Securities Appellate Tribunal
Dr. Pawan Singh vs Sebi on 5 November, 2025
IN THE SECURITIES APPELLATE TRIBUNAL
AT MUMBAI
Dated this the 5th day of NOVEMBER, 2025
CORAM: Justice P.S. Dinesh Kumar, Presiding Officer
Ms. Meera Swarup, Technical Member
Dr. Dheeraj Bhatnagar, Technical Member
Appeal No. 401 of 2024
BETWEEN:
Dr. Pawan Singh
85 Block D Panchsheel Enclave,
New Delhi - 110 016. ..... Appellant
(By Mr. P.R. Ramesh, Advocate with Mr. Joby Mathew,
Mr. Aditya Joby, Ms. Shefali Shankar and Mr. Pranav
Kethineni, Advocates i/b Joby Mathew & Associates for the
Appellant)
AND:
1. Securities and Exchange Board of India
SEBI Bhavan, Plot No. C-4A, G-Block,
Bandra-Kurla Complex, Bandra (East),
Mumbai - 400 051.
2. PTC India Financial Services Limited
7th Floor, Telephone Exchange Building,
8 Bhikaji Cama Place,
New Delhi - 110 066. ...Respondents
(By Mr. Chetan Kapadia, Senior Advocate with Ms. Prapti
Kedia and Mr. Mohit Kumar Sharma, Advocates i/b Agama
Law Associates for Respondent No. 1)
(None for Respondent No. 2)
2
THIS APPEAL IS FILED UNDER SECTION 15T OF THE SEBI
ACT, 1992 TO SET ASIDE THE ORDER DATED JUNE 12,
2024 (EX-A) PASSED BY THE WTM, SEBI.
THIS APPEAL HAVING BEEN HEARD AND RESERVED FOR
ORDERS ON NOVEMBER 21, 2024, COMING ON FOR
PRONOUNCEMENT OF ORDER, THE TRIBUNAL MADE THE
FOLLOWING:
ORDER
Per: Ms. Meera Swarup, Technical Member Appeal No. 401 of 2024 has been filed by the appellant-Dr. Pawan Singh challenging the common order dated June 12, 2024, passed by the WTM1, SEBI2 under Section 11(1), 11(4), 11(4A), 11B(1) and 11B(2) of the SEBI Act3 read with Rule 5 of the Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties), Rules, 1995 against the appellant (Noticee No. 1) and Mr. Rajib Kumar Mishra (Noticee No. 2) who were the Managing Director & Chief Executive Officer and Non- Executive Chairman, respectively, of PTC India Financial Services Ltd (PFS for short).
2. The brief facts of the case are:
PTC India Ltd., (PTC for short) is a joint venture public sector company in which four central public enterprises are joint venture partners. The promoters of the PTC are NTPC4, PFC5, Powergrid6 and NHPC7.
PFS is a material subsidiary of PTC, which holds 1 WTM - Whole Time Member 2 SEBI - Securities and Exchange Board of India 3 SEBI Act - Securities and Exchange Board of India Act, 1992 4 NTPC - National Thermal Power Corporation Ltd 5 PFC - Power Finance Corporation Ltd 6 Powergrid - Powergrid Corporation India Ltd 7 NHPC - Natural Hydro Power Corporation Ltd 3 64.99% shares in PFS.
Dr. Pawan Singh is the MD8 & CEO9 of PFS since October 3, 2018. Prior to appointment as MD & CEO, he worked as Director (Finance) & Chief Financial Officer (CFO) of PFS w.e.f. February 2012.
3. On January 19, 2022, three IDs10 (Independent Directors) of PFS, namely, Mr. Santosh B. Nayar, Mr. Thomas Mathews and Mr. Kamlesh Shivji Vikamsey resigned from the Board of PFS and a copy of the resignation letter was forwarded to the SEBI. The following allegations of violation of corporate governance norms were raised in their resignation letters.
One Mr. Ratnesh who was appointed as a Whole Time Director ('WTD') & Director - Finance of PFS by the Board, was not allowed to join PFS; The FAR11 on loans given to Nagapatnam Power and Infratech Pvt. Ltd. (NPL) was not placed before the Board of PFS even after 2 years of completion of forensic audit;
The former Chairman of PFS Mr. Deepak Amitabh had raised certain governance issues in the Board meeting held on August 5, 2021. But no action was taken;
Unilateral change in conditions of loan extended to Patel Darah-Jhalawar Highway Pvt. Ltd., without prior approval of the Board;
Independent Directors' communications were blatantly ignored by the management; and 8 MD - Managing Director 9 CEO - Chief Executive Officer 10 IDs - Independent Directors.
11FAR - Forensic Audit Report 4 Limited or no information shared by the management with the Board.
4. Consequent to the resignation of the IDs in PFS, the Board of the Company on January 19, 2022, became non- functional and as a result, all the other Board Committee were also rendered inoperable. On January 21, 2022, Rakesh Kacker, an ID in both PTC and PFS also resigned from the Board of PTC citing similar concern raised by the three IDs of PFS in their resignation letters to PFS.
