Securities and Exchange Board of India has pulled up PTC India Financial Services (PFS), asking the company not to hold a board meeting until the corporate governance issues are addressed and the company has appointed new independent directors, three sources close to the development told Moneycontrol.
The company received an email on Saturday from the regulator, ahead of its board meeting which was scheduled for later in the day. The email came after the management of the company and its parent PTC India (PTC) held a press briefing on Friday, addressing the corporate governance issues raised by independent directors who recently resigned.
“There was an email from SEBI which stated that the company cannot hold a board meeting till the corporate governance issues are resolved. In a separate development, PFS has asked SEBI for exemption so that a board meeting can be held without any independent directors. That is yet to come,” a source close to the development told Moneycontrol.
SEBI could not be reached for a comment immediately despite several attempts.
Rajib Kumar Mishra, chairman of PTC India told Moneyontrol he was not aware of PFS receiving an email from SEBI. He reiterated that the management refutes the allegations made by the independent directors.
“SEBI (Listing Obligations and Disclosure Requirements) requires at least one independent director for a board meeting. We have applied for exemption from this; this is a standard practices. Once we get the exemption, we will organise a proper board meeting. This is work in progress,” Mishra said.
He also said that the management has a virtual video meeting on Saturday to discuss all the issues, but did not reveal the agenda. The company had submitted a status report to the Reserve Bank of India and the Securities and Exchange Board of India on Friday.
The directors were sent a notice on January 14th about the board meeting on January 22nd. The independent directors stated in their resignations that the board meeting was invalid as the notice was not served to all the directors of the board and the agenda it did not include the corporate governance issues raised by them.
“Why did the management kept saying on Friday that there is a board meeting on Saturday? They knew that they don’t have independent directors and cannot hold a meeting,” another source said.
Story so far
On January 19th, Kamlesh Shivji Vikamsey, Thomas Mathew T and Santosh B Nayar resigned from the post of independent director of PFS on concerns over lapses in governance and compliance. They submitted similarly worded resignations and other supporting documents. The three directors had stated that former bureaucrat Rakesh Kacker had also previously written to the management highlighting lapses in corporate governance before his tenure ended at PFS in end-December. Kacker was also on the board of the parent entity PTC; he resigned on Friday.
The management of PTC and PFS has been refuting the allegations made by the independent directors. In the press briefing on Friday, top executives of both companies also questioned the intent behind the coordinated resignation of the independent directors. They said that an internal committee has been set up for investigation, but they are open to third party investigation.
The independent directors have made six allegations, of which one is about the appointment of another director while the other five pertain to operations and corporate governance issues.
They said that PFS’s managing director and chief executive officer Pawan Singh did not allow “Mr Ratnesh,” who was appointed by the board as director finance and chief financial officer, to take over the position and function. They said Singh took the decision “unilaterally” and without any explanation given to the board, which is in violation of the Companies Act. PTC said later that an independent audit in the matter has been completed and the report will be submitted to the board soon.
The directors also alleged that the company did not disclose the forensic report of a loan account related to NSL Nagapatnam Power and Infratech. The independent directors highlighted at least two instances where loan conditions were changed without prior approvals.
The independent directors said the management took no action after former PTC head Deepak Amitabh raised several corporate governance issues in a board meeting on August 5th, 2021.
The independent directors said that they have repeatedly voiced their concerns and sought information through e-mails but were disappointed as these communications were “blatantly ignored.”PTC India, formerly known as Power Trading Corporation of India, holds a 65 percent stake in PTC India Financial Services. State run-power sector companies NTPC, Power Grid Corporation of India, Power Finance Corporation and NHPC together own a 16.2 percent stake in PTC India.