All Independent Directors of PTC India Financial Services resigned on January 19, 2022 together citing following issues:-
The Independent Directors of PTC India have made six allegations where one pertains to the appointment of another director and the other five pertains to operations and corporate governance issues. The main reason for the resignation is managing director and chief executive officer, Pawan Singh, did not allow “Mr Ratnesh” to join as Director-Finance and Chief Financial Officer despite getting Board approvals for the appointment. The Independent Directors said that the company was in violation of the Companies Act, as Mr Pawan Singh took the decision “unilaterally” and did not seek Boards approval, nor gave an explanation.
The directors also alleged that the company did not disclose the forensic audit report relating to a loan account of NSL Power and Infratech for two years between November 2018 and December 2020. Due to current stress, insolvency proceedings were initiated in the project for which loan was taken by NSL and the promoter company of NSL made a one-time settlement offer to the company in March 2020. PFS’s audit committee recommended that the matter should be reported to Reserve Bank of India as suspected fraud.
The management took no action on corporate governance issues highlighted by former PTC head Deepak Amitabh in a Board Meeting held on August 5, 2021 as management made changes in the conditions of loans, without prior approval of the board. Also Independent Directors cited two issues, both pertaining to highway projects and expressed concerns that there may be more such instances
The management ignored communications from the Independent Directors where they called for documentation pertaining to the appointment and joining of Ratnesh, and board requested for help of company’s legal counsel and called meeting of nomination and remuneration committee to fill up the vacancy of a lady independent director, and action needed after the withdrawal of nomination from the board of the company that rendered the nomination and remuneration committee dysfunctional.
What has the management done in response?
The management rebutted all the allegations and further questioned the intent of the Independent Directors and formed an internal committee for investigation. They also sent status report to the RBI, SEBI and the two stock exchanges.
The management has started the process of appointing new Independent Directors and sought SEBI approval to hold a board meeting in their absence.
The management said that when the former chairman Deepak Amitabh raised concerns over the corporate governance practices of the company in a board meeting on August 5, 2021, for which the board provided a clean corporate governance report on the same day for the financial year ending March 31, 2021
What regulatory action has been taken?
Securities and Exchange Board of India pulled up PTC India Financial Services (PFS), asking the company not to hold a board meeting until the corporate governance issues are addressed and the company has appointed new Independent Directors. Company received email from SEBI which stated that the company cannot hold a board meeting till the corporate governance issues are resolved. On this, PFS asked SEBI for exemption so that a board meeting can be held without any Independent Directors . As a listed NBFC, the company falls under the purview of both RBI and SEBI. Further authorities could direct the company to conduct an independent audit of the corporate governance issues. The management has been in talks with key investors to ease their concerns.
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