5. Thereafter, PFS scheduled a Board meeting for January 22, 2022, without having a valid quorum for the same. SEBI intervened and directed PFS to first address the corporate governance issues raised by the resigning IDs before scheduling any Board meeting, and further, prohibited the Board meeting from taking place without a valid quorum. Further, PFS was directed to file an Action Taken Report (ATR) on the corporate governance issues raised by the IDs. PFS submitted ATR to SEBI, which according to SEBI failed to satisfactorily address the corporate governance issues as highlighted by the IDs.
6. To satisfy the condition in relation to the composition of the Board and its Committees PTC appointed four of its IDs to Board of PFS on March 30, 2022. On the recommendation of the newly constituted Audit Committee, a forensic auditor was appointed to carryout third party independent forensic audit of PFS. The RMC12 of PTC examined the corporate governance issues in PFS and two reports RMC-I and RMC-II were submitted, as two of the RMC members differed in their opinions from the other RMC members. The Forensic Audit Report (FAR 22) was sent to 12 RMC - Risk Management Committee 5 SEBI on November 16, 2022 after considerable delay.
7. In the wake of the issues raised by the outgoing independent directors, the SEBI examined the issues for the period between April 1, 2021 and December 31, 2022 from the perspective of possible violations of the provision of the SEBI Act and LODR13 Regulations. Thereafter, SEBI issued a show cause notice on May 8, 2023 to the Appellant and the Non-Executive Chairman alleging violation of LODR Regulations and Code of Conduct of PFS. The Appellant submitted his reply vide letters dated May 24, 2023, June 02, 2023, June 30, 2023, October 07, 2023 and April 06, 2024 to the SCN. After considering the replies and affording personal hearing, the learned WTM, SEBI has passed the impugned order on June 12, 2024 which is the subject- matter of this appeal. By the impugned order, Appellant has been restrained from holding any position in any listed company, etc. for a period of two years and also levied with a penalty of Rs. 25 lakh under Section 15HB of the SEBI Act.
8. We have heard Mr. Joby Mathew, learned Advocate for the appellant and Mr. Chetan Kapadia, Senior Advocate for the respondent and perused the records.
9. SEBI has filed a brief note of the arguments indicating the violations against Shri Pawan Singh and Shri Rajib Mishra. The Appellant is alleged to have violated Regulations 4(2)(f)(i)(2), 4(2)(f)(ii)(2), 4(2)(f)(ii)(7), 4(2)(f)(ii)(8), 4(2)(f)(iii)(3), 4(2)(f)(iii)(6), 4(2)(f)(iii)(7), 4(2)(f)(iii)(8), 4(2)(f)(iii)(12), 4(2)(f)(iii)(13), 4(2)(f)(iii)(14), Clause E of Part A of Schedule II read with 13 LODR Regulations - SEBI (Listing Obligation and Disclosure Requirement) Regulations, 2015 6 Regulation 17(7), Regulation 26(3), Regulations 30(4)(i)(a) and 30(12) read with Regulations 4(2)(d)(iii) & 4(2)(b) and Regulations 30(2) and 30(6) read with Clauses 7 & 17 of Schedule III of Part A and Regulations 4(1)(d), 4(2)(e) of LODR Regulations, 2015 and Clauses 4 (ii), (vii), (ix), 5(iii),
(vi), (vii), (viii), (xii), (xiii), (xv), and (xvii) of Code of Conduct of PFS on account of following issues.
10. The impugned order gives findings against the appellant on the following issues:-
Issue No.1:- Mr. Ratnesh not being allowed to join PFS as WTD14 and Director (Finance) Issue No. 2:- Loan to NSL Nagapatnam Power and Infratech Pvt. Ltd.
Issue No. 3:- Inaction on Corporate Governance issues highlighted by Ex-chairman (Mr. Deepak Amitabh) Issue No. 4:- Change in the terms and conditions of loan granted to Patel Darah-Jhalawar Highway Pvt. Ltd.
Issue No. 5:- Ignoring communication of
Independent Directors and providing no or
limited/incomplete information to the Board
Members.
Issue No. 6:- Additional issues:
a) Delays in commencement of Forensic Audit
and non-cooperation with forensic auditor.
b) Reconstitution of Audit Committee prior to submission of FAR-2022.
c) Issues related to disclosure of Forensic Audit Report.14
WTD - Whole Time Director 7
d) Delay in disclosing the resignation of Ms. Sushma Nath (ID of PFS).
e) Functioning of Audit Committee.
11. Each of these issues are dealt with in subsequent paras. First the submission of appellant and respondent are recorded, thereafter, the issues are dealt with after carefully considering the rival contentions.
12. Issue No: 1: (Mr. Ratnesh not being allowed to join PFS as WTD and Director (Finance).
12.01. The Appellant contended that the selection and appointment as well as joining process of Mr. Ratnesh was predominantly handled by the HR Department of PTC India Limited and not PFS. The Board of PFS had delegated HR functions to NRC15 and Chairman PFS and the appellant had no role to play in this matter. The minutes of the 138th Board meeting of PFS held on August 28, 2021 clearly indicate that the Chairman of PFS was authorized to take necessary actions for the appointment of Mr. Ratnesh. In PFS, it was the Nomination & Remuneration Committee (NRC) that considered and recommended the appointment of Mr. Ratnesh to the Board of PFS, which in turn authorised the Non-Executive Chairman of PFS to determine the terms of his appointment. Mr. Ratnesh was appointed on absorption basis, however, his relieving letter from NTPC permitted lien. Mr. Ratnesh did not provide DIR-2 form so could not be invited to the Board meeting. Mr. Ratnesh decided to rejoin NTPC without making any complaint against PFS of PTC.
