The Larsen and Toubro employee stock option controversy is becoming a major face-off between the financial institutions and the construction major.
The Life Insurance Corporation, which is the single largest shareholder in L&T, moved the Mumbai high court against the company for issuing Esops to its nominee director, Kranti Sinha, without keeping it in the loop.
LIC, which along with other financial institutions are the biggest shareholders in L&T, is miffed at the fact the Esops allotted to Sinha were transferred to his demat account instead of crediting it into a joint account between Sinha and LIC. L&T was defendant number two along with number one defendant Sinha, according to the LIC's petition.
The petition was filed on Monday and it came up for hearing on Wednesday. In an ex-parte order, the Bombay high court had stayed Sinha from dealing in the 20,000 L&T shares till further orders on Monday.
In the hearing today, lawyers representing Sinha pointed out that as there was a lot of inconsistencies in LIC's petition, they would require more time to present their side to the court. Larsen & Toubro - in which financial institutions own more than 26 per cent stake - also sought additional time.
The high court adjourned the hearing on the LIC petition against Sinha and L&T till June 12 to prepare their defence.
LIC said that Sinha had exercised his options worth Rs 3.5 crore (Rs 35 million) in spite of a June 2006 circular from the financial institution that barred nominee directors from exercising any options.
Sinha denied receiving the June 2006 circular from LIC and instead said it was he who informed the LIC about the exercise of the options in good faith.
L&T officials declined to comment. But insiders said they had kept the nominee directors informed. "It was the duty of nominee directors to inform the institutions. For us, the nominee directors are the representatives of the LIC and GIC," said an L&T executive.
L&T sources added that it was impractical to inform the heads of all the financial institutions about the exercise of every share option.
GIC is expected to file a similar petition against its nominee director, BP Deshmukh and L&T tomorrow in the same court. GIC officials say, had the L&T management kept them informed about the exercise of options, they would have issued a cheque and transferred the shares in their joint demat account.
"It was only when we asked for information from L&T's managing director, A M Naik on March 29 that we came to know that our nominees have exercised the stock options," said a top GIC official.
