Arbitral Award for Employee’s Right to Company Equity Shares Post-Termination

The respondent joined as Director of the petitioner – Management Consultancy and Business Advisory Services Company, vide appointment letter dated 24.8.2011.  It was provided that the respondent shall relinquish all shares on termination of his employment.

However, after termination on 8.12.2018, the respondent for the first time asked for allotment of the shares.

The Arbitrator held in favour of the respondent that the vesting of options in favour had already taken place  as per appointment letter read with the grant letter and Rule 12 of the Companies (Share Capital and Debentures) Rules, 2014.

If the aforesaid stipulations are construed in the context of the appointment letter and grant letter, by and large, the conditions of requirement of vesting and period of vesting, the lapse of the option vested in employee, could be said to have been adequately prescribed. On first principles, the Petitioner company cannot be permitted to take advantage of its failure to frame employee stock option scheme. It was not a case that the company was disabled or restrained from framing such a scheme. To allow the Petitioner to now take advantage of its omission to frame a scheme, when it had made an offer of equity as a part of its remuneration package to the employees would amount to putting a premium on its own wrong. The fact that the allocation of shares was in the nature of the recompense for the services rendered by the claimant cannot be lost sight of.

2.12 The absence of the policy in regard to Employees Stock Option Plan (“ESOP”) did not constitute an impediment to the vesting of the subject shares in the Claimant. In substance, the Company was not justified in refusing to allot the subject shares on the premise that the shares stood relinquished upon the termination of the employment of the Claimant as the vesting of the subject shares in the Claimant had occurred prior thereto in terms of the Appointment Letter and the Grant Letter.

Judgment dated 5.8.2026 of the High Court of Bombay (OS) in Commercial Arbitration Petition No.1149 of 2025 of Waterfield Advisors Private Limited  Vs.   Sridhar Kurpad