All eyes would be on public sector companies as they vote as shareholders in the extraordinary general meeting (EGM) of PTC India (PTC) on June 28, especially for the resolution to confirm the appointment of Rajib Kumar Mishra as the chairman and managing director amid regulatory scrutiny.
The EGM is taking place just after the Registrar of Companies (ROC) found PTC’s subsidiary PTC India Financial Services (PFS) and its Managing Director and Chief Executive Officer Pawan Singh in violation of The Companies Act, 2013 and penalised both entities in three separate adjudication orders on June 27. Separately, the capital market regulator Securities and Exchange Board of India (SEBI) has held PTC CMD Rajib Kumar Mishra and PFS MD & CEO Pawan Singh responsible for the corporate governance lapses in PFS.
While Singh has been sent on leave, Mishra is also being questioned by SEBI for the irregularities in his appointment at the top job.
PTC, which was set up in 1999 as a government-initiated public-private partnership, is partially owned by state run-power companies – NTPC, Power Grid Corporation of India (PGCIL), Power Finance Corporation (PFC), and NHPC each owns a 4.05 percent stake. Life Insurance Corporation owns 5.96 percent and Damodar Valley Corporation owns 3.38 percent in PTC. Detailed queries sent to these companies remained unanswered at the time of publishing this article.
“Even though the stake of these PSUs is small and can just end up being a rounding off error in their books, they cannot be apathetic to what’s happening in the company. Even if they have a nominee on the board and they voted for the resolution, it’s time they vote against it in the EGM and do the right thing in view of the regulatory investigations,” Shriram Subramanian, founder and managing director of proxy adviser InGovern Research Services told Moneycontrol.
NTPC, PGCIL, PFC, and NHPC have nominee directors on the board of PTC. PTC informed bourses on March 29 that its board has approved the appointment of Mishra, which will now be put up for shareholders' approval. Mohammad Afzal, Joint Secretary (Transmission) at the Ministry of Power is also a nominee director on the board of PTC since December 2022.
Mishra took over as acting chairman in November 2021, after former CMD Deepak Amitabh quit.
The notice for the extraordinary general meeting (EGM) of PTC was issued after SEBI sent the show-cause notice to Mishra. Yet, the EGM agenda shared with investors does not disclose this. However, it includes a clause that will allow Mishra to be on the board as a director even if the resolution for his appointment as CMD is rejected.
“Nominees on board act on behalf of the nominating agency and in this case, these nominee directors have given their approval to the resolution for the appointment in the board meeting. Unless the PSUs have questioned them for their vote, it means that they are in agreement with the vote given. Therefore the PSUs are in a Catch-22 situation, if they vote yes at EGM, they are voting for the appointment of a person who is facing investigation. If they vote no, it questions their previous decision to vote for the decision during the board meeting,” said JN Gupta, who is the Founder and Managing Director of Stakeholders Empowerment Services (SES).
Both SES and InGovern have advised shareholders to vote against the resolution to appoint Mishra as CMD.
“We have advised the minority shareholders to vote against the resolution of the appointment of the CMD. The PSUs who own stakes in PTC India should vote with a conscience too,” Gupta said.
Moneycontrol reported exclusively that SEBI sent a letter to Mishra and the company secretary of PTC on June 22, asking about possible irregularities related to the CMD’s appointment, collusion between Mishra and Pawan Singh, managing director and chief executive officer of PFS, and issues pertaining to corporate governance.
Prior to this, on May 8, SEBI pulled up both Mishra and Singh for their role in the lapses in corporate governance in PFS. SEBI said that Mishra had not acted in the interest of shareholders of PFS and failed in his “prime responsibility” of letting the board function effectively and in discharging his duties.
“How they (PSUs) vote for a company and a CMD who are in trouble for corporate governance matters will reflect on those companies. They need to be careful because we live in an environment where scrutiny on the basis of corporate governance and ESG is higher. Any dent on these accounts could potentially have an impact on their business and even their ability to raise funds,” a corporate governance experts said.
PFS has been under the scanner since January 2022 when three of its independent directors resigned with similarly worded letters that alleged corporate governance issues including bypassing the board in certain decisions and changing the terms and conditions of loans.
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