SEBI bars board meeting till action report filed in 4 weeks, PTC India Financial tells bourses

Corporate governance

PTC India Financial Services (PFS) informed the bourses late on Sunday that the Securities and Exchange Board of India (SEBI) has asked it to not hold a board meeting until it addresses the issues pertaining to corporate governance and various subjects raised by its resigning independent directors and former chairperson within the next four weeks.

Moneycontrol was the first to report on Saturday about the email the company’s board received from the market regulator. It had barred PFS, a non-banking financial company, from holding the board meeting that was scheduled for the day.

In accordance with the SEBI rules, PFS had sought for exemption to hold a board meeting since three of its independent directors quit together on January 19, citing lapses in corporate governance and compliance. But the email from SEBI makes it clear that the regulator first wants the management to address the issues raised by the resigning directors.

“It is informed that the company has received a communication dated January 22, 2022 from SEBI, informing that the company is directed to address the corporate governance issues and all other issues raised by the resigning IDs and ex-chairperson first, before holding any Board meeting and to file an action taken report in the regard to SEBI within four weeks,” PFS wrote to the bourses.

On Friday, the company’s management and its parent PTC India (PTC) had held a press briefing on the corporate governance issues raised and said that those issues will be taken up at the board meeting on Saturday.

“These are two different matters. The company has applied for an exemption for holding board meeting but the SEBI has barred it for now. So, it is unlikely that they will get the exemption till the report is filed,” a source close to the development told Moneycontrol.

On January 19, Kamlesh Shivji Vikamsey, Thomas Mathew T and Santosh B Nayar resigned as independent directors of PFS alleging lapses in governance and compliance. They submitted similarly worded resignations and other supporting documents. They said 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 India (PTC). He resigned on Friday.

The management of PTC and PFS have refuted the allegations and questioned the intent behind the coordinated resignations. An internal committee will look into the allegations, PFS said.

Shares of PTC and PFS went down in two consecutive sessions since the independent directors quit last Wednesday. PTC shares have shed over 16 percent, while PFS has declined over 22 percent in the last two sessions.

Former Chairman Deepak Amitabh had raised concerns over the corporate governance practices of the company in a board meeting on August 5. “It is pertinent to mention that PFS managing director and chief executive officer addressed all the concerns of the ex-chairman in the same board meeting. On the same date, the board, including the ex-chairman and the outgoing independent directors, provided a clean corporate governance report for the financial year ending March 31, 2021 and acknowledged with deep appreciation the co-operation received from directors,” PFS said.

“We further wish to inform that subsequently on September 24, 2021, the ex-chairman addressed the shareholders of the company at the 15th Annual General Meeting with appreciations to the company and mentioning no concern related to corporate governance.”

The Allegations

The independent directors have made six allegations – one of them pertains to the appointment of another director, while the other five relate to operations and corporate governance issues.

They said that the company was in violation of the Companies Act as the PFS managing director and chief executive officer Pawan Singh did not allow “Mr Ratnesh” to join and function as director of finance and chief financial officer after the board had appointed him. They said Singh took the decision “unilaterally” and did not give any explanation for it. 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 5 and their repeated attempts at raising their concerns 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.