15NRC - Nomination and Remuneration Committee 8 12.02. Mr. Chetan Kapadia, Senior Advocate for the SEBI, contended that pursuant to the appointment letter dated September 7, 2021 and the addendum dated September 16, 2021, Mr. Ratnesh was required to submit following documents:-
(i) Release order; and
(ii) self-attested copies of certificates relating to his educational qualification and experience at the time of joining.
12.03. Mr. Ratnesh submitted joining report on October 29, 2021 to the then Chairman Mr. Deepak Amitabh and same was forwarded to the Appellant directing him to "Accept the joining in terms of decision of PFS Board in 138th & 139th Board Meeting". Despite this the Appellant failed to take necessary steps to ensure the joining of Mr. Ratnesh. The Appellant proceeded to procure legal opinions to justify non-joining of Mr. Ratnesh and the said legal opinions were not shared with Mr. Ratnesh. At that point in time, the appellant was the only Executive Director on the Board of PFS and it was imperative that Director Finance be appointed at the earliest. However, neither Mr. Ratnesh nor the standby candidate was appointed. It was further contended that the terms of appointment as approved by NRC and the Board allowed appointment on lien basis. However, appellant insisted that appointment be made on absorption basis. At no point in time did the Board modify the terms of appointment to mandate appointment on absorption basis. The appellant deliberately did not share the list of documents with Mr. Ratnesh, purportedly required to complete his joining formalities. Therefore, the acts of the appellants were malafide with the intent to obstruct 9 Mr. Ratnesh from joining PFS as WTD and Director (Finance).
12.04. With regard to Issue No. 1 on Mr. Ratnesh not being allowed to join PFS as WTD and Director Finance, we note that the minutes of 132nd Board Meeting held on March 9, 2021 state that the recruitment process for Director Finance in PFS would be handled by PTC. The 43rd Meeting of NRC of PFS held on July 17, 2021 gave specific instructions to PTC HR to carry out the process of appointment of Director Finance, PFS. Chairman PFS was directed to issue letters to PTC, NTPC, NHPC, PGCIL and PFS for forwarding the names of suitable candidates. One of the decisions taken was to allow persons to come on deputation/lien. Minutes of 138th Board Meeting held on August 28, 2021 endorsed the NRC decision to allow the candidate to join on deputation / lien though MD & CEO (the Appellant) felt that the candidates should be allowed on absorption basis only. The Chairman PFS was delegated the power to decide on the terms and conditions of appointment. However, the minutes of 139th Board Meeting held on September 13, 2021 state 'as suggested by the MD and CEO, both the candidates are joining on absorption basis". Prior to this meeting joining letter was issued to Mr. Ratnesh on September 07, 2021. The letter did not indicate whether the appointment was on deputation or absorption basis. It only stated that at the time of joining, a release order from the last organisation and self-attested copies of qualification and experience certificate will have to be submitted. Mr. Ratnesh, submitted his joining report on October 29, 2021 on which the then Chairman noted 'accept the joining in terms of decisions of PFS Board in 138th and 139th Board Meeting' and marked the joining report to MD. Release order of 10 NTPC dated October 28, 2021 states that Mr. Ratnesh is released provisionally from NTPC w.e.f. October 28, 2021 and that he is allowed to retain lien on the post of CGM in NTPC up to September 30, 2023.
12.05. From the above sequence of events, we observe that the process of selection of Director Finance and joining was handled by PTC HR. Further, as noted in the impugned order Mr. Ratnesh corresponded with PTC HR and submitted the documents to them. The Board had given the mandate to Chairman, PFS to decide the terms and conditions for appointment of Director Finance. The invitation to PSUs to suggest suitable candidate as well as the appointment letter were issued by the then Chairman PFS. The appointment letter had no clarity as to whether the appointment was on absorption basis or on deputation / lien. In the 139th Board Meeting statement of the then Chairman PFS as recorded in the Minutes state that both the candidates, Director Finance and Director Operations, are joining on absorption basis. The directions given by the Chairman PFS to MD and CEO on the joining letter of Mr. Ratnesh states that 'accept the joining in terms and decisions of the PFS Board in 138 th and 139 Board Meeting'. In these circumstances, specially when the release letter of NTPC states that it is a provisional release, the responsibility to not allow Mr. Ratnesh to join as Director Finance cannot be squarely put on the appellant. Therefore, we conclude that the findings under Issue No. 1 are not conclusively proved.
13. Issue No. 2: (Loan to NSL Nagapatnam Power and Infratech Pvt. Ltd) 13.01. The findings against the appellant on this issue was that there was a significant delay on his part in putting up 11 the FAR 2018 which contain material information on NSL loan before the Board. The audit committee meetings to discuss the issue were delayed by the appellant. Even after clear direction of the Board to report the NSL loan as 'suspected fraud', there was a significant delay in reporting the matter to RBI.
