SEBI increases strictness on PTC India Financial, allows board meeting only after the issue of corporate governance is resolved

PTC India Financial: Markets regulator SEBI has increased strictness on PTC India Financial Services (PFS) on the issue of corporate governance.  The regulator has said that board meetings will not be allowed until the company resolves the issue of corporate governance.  Three sources with knowledge of the matter have told Moneycontrol that the company has appointed new independent directors.

The board meeting of PTC India Financial Services was scheduled to be held on Saturday 22 January.  But even before the meeting, the company got a letter from SEBI.  In this letter, the regulator had directed that no board meeting is allowed until the issue of corporate governance is resolved.  Before this letter from SEBI came, the management of the company and its parent company PTC India (PTC) held a press conference on Friday.  It said that the issue of corporate governance raised by the independent directors would be resolved at the earliest.

A source privy to the matter told Moneycontrol, “SEBI has sent a mail stating that there will be no board meeting till the issue of corporate governance is resolved. In another incident, PFS has also informed SEBI.  I have sought permission from SEBI to allow them to hold board meetings without independent directors. However, no response has been received from SEBI on this.

However, there has been no communication from any official from SEBI in this matter.  PTC India Chairman Rajib Kumar Mishra told Moneycontrol that he is not aware that PFS has received an email from SEBI.  He reiterated that the management rejects the allegations of the independent directors resigning.

Mishra said, “As per SEBI rules, there is a requirement of at least one independent directors for board meeting. We have sought exemption from this rule. It is a normal process. Once we get this exemption, then we can go to the board.  Can organize a meeting. This work is going on now.”

He also said that the management has held a virtual video meeting on Saturday.  All the issues have been discussed in this meeting.  Mishra, however, refused to divulge the issue of the meeting.  The company had submitted the status report to RBI and SEBI on Friday.

A notice was sent to the directors on January 14 that there is a board meeting on January 22.  The independent directors have submitted their resignation saying that this board meeting is illegal as notices have not been sent to all the directors of the board.  With this, the issue of corporate governance has not been raised in the agenda of this meeting.

What is the full story?

Three independent directors of PTC India Financial – Kamlesh Shivaji Vikamsey, Thomas Mathew T and Santosh B Nair had resigned on January 19 raising questions over the corporate governance of the company.  After this there was a big fall in the shares of PTC India and its subsidiary company PTC India Financials.

After the market closed on January 20, the shares of PTC India lost 10.99% and closed at Rs 100.45.  While the shares of PTC India Financials fell 18.32% and closed at Rs 20.95.

Rakesh Kaker, the fourth independent director, had also written to the company’s management explaining the lapses in corporate governance.  Kaker’s term ends on 31 December 2021.

Independent directors also allege that the company’s chairman and managing director put Ratnesh’s hiring on hold without any reason and did not inform the board.  After this Ratnesh joined NTPC.

The Independent Directors had also alleged that the forensic report of Rs 125 crore bridge loan to Nagapatnam and Rs 150 crore term loan to Infratech Pvt Ltd was submitted after two years.

The reports of two independent directors probing the delay in the forensic report were also delayed as there was no support from the management.  “The committee, in its report, recommended that the Nagapatnam case should be brought before the RBI as suspected fraud,” Mathew said.