Exclusive | PTC India head refutes allegations of independent directors who resigned from subsidiary, open to probe

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PTC India has refuted allegations made by three independent directors of its subsidiary PTC India Financial Services who resigned citing lapses in corporate governance and compliance.

“We are refuting all their charges prima facie, but we will investigate the issues internally,” Rajib Kumar Mishra, chairman of PTC India, told Moneycontrol.

Kamlesh Shivji Vikamsey, Thomas Mathew T, and Santosh B Nayar resigned on January 19, alleging lapses in governance and compliance by the management of PTC India Financial. The share of both companies plunged.

A fourth director, Rakesh Kacker, had also written to the management of the company highlighting lapses in corporate governance earlier. His tenure on the board ended on December 31.

The allegations of lapses at PTC India Financial include stalling the appointment of a CFO appointed by the board, failure to disclose the forensic report of a loan account related to NSL Nagapatnam Power and Infratech, and alteration of loan conditions without prior approvals.

“We are going to take it very seriously,” Mishra said. “Corporate governance and business ethics is of the highest standard in the company. If somebody has raised some issues, we have taken cognisance of that. We will follow proper procedure at the board level and if it has to be investigated further, we will take care of it.”

Mishra, who has been firefighting since the resignations and supporting documents were made public, said the company is updating the Securities and Exchange Board of India and the Reserve Bank of India about the developments at its non-banking financial services arm.

‘Many errors’

“What they have said is their version – the company’s version is different. The issues raised are not correct to a great extent. Factually, there are many errors. We are looking into it and we will come back on it at an appropriate time,” Mishra said.

Mishra, who was director marketing at PTC India, took over additional charge of the top position in November after Deepak Amitabh retired.

Shares of PTC India plummeted 11 percent to Rs 100.55 at the close on the BSE on January 20. PTC India Financial shares plunged over 18 percent to Rs 20.95.

The RBI has been pushing for strong corporate governance practices among non-banking financial companies.

“RBI will look at any major lapses in corporate governance in regulated entities on a regular basis,” an official of the central bank said when Moneycontrol reached out to him.

Surprise resignations

While the independent directors said they had voiced their concerns over “serious lapses” in governance and compliance on multiple occasions, the resignations themselves took the management by surprise. Senior industry executives said it was unprecedented for independent directors to quit a government-backed company like this.

Did the management have any inkling of the plan of the independent directors to resign together?

“I have been interacting with them very regularly,” Mishra said. “If they had something in mind, which they wanted to keep to themselves, that is their choice.”

The allegations

Thomas Mathew T, who was on the company’s board since October 2019, said that he had placed on record many times – especially over the past few months – his deep displeasure about the lack of appropriate information made available to the board.

“Even when supplied, I have questioned the very poor quality of information being shared with the directors as also the complete disregard to timelines in the flow of information to the directors between the company management and the board that is necessary for the independent directors to function effectively and reasonably perform our duties,” he said.

The resignation letters of Vikamsey and Nayar were similarly worded.

The former directors said PTC India Financial’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.

A PTC India official told Moneycontrol that an audit of this appointment has been concluded and a report is awaited.

Kept in the dark

The directors also alleged that the company did not disclose the forensic report of a loan account related to NSL Nagapatnam Power and Infratech. They said the audit committee’s request for the report and subsequent closure of the matter was “thwarted by the non-cooperative and rather evasive management.”

The independent directors highlighted at least two instances where loan conditions were changed without prior approvals.

“It was a coincidence that such unilateral change came to the notice of the board and it raises suspicion of many more such instances of similar nature which exist in the company, and the board oblivious on account of non-disclosure by the company,” the resignation letters said.

The letters said the management took no action on corporate governance concerns raised by the company’s previous chairman in August 2021 and that communication from independent directors was being “blatantly ignored.”

Responding to the allegations, Mishra said the directors had been with the company for many years and could have raised the issues at the appropriate time.

“Corporate governance is a process and not an event. The issues that they have raised have been addressed at different points of time. They could have been resolved at the board level itself,” Mishra said.

Taking a stand

“This incident is a perfect signal that the institution of independent directors is coming of age,” said JN Gupta, founder of proxy advisory firm Stakeholder Empowerment Services. “It does not mean their allegations are right or wrong, but it is a sign that the institution itself is getting mature and directors are taking stands.”

Gupta said they could write to SEBI to apprise the regulator of the situation and seek audit and legal support, especially in an instance like this where they claim that the management knew about these issues but did not act on it.

Mishra said he and his team have been talking to key investors to assuage their concerns and will continue to communicate any new development on the matter.

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.

Separately, PTC India Financial told the bourses, “We are in receipt of resignations from three independent directors mentioning some reasons. We refute the allegations by the outgoing directors, which were due to our adherence to best corporate governance practices under the guidance of the promoter, regulator, and Government of India. The matter will be addressed at the board level and the subsequent updates will be communicated to all the stakeholders appropriately.”

(With inputs from Dinesh Unnikrishnan)