13.02. The appellant submitted that the SEBI failed to consider that GSA16, (the Forensic Auditor) submitted its report on November 26, 2018 without having the benefit of examining all the documents because the Interim Resolution Professional (IRP) refused to co-operate with the audit, thus the FAR was incomplete and could not have been acted upon in order to report a fraud to the RBI. The learned counsel for the appellant submitted that SEBI failed to consider the recommendations in the FAR to consider enforcing forensic audit procedure on NSL through the NCLT. As per Respondent No. 2 (PTC India) fraud monitoring Policy, the Stress Team identifies fraud and it was reported to the RBI through the Fraud Monitoring Return. The Audit Committee considered the report while approving accounts for the Quarter ended December 2020 but did not recognize the account as a fraud or made any provisions. It was only in the 131st Board meeting held on February 04, 2021, Mr. Kamlesh Vikamsey, the Chairman of the Audit Committee had informed the Board that the Audit Committee did not treat the account as fraud and in case it was to be treated as fraud then related actions arising out of declaration of fraud were to be taken. It was further argued by the appellant's counsel that the Respondent No. 1 failed to consider the Committee of Independent Directors (CoID) report on the findings of the FAR 2018, which concluded 16 GSA - GSA & Associates 12 that the non-disclosure was not deliberate, but due to lack of internal controls.
13.03. Learned Senior Advocate for the SEBI, contended that the receipt of the FAR-2018 is not denied by the Appellant and the appellant being the MD and CEO, cannot shift the responsibility to place the FAR-2018 before the Board. It was imperative that the FAR-2018 was placed before the Board immediately, especially, when the findings relate to (1) no progress in the project to indicate expenditure not being incurred and; (2) diversion of funds to related parties. The Report of CoID, RMC2 and FAR-2022 echoed the findings. The RMC2 Report noted that non- disclosure of FAR-2018 was a corporate governance failure. The FAR-2018 consisted of material findings and was not placed before the Board. Pendency of proceedings before NCLT is inconsequential as the same relates to the claim being filed before the IRP. Further, legal opinion dated December 15, 2020 from one Mr. Abhinav Vasisht, Senior Advocate opines that the FAR-2018 notes that there was sufficient material qua diversion of funds and there was dereliction of duty by managerial personnel of PFS. Even subsequent to disclosure, the Appellant delayed providing the information to CoID17 / Board Members and further delayed acting on decision of Board and Audit Committee to report the NSL account as suspected fraud to RBI. The decision was taken on May 17, 2021 and letter to RBI was addressed on August 12, 2021.
13.04. We note that FAR 2018 on NSL Loan was received by the appellant on November 26, 2018. Even if the FAR 2018 was incomplete due to non-cooperation by the IRP the Board should have been informed regarding the receipt of 17 CoID - Committee of Independent Director 13 the report and its contents. Therefore, the substantial delay of two years on the part of PFS Management cannot be denied. The CoID which examined this issue also concluded that there was a dereliction of duty in non-disclosure of the FAR 2018. However, the same was not considered to be deliberate. In its 133rd Board Meeting held on May 17, 2021 the Board of PFS gave directions to report NSL loan as a suspected fraud to RBI. After placing the item for discussion in audit committee three times the reporting in the matter to RBI was done on August 12, 2021. However, this whole issue is to be viewed in the context that it was an isolated case out of 100's of loan cases dealt by PFS and NBFC, the loan had been sanctioned with the Board's approval, there was no allegation of any wrong doing on part of PFS in disbursement of loan and the CoID which looked into the matter stated that the delay did not appear to be deliberate. Thus, it is clear that though there was delay, it was not deliberate, nonetheless there was dereliction without any malafide intention. We record our finding accordingly.
14. Issue No: 3: (Inaction with respect to the Corporate Governance issues highlighted by the Ex-chairman Mr. Deepak Amitabh) 14.01. The Ex-chairman of PFS had informed the Board in the 137th meeting held on August 05, 2021 that he wanted to highlight the following points relating to corporate governance in PFS:- (a) not scheduling meeting of audit committee to discuss a 'suspected fraud' account of NSL despite insistence of Chairman, Audit Committee; (b) Director Marketing declining to sign duplicate deed of covenants as he might have had certain issues regarding governance of PFS and might not be comfortable signing the same; (c) a presentation provided to RMC of PTC was 14 different from the one provided by the appellant to PTC; (d) correspondence address to the Chairman PFS did not reach to his office; (e) inputs required to be given by PFS Management to the Committee of IDs on NSL issue were considerably delayed; (f) information / data sought by PTC either delayed or not given; (g) agenda items of PFS did not contain the required information / disclosure.
14.02. In the impugned order Issues at (a) and (e) have already been discussed under Issue No. 2. Charges related to points (b), (c) and (f) were not pursued and no finding has been given on point (g). Thus, the impugned order gives finding only on point (d) that the appellant was responsible in failing to ensure that correspondence addressed to Chairman PFS did not reach his office.
