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Monday, September 27, 2021

Sebi-PNB Housing Finance case: SAT verdict split, interim order to continue

In its interim order, the SAT had restricted PNB Housing from declaring the results of shareholders’ votes on the deal with Carlyle.

By: ENS Economic Bureau | Mumbai |
Updated: August 10, 2021 9:49:16 am
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The Securities Appellate Tribunal (SAT) on Monday pronounced a split verdict on the PNB Housing-Sebi case with both judges having different observations on the market regulator Sebi’s action.

The interim order on PNB Housing Finance-Carlyle deal will continue, the SAT said. In its interim order, the SAT had restricted PNB Housing from declaring the results of shareholders’ votes on the deal with Carlyle.

The matter was heard by a two-judge Bench of Presiding Officer Justice Tarun Agarwala and Judicial Member Justice MT Joshi. Justice Agarwala ruled in favour of the housing finance company, while Justice Joshi agreed with the market regulator’s action.

“In view of the difference of the opinion between the Members of the bench we direct the interim order dated June 21, 2021 to continue till further orders. The registry is further directed to place the papers of the appeal before the Presiding Officer on the administrative side for appropriate orders,” the SAT said.

“The impugned communication dated June 18, 2021 issued by General Manager of Sebi cannot be sustained and is quashed. The appeal is allowed. We direct the appellant to declare the results of the extraordinary general meeting which was held on June 22, 2021,” Justice Agarwala said in the order.

However, Justice Joshi differed with Justice Agarwala. “In the present case in order to safeguard the interest of the investors, the impugned order was passed by Sebi on the line of the provisions made in Article 19(2) by the appellant company and its shareholders, at the time the company was to be listed on the stock exchanges. Therefore, in my view the same cannot be called as illegal or unjustified,” Justice Joshi said in the order. “Presiding Officer has observed that the right of shareholders to accept or reject an agenda is supreme and paramount which cannot be whittled by any executive action,” the order said.

On June 8, The Indian Express reported how Stakeholders’ Empowerment Services, at the behest of minority shareholders, had red flagged the proposed transaction. On the pricing of the preference share at Rs 390, PNBHF, the firm’s report said, ignored its AoA that calls for the price to be “determined by the valuation of a registered valuer.”

The controversy arose when Sebi wrote to the company, raising objections to pricing of the preferential allotment issue to investors led by Carlyle including Aditya Puri, former MD of HDFC Bank and a senior advisor to Carlyle.

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