The Securities and Exchange Board of India, on Wednesday, imposed strict restrictions on Pawan Singh, the former managing director and CEO, and Rajib Kumar Mishra, the former chairman of PTC India Financial Services Ltd., following an investigation into corporate governance issues.
Singh has been barred from being a director, holding managerial positions, or associating with any listed company for two years, while Mishra faces a similar ban for six months. Additionally, SEBI has levied penalties of Rs 25 lakh on Singh and Rs 10 lakh on Mishra.
The investigation began after the resignation of three independent directors from PFS and one from PTC India Ltd. They brought up corporate governance issues, which led SEBI to scrutinise the period from April 1, 2021, to Dec. 31, 2022, for potential violations of the law.
SEBI's findings revealed multiple governance lapses. In one such instance, the company did not comply with the provision, which requires at least one independent director for a valid quorum. Despite the resignation of all IDs, PFS did not cancel a scheduled board meeting and instead sought an exemption from SEBI, which was denied.
Further issues included delays in commencing a forensic audit. The forensic audit, initially scheduled to start in April 2022, was delayed due to non-cooperation from Singh and Mishra. This delay affected the timely finalisation of PFS's financial results for FY22, resulting in the company being moved to the 'Z Category' by stock exchanges, which impacted its stock price.
SEBI also found that Singh withheld the forensic audit report about a loan account from the board for two years. He also delayed informing the board about a suspected fraud case. These actions created an environment where corporate governance issues were ignored, leading to the resignation of several independent directors.
As per the SEBI order, Mishra also played a complicit role by failing to address the concerns of the IDs. Despite having the authority to correct these issues, he allowed Singh to continue his mismanagement unchecked, SEBI found. As a result of these violations, regulatory action was taken against both.
Last month, PTC India Financial Services decided to call back Rs 49.7 lakh, paid as legal fees for Singh and Mishra. The board of directors had decided to recover Rs 10.94 lakh, paid as legal fees for Mishra; and Rs 38.76 lakh crore, paid as legal fees for Singh.
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