14.03. The Appellant submitted that the Managing Director and Chief Executive Officer is not responsible for the receipt and disclosure of the correspondences. The CFO received the RBI report and as directed by RBI, placed the same before the Board. The correspondence which Mr. Deepak Amitabh raised was the subject matter of discussion at the 135th meeting of the Board held on June 21, 2021. SEBI failed to consider the observations made by RBI in the Risk Assessment Report to ensure that Arm's length relationship is maintained between PTC India Ltd and PFS.
14.04. Learned Senior Counsel for the SEBI submitted that in the RMC Meeting held on February 16, 2022, the appellant had admitted that the RBI report was received by him and since the direction was to place it before the Board, the report was placed directly before the Board. Having decided himself to place the report before Board, the appellant cannot seek now to shift the responsibility. Admittedly, notices were sent to Chairman and meetings 15 were attended by him, therefore, correspondences could also be forwarded to the Chairman, irrespective of existence of separate office or the then ongoing Pandemic. When Mr. Rajib Mishra (Noticee No. 2) was appointed as Chairman, the RBI Letters were duly forwarded to him by e-mail. Accordingly, same steps ought to have been taken during Mr. Deepak Amitabh's tenure.
14.05. In our view, the issue is trivial and does not behove the regulator to take up such matters seriously. MD and CEO is not expected to ensure that correspondence reaches the right person. In any case, the Chairman was an Ex- Officio Non-Executive Chairman and did not have a regular office. Only one instance of such an issue has been pointed out. In this instance too, the RBI Inspection Report was put up to the Board and there is no allegation of delay in putting up the report to the Board. Therefore, in our view, the findings are not proved.
15. Issue No: 4: (Change in terms & conditions of loan granted to Patel Darah Jhalawar Highway Limited) 15.01. The impugned order found that the appellant had changed the terms and conditions of loan granted to Patel Darah Jhalawar Highway Limited without the approval of the PFS Board.
15.02. The learned advocate for the appellant submitted that the pre-disbursement condition of obtaining approval from NHAI18 for SCOD19 extension had been captured in the loan agreement as approved by the Board. Pursuant to the approval of the terms of the agenda, appraisal note by the Board, documentation had been carried out by PFS legal 18 National Highways Authority of India 19 SCOD - Scheduled Commercial Operate Date 16 team without any further reference to the appellant. Sanction letter dated December 31, 2020 issued by the PFS sanctioning the loan has specifically recorded the condition approved by the Board as one of the 'Pre-Disbursement Conditions'. Amendment Agreement dated March 04, 2021, was not drafted and finalized by the Company alone; rather was done by all the members of the consortium of lenders. SEBI overlooked the fact that the sanction letter for the amendments was made by the legal team and approved by the Director (Operations) and that no approval was sought from the appellant. SEBI failed to consider that the Risk Management Committee Report 1 (RMC 1) concluded that there was no deviation in the terms of the loan.
15.03. SEBI, contended that when a grant of loan was approved by the Board in its 130th Board Meeting held on December 19, 2020, it was specifically stated that "any modification in the terms and conditions may be made with the approval of the Board only". One of the pre- disbursement conditions was modified in relation to extension without the disbursement being dependent on such extension. The amendment is significant and ought to have been approved by the Board. Pursuant to this amendment, extension of timeline could be obtained by July 31, 2021 as opposed to the original condition wherein the extension was to be obtained upfront for commissioning of the project by July 31, 2021. Considering this the loan was disbursed on June 10, 2021 at which point EOT20 extension was only upto May 18, 2021 and SCOD extension was only upto June 06, 2021.
15.04. We have examined the relevant documents and submissions with regard to this issue. We find that the 20 Extension of Timeline 17 respondent did not take into consideration the appellant's submission that no approval was sought from the appellant for the Amendment Agreement No. III. We note that the amendment brought about was as decided by the consortium of lenders.
15.05. The minutes of 140th Board Meeting held on September 29, 2021 on this issue are extracted below:-
"The Board expressed its concern over the change in the condition approved by the Board in the agreement(s). The same amounts to a change without the approval of the Board. The management may bring the complete details to the Board in this regard by October 31, 2021. If the Board directives were not followed in the instant case, then responsibility for the same be fixed and necessary action should be taken by MD and CEO".
15.06. Thus, from the above directions of the Board it is clear that the appellant himself was directed to fix the responsibility for amending the relevant pre-sanctioned term, thereby, implying that the Board believed that the appellant was not responsible for the amendment. Thus, we hold that the finding against the Appellant under this issue is not proved.
16. Issue No. 5: (Ignoring communication of Independent Directors and providing no or limited/incomplete information to the Board Members) 16.01. The finding under this issue was with regard to not acceding to the request of the IDs for independent legal advice on Mr. Ratnesh appointment, not providing documentation pertaining to appointment and joining of Mr. Ratnesh, not calling the meeting of NRC rendering the NRC dysfunction and not providing information or limited /incomplete information to the Board.
