SEBI slaps fine of Rs 35 lakh on PTC India CMD & PFS CEO for corporate governance lapses

New Delhi: The Securities and Exchange Board of India (SEBI) has imposed a fine of Rs 35 lakh on the senior management of PTC India Financial Services (PFS), which is a joint venture company of PTC India Limited and four Public Sector Undertakings (PSUs). The market regulator has imposed a fine of Rs 10 lakh on Rajib Kumar Mishra, CMD of PTC India and director of PFS, and Rs 25 lakh on PFS CEO Pawan Singh for corporate governance lapses.

PSU Watch is now on Whatsapp Channels. Click here to join

SEBI has also restrained Singh and Mishra from holding any Board or key managerial position in any listed company or any registered intermediary or associating themselves with any listed entity which intends to raise money from the public. The order,  dated June 12, said that Singh “grossly misused” his position as MD and CEO of PFS and Mishra had been “acting as a willing accomplice.” The order added that SEBI’s investigation has not brought out any detail pointing to the manipulation of the market or its abuse.

What does the SEBI order mean for PFS & PTC?

Singh was forced to go on leave until retirement in June last year following a Reserve Bank of India (RBI) directive. The order will have a bigger ramification for Mishra who is still serving as the non-executive chairman of PFS and the CMD of PTC India because he will have to step down from these positions.

PTC India owns 64.99 percent stake in PFS. PTC India, on the other hand, is owned by NTPC Ltd, NHPC Ltd, Power Grid Corporation of India Ltd and Power Finance Corporation (PFC) Ltd, which together hold 16 percent stake, while the balance 84 percent is owned by financial institutions, large utilities and public at large.

Corporate governance lapses

The PTC India subsidiary has been facing heat from SEBI for the last two years since three independent directors resigned from the company’s board in January 2022, flagging concerns regarding corporate governance. SEBI initiated investigations into the allegations following the resignation. Later, the RBI also started looking into the irregularities in PFS. In June 2023, the Registrar of Companies (ROC) found both PFS and Singh in violation of The Companies Act, 2013 and penalised both entities in three separate orders. Singh was found to have disregarded the Board’s recommendations, keeping an important position vacant and had informed the Board about a forensic audit done on a bad loan after two years.

The order said that Singh had “grossly misused his position as the MD and CEO of PFS to prevent Mr. Ratnesh from joining as WTD (Finance) and CFO, which was approved by the Board of PFS. The MD & CEO in a company, though sitting at a high position within the management hierarchy, is duty bound to follow the decisions of the Board of his company and cannot exercise his power unilaterally in an unfettered manner. However, in this case, the MD & CEO employed all the tricks to defeat the decision of PFS Board to appoint Mr Ratnesh, thereby keeping a critical vacancy in the Company unfilled.”

In a letter dated January 19, 2022, the independent directors had pointed out how Singh and Mishra had obstructed the onboarding of Ratnesh, an NTPC executive who was appointed by the board as Director (Finance) and CFO in July 2021. Ratnesh went back to his parent organisation, NTPC, in December 2021.

(PSU Watch– India's Business News centre that places the spotlight on PSUs, Bureaucracy, Defence and Public Policy is now on Google News. Click here to follow. Also, join PSU Watch Channel in your Telegram. You may also follow us on Twitter here and stay updated.)