Taking cognizance of corporate governance issues at PTC India Financial Services Ltd (PFS), market regulator Securities and Exchange Board of India (SEBI) has imposed a penalty of Rs25 lakh on Pawan Singh, former managing director and chief executive officer (MD&CEO) and Rs10 lakh on Rajib Kumar Mishra, former non-executive chairman of PFS. PFS is a material subsidiary of PTC India, which holds a 64.99% stake in PFS.
The case concerns the resignation of three independent directors (IDs) of PFS over violation of corporate governance norms in the non-banking finance company (NBFC). On 19 January 2022, three independent directors—Kamlesh Shivji Vikamsey, Santosh B Nayar and Thomas Mathew—resigned en masse from the board of PFS, citing corporate governance and other issues.
In the latest order, Ashwani Bhatia, whole time member (WTM) of SEBI, says, "I note that Mr Singh, with a long tenure of more than 10 years starting from 1 February 2012, entrenched himself in the affairs of the Company in such a manner that he became synonymous with the board of the Company. The non-adherence to the decision of the board to appoint Ratnesh as whole time director (WTD) for finance and the reluctance to report the matter of NNPIPL as a case of suspected fraud are just some examples of Mr Singh having absolute control. In this endeavour, he was actively aided by Mr Mishra, who, being the chairman of PFS, had the power to bring necessary course correction but chose to be a silent spectator and collaborator in the acts of Mr Singh."
"In these circumstances, the notion of 'Board' as appearing in the LODR Regulations2015, in the present case, has become synonymous with Mr Singh and Mr Mishra, and as such, they were made parties in the show cause notice (SCN). It is, however, obvious that a differentiation has been made in the allegations against Mr Singh and Mr Mishra. Mr Singh, being the MD and CEO, was at the forefront of this endeavour to impede and frustrate the Board process, while Mr Mishra provided the active support in that process," the WTM says.
In June 2022, following the resignations of three IDs, SEBI asked PFS not to make any changes to the company's board until completion of a forensic audit.
Earlier in January 2022, the market regulator had asked PFS to address corporate governance and other issues raised by its former chairman and outgoing independent directors before holding its board meeting.
In their resignation letter, the three independent directors raised several issues, including not allowing board-appointed WTD and director for finance, Ratnesh, to join PFS.
They also alleged that there was a delay of two years in disclosing the forensic audit report (FAR) on loans to Nagapatnam Power and Infratech Pvt Ltd to the board of PFS.
Inaction on corporate governance issues highlighted by former chairman Deepak Amitabh at the board meeting held on 5 August 2021 and unilateral change in conditions of loan extended to Patel Darah-Jhalawar Highway Pvt Ltd, without prior approval of the board were the other two allegations made by the three independent directors.
Further, they alleged that the management blatantly ignored the IDs' communication, and PFS management shared limited or no information with the board.
In its order, the SEBI WTM says, "Mr Singh deliberately glossed over the issues of corporate governance highlighted by the IDs, who were persons of repute, which ultimately led to the IDs resigning from the Company in quick succession. Interestingly, it must be mentioned that Mr Singh was the director of finance) of PFS since 2012. Mr Singh not only undermined the board process by not being transparent with the board and working against its decisions, he also flouted SEBI's direction not to change the structure and composition of the board. The said acts of disregarding regulators' directions reflected poorly on the conduct of Mr Singh and Mr Mishra as board members of PFS."
Mr Bhatia, the SEBI WTM, also observed that Mr Singh was repeatedly acting in a confrontational manner with the IDs and engaging in one-upmanship. This had a telling impact on the performance of PFS. During FY18-19 to FY22-23, the assets of PFS fell from Rs13,193 crore to Rs7,634 crore.
It is also worth noting that PFS's holding company is PTC India with a 64.99% stake, in which four public sector undertakings (PSUs), NTPC Ltd, NHPC Ltd, Power Grid Corporation of India Ltd and Power Finance Corporation Ltd, together hold 16.20% shares (each having 4.05% in PTC), SEBI says.