1816.02. The learned Advocate for the appellant submitted that the appellant did not refuse to support the efforts of the IDs to obtain the legal opinion. The Company did not deny for appointment of legal counsel and paid for the expenses of the same. Legal counsel was appointed by the IDs suo- moto therefore the issue of non-appointment does not arise. The MD was not responsible to provide documents regarding the appointment of Mr. Ratnesh. He was not part of the process, nor a member of NRC. The IDs who sought documents were themselves part of the NRC. Joining of Mr. Ratnesh was handled by PTC HR and as submitted by Company Secretary to RMC, no documents relating to joining of Mr. Ratnesh were provided by PTC- HR to PFS. PTC, the promoter of PFS, was responsible for appointment of Directors. The PTC nominated Director was withdrawn by NTPC. Therefore, the appellant had no role to play in this regard.
16.03 On behalf of the SEBI, it was submitted that the IDs had addressed various emails seeking appointment of legal counsel wherein the appellant directed them to Noticee No. 2. However, Noticee No. 2 instead of assisting in the appointment of legal counsel stated that the request was pre-mature. Both the appellant and Noticee No. 2 failed to address the issue of non-appointment of Mr. Ratnesh wherein, neither the legal counsel was appointed nor documents sought for were provided. Information regarding joining / non-joining of Mr. Ratnesh was deliberately not disclosed. In December 2021, NRC meeting was called for to appoint a woman Director but the same was postponed, at the instance of the appellant and Noticee No. 2. Before 19 the vacancy could be filled up, PTC withdrew the nomination of Mrs. Renu Narang rendering NRC dysfunctional.
16.04. We have carefully considered the rival contentions. The first email from IDs to the appellant seeking independent legal advice from a lawyer of their choice is dated December 07, 2021. The chairman (Noticee No. 2) informed the IDs that the management was in the process of submitting a comprehensive report and, therefore, a separate legal consultation was pre-mature. On December 15, 2021 the IDs conveyed to the appellant that they were going ahead with the appointment of an advocate and followed up by appointing an advocate suo-moto. The expenses incurred on appointment of such an advocate was informed to the appellant on April 05, 2022 and were duly paid by the Company. We note that the gap between the initial request of the IDs and their decision to appoint an advocate is approximately eight days and this cannot be considered as in undue delay. With regard to not calling meeting of NRC, we note that the appellant was not a member of NRC and it was not incumbent upon him to call the meeting of NRC. The management had attempted to reconstitute the NRC, however, the IDs did not approve the resolution dated December 31, 2021. With regard to withdrawal of Mrs. Renu Narang from the Board of PFS, we note that the appellant had no role to play as she was a nominee director of NTPC and her nomination was withdrawn by NTPC. In view of these facts, we find that the findings with regard to Issue No. 5 made against the appellant are not substantiated.
2017. Issue No. 6: (Additional issues)
(a) Delays in commencement of Forensic Audit and non-cooperation with Forensic Auditor:-
(i) The impugned order finds that the appellant did not act in the best interest of the company and its shareholders by failing to cooperate with the forensic auditor, which resulted in a delay in the preparation of the FAR-2022 and finalizing financial results of PFS for FY 22.
(ii) Learned Counsel for the Appellant submitted that Mr. Jayant Gokhale appointed CNK21 in his capacity as Audit Committee Chairman without carrying out due diligence and without considering the Conflict of Interest between CNK and PFS due to their association with Mr. Kamlesh Vikamsey, then an independent director of PFS.
CNK publicly supported the election campaign of Kamlesh Shivji Vikamsey and his brother/Partners and the same were also notified vide the complaints filed by the shareholders. The Appellant constituted a committee of Senior Officials of the Company to handle information sharing with CNK and same was operated under the supervision of the Board. The delays in completion of the Forensic Audit Report were repeatedly reported to SEBI. In the 166th Board Meeting of PFS dated February 3, 2023, the Board was informed that RBI vide its letter dated January 1, 2023, had advised the Company to revisit the FAR prepared by CNK and take necessary action.
(iii) On behalf of the SEBI, it was submitted that admittedly, the Appellant had objected to appointment of the Forensic Auditor. Further, the documents such as report 21 CNK - M/s. CNK & Associates LLP 21 of PWC on HR related matters were not provided. Due to non-cooperation by the Appellant, the forensic audit could only commence in July 2022, despite appointment in April 2022. Even the engagement letter was eventually signed by the Audit Committee. The affairs of the Company were being investigated by various authorities, including RBI and SEBI, wherein in January 2022 independent directors had resigned raising concerns with regard to corporate governance lapses. It was, therefore, imperative to investigate the affairs and enable the forensic audit instead of creating obstructions on one pretext or the other.
(iv) Having considered the rival contentions, we observe that the Forensic Auditor was appointed suo motu by the Audit Committee and the Forensic Auditor was not empanelled by either SEBI or the Exchanges for conducting Forensic Auditor. While Forensic Auditor was appointed on April 26, 2022 by the Audit Committee, engagement letter was issued on July 16, 2022, the Forensic Auditor issued first preliminary findings on September 23, 2022 and final reports were issued on November 4, 2022. The report itself indicates in the chronology of events that there was continuous dialogue with PFS and therefore to conclude non- cooperation by the Company and the Appellant does not appear to be right conclusion. As far as delay in finalizing financial results of PFS for FY 2023 is concerned, SEBI itself had directed not to hold any Board meeting before the receipt of FAR and so the financial results could not be finalized.
