In an interim order, the Securities Appellate Tribunal (SAT) on June 21 gave the nod to PNB Housing Finance to hold its EGM (Extraordinary General Meeting) scheduled for June 22 which would vote on the public sector lender’s Rs 4,000 crore deal with a consortium led by private equity giant Carlyle.
However, the tribunal directed that the results of the voting on the proposed transaction would not be declared and kept in a sealed cover till further orders are passed by it. PNB Housing Finance was also directed by the tribunal to issue specific directions to NSDL which is in charge of the electronic voting to not reveal the voting results. The matter will now come up for admission and final disposal on July 5, 2021.
Elaborating its rationale, the SAT interim order said, “When the electronic voting has already commenced it would not be fair to stay the consideration of agenda no. 1 of the EGM notice dated May 31, 2021 which is going to be held on June 22, 2021.”
After listening to arguments from both PNB Housing Finance and Sebi, SAT further said: “ Considering the aforesaid that no factual dispute exists and only an interpretation of the provisions of the ICDR Regulations and Companies Act read with Articles of Association is required to be considered. We direct the respondent to file a reply on or before June 26, 2021. Rejoinder, if any, may be filed by July 4, 2021.”
The respondent in this case is market regulator Sebi. ICDR Regulations refers to Sebi norms on Issue Of Capital & Disclosure Requirements.
PNB Housing Finance was represented by senior counsel Janak Dwarkadas and advised by law firm Shardul Amarchand Mangaldas. Sebi was represented by senior counsel Mustafa Doctor and advised by law firm K Ashar & Co.
The order by SAT was passed on an appeal filed by PNB Housing Finance which had challenged the directions by Sebi relating to the valuation procedure of the former’s Rs 4,000 crore transaction with the Carlyle led consortium. The consortium includes former HDFC Bank MD and CEO Aditya Puri and private equity funds General Atlantic and Ares SSG. PNB Housing Finance made the announcement in a disclosure to the stock exchanges.
On June 20, 2021, Moneycontrol was the first to report that the public sector lender was likely to move the Securities Appellate Tribunal and challenge the directions from Sebi.
In a letter sent to the public sector lender last week, the market regulator halted the deal temporarily and said the notice for an EGM (Extraordinary General Meeting) scheduled for June 22 was not consistent with the firm’s articles of association. Sebi directed the lender to undertake the valuation exercise based on the firm’ articles of association.
The market regulator said that the notice given on May 31 for Extraordinary General Meeting is "ultra-vires of Article of Association (AOA) and shall not be acted upon until the company undertakes the valuation of shares as prescribed under 19(2) of AOA, for purpose of preferential allotment, from an independent registered valuer as per the provisions of applicable laws. The said report shall be considered by the Company’s Board while deciding on the preferential issue of shares and warrants."
The high-profile deal has been shrouded in controversy. Moneycontrol was the first to report that Sebi is examining the deal after a proxy advisory firm, SES (Stakeholders Empowerment Services) led by former Sebi ED JN Gupta, questioned the proposed investment by the US private equity major over valuations and interest of minority shareholders.