REL. Their September 2023 open offer sought to augment this with an additional 26% at ₹235 per share, an investment totaling ₹2,116 crore. Upon approval from SEBI and the RBI, their acquisition would bestow upon them majority control over REL.
However, REL’s existing leadership, helmed by Chairperson Rashmi Saluja, was neither nonchalant nor acquiescent in the face of this impending shift in power. They vociferously opposed the Burmans’ move, branding it an undervaluation of the company’s worth. Further, Saluja raised the rhetorical question of whether the Burmans met the “fit and proper” criteria—a quintessential regulatory benchmark for financial sector entities.
In an unexpected twist, U.S.-based investor Danny Gaekwad surfaced with a counteroffer of ₹275 per share. But the Securities and Exchange Board of India (SEBI), acting with its characteristic scrutiny, rejected Gaekwad’s bid due to procedural deficiencies. This left the Burman family as the sole contender in this corporate duel.
This episode raises a trenchant query: Should regulators mandate independent valuations during hostile takeovers? If SEBI had allowed Gaekwad’s bid, the competitive bidding war could have ensured fairer valuations and better outcomes for minority shareholders. In hindsight, the absence of such a mechanism emboldens dominant shareholders while rendering minority interests a mere afterthought.
The AGM Controversy: Can Contractual Tenure Pervert Statutory Governance?
The February 2025 AGM of REL was nothing short of a corporate battlefield. The agenda? The retirement by rotation of Chairperson Rashmi Saluja under Section 152 of the Companies Act. But Saluja, resolute in her defiance, refused to step down, citing her contractual term extending until 2028.
This maneuver did not sit well with corporate governance watchdogs. Institutional Investor Advisory Services (IiAS), a seasoned proxy advisory firm, urged shareholders to reject her reappointment. Shareholders, with an emphatic 97% vote, echoed this indignation.
The Delhi High Court weighed in with a perspicacious ruling: statutory mandates under the Companies Act take precedence over private contractual terms. In other words, no director, however indispensable, can elope from the legal obligations of retirement by rotation.
This altercation underscores the importance of transparency in board governance. Had REL’s leadership acted with greater probity, this public debacle could have been averted. Instead, it devolved into an unnecessary and avoidable contention that only exacerbated the instability within the company.
Corporate Governance in India: The Broader Implications
The REL case is emblematic of the systemic frailties plaguing India’s corporate governance framework, exposing critical gaps in shareholder rights, regulatory oversight, and judicial mechanisms.
One of the most striking issues highlighted by this case is the vulnerability of minority shareholders. Over 73,000 small investors found themselves mere spectators in a battle that directly impacted their financial interests. Unlike in the U.S. or the EU, where robust mechanisms such as class-action lawsuits empower small investors in takeover battles, Indian corporate law offers limited avenues for minority shareholders to challenge decisions that may dilute their influence or erode shareholder value. \
The Private Securities Litigation Reform Act (PSLRA) of 1995 in the U.S. and the Shareholder Rights Directive (SRD II, 2017) in the EU provide substantial legal mechanisms to empower investors, yet India lacks an effective enforcement culture for its own class-action provisions under Section 245 of the Companies Act, 2013 (Coffee, 2006; Enriques, 2017; Sarkar & Singh, 2020). This underscores the urgent need for stronger legal protections that ensure equitable participation in corporate governance.
The case also sheds light on the fragmented nature of judicial jurisdiction in India’s corporate legal framework. The dismissal of the PIL by the Madhya Pradesh High Court on jurisdictional grounds exemplifies the complexities associated with forum selection in corporate disputes.
The lack of a streamlined judicial process often results in unnecessary delays and procedural ambiguities. Establishing a dedicated tribunal exclusively for corporate disputes could mitigate these challenges, providing a more efficient and specialized mechanism for resolving governance-related conflicts.
Additionally, regulatory bodies such as SEBI and the RBI must not only enforce procedural compliance but also scrutinize the substantive fairness of corporate transactions. Implementing mandatory independent valuations during open offers could serve as a safeguard against undervaluation, reinforcing investor confidence in the regulatory framework.
Conclusion
The REL case is not just a corporate power struggle; it is a case study that exposes the imperfections in India’s corporate governance landscape. The tensions between promoter control and shareholder democracy, the inadequacies in minority shareholder protections, and the judicial and regulatory gaps that allow governance failures to persist all call for urgent reforms.
Moving forward, India must draw critical lessons from this episode. Strengthening minority shareholder protections, imposing stricter regulatory scrutiny on takeover valuations, enforcing statutory provisions with greater rigor, and reforming judicial processes for faster dispute resolution are imperative steps in reinforcing corporate governance.
For investors, this case serves as a cautionary tale. Corporate governance, albeit well-structured in legal texts, is often perverted by those in positions of power. The true test of any governance framework lies not in its theoretical existence but in its consistent enforcement. While the REL case may have reached its legal conclusion, its impact will continue to resonate—leaving an indelible mark on India’s corporate jurisprudence and shaping the discourse on governance reforms for years to come.