(b) Reconstitution of Audit Committee prior to submission of FAR-2022:-
(i) The impugned order finds that by reconstituting the Audit Committee the Noticees contravened SEBI's 22 directions not to change the structure and composition of the Board till completion of forensic audit.
(ii) The Appellant contended that the email dated May 13, 2022 of SEBI to PFS advising it to not change the structure and composition of the Board was in the nature of advisory, issued by Corporate Finance Department - II and was not in the nature of an order issued by SEBI, in accordance with the SEBI Act. At any rate, the email dated May 13, 2022 has only advised PFS to abstain from altering the structure and composition of its Board and not the committees.
(iii) SEBI contended that the Appellant has deliberately sought to flout directions of SEBI wherein legal opinions were sought to justify non-compliance with such directions. Audit Committee is an extension of Board and in view of the ongoing Forensic Audit SEBI had directed that the Board not be reconstituted until completion of the Forensic Audit. Re-
constitution of Audit committee was contrary to the directions passed vide email dated May 13 2022 read with email dated October 25, 2022, wherein Mr. Jayant Gokhale, the Independent Director had raised a red flag in relation to the same.
(iv) We note that the re-constitution of the Audit Committee had to be done by the Board as per Section 177 of Companies Act, 2013. Therefore, in our view, the Appellant alone could not be held responsible for this charge as the re- constitution was done by the Board.
(c) Issues related to disclosure of Forensic Audit Report:-
(i) The findings against the appellant on this issue was that FAR-2022 was not disclosed in a prudent and 23 objective manner. It was not disclosed by uploading the document, rather only an announcement was made that the forensic audit was complete. When disclosed, it was disclosed in one complete document as 'General updates' along with PFS Management's response and remarks of Ernst & Young LLP whereas other announcements were made under Regulation 30 of LODR.
(ii) On this aspect, the Appellant contended that the disclosures to the Stock Exchanges were made on November 8, 2022 by the Compliance Officer of PFS as approved by the Board in its meeting held on November 7, 2022. The FAR as received from CNK was not in a machine-
readable format and contained certain pages of the report as well as the exhibits which were not readable. When the stock exchanges brought this to the notice of PFS, upon receipt of the revised report from CNK, the same was submitted by the Compliance Officer to the stock exchanges on November 22, 2022.
(iii) In reply, SEBI submitted that the FAR-2022 was completed on April 27, 2022 and it was not disclosed until November 2022. Initially, on November 8, 2022, it was simply disclosed that Forensic Audit was complete. On November 9, 2022, the disclosure were made under "general update" wherein a consolidated document consisting of response of PFS, and remarks of EY were uploaded, to minimize the impact of findings arrived at in FAR-2022. Considering the nature of findings, it was imperative that the document was uploaded as a separate announcement under Regulation 30 of LODR Regulations.
(iv) While considering the rival contentions we note that the finding is that Appellant was responsible for 24 ensuring that disclosures were made prudently and in an objective manner. It is not the case of the Respondent that the disclosure was not made at all, rather it was disclosed as a 'General updates'. In our view it is the Company which has to made disclosure. The Company has not been charged by the Respondent. However, as noted in the Impugned Order, the disclosures were being made with approval of the Appellant, therefore, the finding stands substantiated.
(d) Delay in disclosing the Resignation of Ms. Sushma Nath (ID of PFS):-
(i) The impugned order finds that Ms. Sushma Nath intimated her resignation on November 22, 2022. The information regarding resignation was disclosed on November 24, 2022 with a delay of more than 24 hours which exceeded the permissible timeframe for disclosure.
(ii) The Appellant submitted that SEBI failed to consider that the disclosure to the stock exchanges is done by the Company Secretary/Compliance Officer and not by the Managing Director & Chief Executive Officer. The documents requested for undertaking the disclosures were received on November 23, 2022 at 16:42 hrs and the same was disclosed on the next day i.e. November 24, 2022. The delay was inadvertent and cannot lead to drastic directions and significantly high penalties as issued by the WTM.
(iii) SEBI, submitted that the disclosure of Ms. Sushma Nath's resignation as an independent director from PFS's Board was delayed by more than 24 hours. Ms. Nath intimated her resignation on November 22, 2022, at 11:00 a.m., however, the information regarding her resignation was disseminated only on November 24, 2022, at 5:42 p.m. 25 exceeding the permissible timeframe. It cannot be said that merely because the delay is of a single day it is inconsequential.
(iv) Admittedly, there was one day's delay in disclosing the resignation of Ms. Sushma Nath, ID to the Stock Exchange. In our view it is the Company which has to make the disclosure and the Company Secretary / Compliance Officer is principally responsible for the same.
Neither the Company nor the Company Secretary have been charged on this account. However, as disclosures were being made with the approval of the Appellant, delay of one day can be attributed to the Appellant.
(e) Functioning of Audit Committee:-
(i) The impugned order finds that management of
company was responsible to bring to the knowledge about SEBI's communication dated June 03, 2022 to Audit Committee with respect to non-adoption and non- recommendation of Q3 results. The meetings were scheduled without adequate and complete information to Audit Committee within very short notice and agenda was included at the last moment.
