The Securities and Exchange Board of India (Sebi) is said to have questioned the process of appointing Rajib Kumar Mishra as chairman and managing director of PTC India Ltd (PTC)after allegations of irregularities.
This comes after the regulator had pulled Mishra up for his role in corporate governance lapses in subsidiary PTC India Financial Services Ltd (PFS).
Sebi sent a letter to Mishra and the company secretary on June 22, asking about possible irregularities related to the CMD’s appointment, collusion between Mishra and Pawan Singh, managing director and chief executive officer of PFS, and issues pertaining to corporate governance.
Three people familiar with the developments confirmed this to Moneycontrol. Detailed email queries sent to Sebi, Mishra and PTC company secretary Rajiv Maheshwari remained unanswered at the time of publishing.
Sebi had issued a show-cause notice in May to Mishra, who is also non-executive chairman of PFS, and Singh for alleged corporate governance issues at PFS, including bypassing the board on certain decisions, changing the terms and conditions of loans, and failing to inform independent directors about important matters.
The regulator said in the May 8 notice to Mishra that he failed in his “prime responsibility” as the head of PFS to let the board function effectively and in discharging his duties.
Mishra’s appointment as CMD of PTC is scheduled to come up for shareholder approval on June 28 amid SEBI’s findings in the PFS case.
Shareholder flags concerns
While SEBI was investigating corporate governance lapses in PFS highlighted by three independent directors who resigned on January 19, 2023, a letter from a minority shareholder has now brought the parent company into focus.
“An incriminating letter from a minority shareholder to SEBI, key shareholders of PTC, and independent directors has come to the notice of top officials at SEBI and they have ordered an investigation,” a fourth person said.
Moneycontrol has reviewed a copy of the letter, which is marked to SEBI and the heads of state run-companies NTPC, Power Grid Corporation of India, Power Finance Corporation of India, and NHPC. Each of these PSUs owns a 4.05 percent stake in PTC. The letter could not be separately verified with the CMDs of these PSUs.
The new letter from Sebi indicates that the regulator is also looking into the allegations of irregularities at PTC. Typically, once the regulator receives response to an initial query like this, it assesses them and if it is not satisfied then it may issue a show-cause notice.
The shareholder’s letter alleged that Mishra and Singh ensured that they alone could be the sole wholetime directors on their respective company boards and could “rule as a single emperor.”
During the term of former PTC CMD Deepak Amitabh, besides him on the board, there were two wholetime directors – Mishra (director - marketing) and Ajit Kumar (director - commercial). Kumar retired in April 2021 and then Amitabh resigned in October 2021.
In November 2021, Mishra got additional charge as CMD, while the third position of the wholetime director was left vacant, leaving Mishra effectively as the only wholetime director on the board from 2021 to 2023.
“The shareholders, the ministry and the PSUs asked for succession planning. Mishra was asked about the induction of wholetime directors but he misled them and had no intention of filling the positions. In fact, the roles of director - commercial and CMD were advertised at the same time, but while he pushed the nomination and remuneration committee for his appointment, the other position was not filled,” a person aware of the matter told Moneycontrol.
Similarly in PFS, Singh, besides being MD and CEO, was also director for finance and operations, implying he held all three whole-time director roles too. After the Reserve Bank of India sent a show-cause notice to Singh on January 6, seeking his removal from the post of MD and CEO, the board of the company approved the appointment of Mahendra Lodha as director (finance) and chief financial officer of PFS to ensure continuity of leadership in Singh’s absence.
Lodha joined as a director on June 14 and Singh was sent on leave soon after. Lodha has additional charge as CMD until a replacement is appointed.
The shareholder also alleged in the letter that Mishra and Singh ran the two companies in the way they wanted, favouring their close associates through benefits from developers, and rewarding them with perks and positions for their support.
Appointment irregularities
Mishra took over as acting chairman in November 2021, after Amitabh quit. He was made CMD in March this year, despite facing regulatory issues for his role as non-executive chairman of PFS, which is under scrutiny by SEBI, the RBI and the Registrar of Companies.
It was alleged that the selection process for the role of CMD was heavily influenced by Mishra and only two candidates were interviewed for the post.
According to the shareholder’s complaint, in March 2023, the ED HR of PTC who was looking after filling both the vacancies was sidelined from the process in the most un-transparent manner. Interviews for the CMD’s post were held secretly and only two people were called in. This allegation was echoed by at least three executives who were with PTC at the time.
Sources said the PTC board approved Mishra’s appointment as CMD in March even though it had only three independent directors and three positions were vacant. The PTC board had the CMD and five nominee directors, and only three independent directors to pass this resolution.
SEBI has sought a clarification on this. SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 [Last amended on January 10, 2020], states that if the Chairman of a company is occupying management positions at the level of board of director, at least half of the board of directors of the listed entity shall consist of independent directors.
The three vacancies for independent directors were only filled after Mishra’s appointment as CMD was approved by the board.
PTC informed bourses about the appointment of Mishra on March 29. On April 13, the company informed the bourses about the appointment of three new independent directors– Rashmi Verma, Jayant Dasgupta, and Narendra Kumar as independent directors of the company.
The notice for the EGM, at which Mishra’s appointment would be put up for shareholder approval, was issued after SEBI sent the show-cause notice to him in the PFS case, a matter that has not been disclosed to the investors. Separately, the notice to shareholders mentions in the brief bio of Mishra that he will continue as a director even if his appointment as CMD is rejected.
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