(ii) The Appellant submitted that SEBI has second- guessed the Appellant's and Respondent No. 2's Board decisions regarding the urgency in holding of such meeting. A meeting of the Audit Committee was held, wherein Mr. Jayant Gokhale, Chairman of Audit Committee had raised issued regarding its functioning. The assertions of Mr. Gokhale, and the allegations levelled therein, did not reflect complete picture regarding the functioning of Audit Committee. The allegations made in the resignation letters of Mr. Gokhale and Mr. D.S. Saksena had been denied by the Company.
26(iii) SEBI submitted that the Company was running in a fashion to ensure that independent directors could not take informed decisions and partake in the affairs of the company, and to enable the same, Audit Committee meetings were called at short notice and /or without agenda items. The minutes were not true depiction of proceedings of the meeting. Even when information was sought by the Audit Committee members, the same was shared 5 minutes before the meeting, that too incomplete information to adversely affect the functioning of the Audit Committee.
(iv) With regard to this issue, we note that the Appellant was not a member of the Audit Committee. The directions of the Audit Committee were to the management of the Company. The CFO & Company Secretary were primarily responsible for submitting financials and related document to the Audit Committee. Issue regarding drafting of the minutes of the Audit Committee meetings as well as preparation of agenda items and their submission / non- submission cannot be attributed squarely upon the appellant.
18. Having examined the issues in details, we hold that, except for one main issue and two sub-issues, other findings against the Appellant have not been conclusively proved. The Respondent has considered the Appellant to be the Company as well as the management and alleged that the Appellant was solely responsible with all that went wrong in the Company. The Respondent did not charge the Company and the findings indicate that in the eyes of the Respondent, the Appellant, as the MD & CEO was single - handedly running the Company and responsible for all that happened in the company from ensuring that correspondence reaches 27 the right person to deciding on papers to be put up to Auditors / Committee of the Board / Board etc. The impugned order frequently considers the "Company" & the "management" as a synonym to the Appellant.
19. In our view, the entire issue was at the most a corporate battle in which such interference by the Regulator was not called for. It is inconceivable that in a Company wherein major Maharatna PSUs are shareholders, one single individual could run amok. This also brings the questions as to the role of the nominee directors and the independent directors. The Regulator has admittedly, not made any inquiries as to their conduct. It is noteworthy that all was good till three-four months before the end of the tenure of the then Chairman and of the IDs. In fact, the minutes of 9th meeting of the IDs held on October 5, 2021 (barely 3 months before the resignation of 3 IDs) reads as follows:-
"7.3(e) The Independent Directors agreed that Dr. Pawan Singh (MD & CEO) has contributed greatly to the ability of the company to sustain itself in these difficult times post the ILFS crisis and Covid. He has a deep understanding of Finance and the Energy Sector immense experience in power and finance sector. He leads from the front and is able to take on the various challenges that these difficult times have thrown up. However despite his best efforts he has not been able to grow the company. Another area where his performance was below expectations was in the crucial area of succession planning. Finally in some crucial areas his response to the requests of the Board was found to be a bit slow. On considering his entire performance the Independent Directors rated him as Meets Expectations and accordingly he was given Grade 2."
"7.5 Assess the quality, quantity and timeliness of flow of information between the company management and the board that is necessary for the Board to effectively and reasonably perform their duties.
The Independent Directors discussed the issue of quality, quantity and timeliness of flow of information between the Company management and the Board that is necessary for the Board / Committees to function effectively and found the same as "Excellent". It was 28 observed that all relevant information was provided to the Board in a timely fashion. This applied both to the submission of agenda papers for the Board and its Committees as well as any other information that was subsequently requested for."
(emphasis supplied)
20. Thus, on one hand, the IDs did not find any issues with the Appellant and the Company and on the other within 3-4 months they resigned and raised some issues which were covered in their report dated October 5, 2021. In such circumstances, issuing appreciation letters to the IDs by a quasi-judicial authority should have been avoided. Further, as pointed out by RBI, it is apparent that arm's length distance was not maintained between PTC (Respondent No.
2) and PFS. This was further exacerbated with HR functions of PFS being handed over to PTC HR and appointment of IDs of PTC as IDs on PFS.
21. In view of above, as we have held that the findings against the Appellant stand established in one issue (Issue No. 2 - Loan to NSL Nagapatnam Power and Infratech Pvt. Ltd. (NPL) and two sub issues (issues related to disclosure of Forensic Audit Report and delay in disclosing the resignation of Mrs. Sushma Nath), it would be just and appropriate if the penalty on the Appellant is reduced to Rs. 3 lakh from Rs. 25 lakh and the period of debarment is suitably altered.
22. Therefore, the following:-
ORDER i. Direction at paragraph 253(a) restraining the appellant from holding any position in listed Company or intermediary registered with SEBI or 29 associating himself with any Company which intends to raise money from market in any capacity for a period of two years stands reduced to the period foregone till the date of this order;
ii. Penalty imposed vide paragraph 253(c) stands reduced to Rs. 3 lakh;
iii. The impugned order dated June 12, 2024 stands modified accordingly;
iv. Pending interlocutory application(s), if any, stands disposed of. No costs.
Justice P.S. Dinesh Kumar Presiding Officer Ms. Meera Swarup Technical Member Dr. Dheeraj Bhatnagar Technical Member 05.12.2025 msb