PNB Housing, directors shell out Rs 73 lakh to settle case with Sebi

The payment was made under settlement rules, which allow an alleged wrongdoer to settle a matter without admitting or denying the guilt

PNB Housing Finance and its board of directors paid nearly Rs 73 lakh to the Securities and Exchange Board of India (Sebi) to settle a case around preferential allotment of shares to the Carlyle Group and other investors. The payment was made under the settlement regulations, which allow an alleged wrongdoer to settle a matter without admitting or denying the guilt.

This puts an end to the case involving high legal drama, which saw the market regulator and mortgage lender at loggerheads on whether articles of association (AoA) should gain precedence over Sebi’s regulations around share pricing. The case saw Sebi move the apex court after getting an unsatisfactory verdict from the Securities Appellate Tribunal (SAT).

In May 2021, PNB Housing Finance announced a preferential allotment of shares worth Rs 3,200 crore and Rs 800 crore worth of warrants to the Carlyle Group, Aditya Puri’s family investment vehicle Salisbury Investments, General Atlantic and Alpha Investments at Rs 390 apiece. Following the announcement of the deal, shares of PNB Housing had topped Rs 800 from Rs 400 levels.

Proxy advisory firm SES had called the deal “unfair” to public shareholders of the company and shareholders of PNB.

Taking note of the report by a proxy firm, Sebi had directed the company to halt preferential allotment of shares as it was not in accordance with the applicable provision in the company’s AoA. The regulator had directed the company to get its valuation done from an independent valuer as mandated under its AoA.

The mortgage lender then had moved SAT, challenging the regulator’s directive.  On October 16, 2021, PNB Housing decided not to proceed with the preferential issue. Later, the Supreme Court dismissed Sebi’s appeal declaring it as “infructuous”.

Meanwhile, in a letter dated June 25, 2021, Sebi had asked the company and its board to explain as to “why it should not be construed that the directors have failed to discharge the responsibility cast upon them under law, including the statutory responsibility towards minority shareholders, and consequently why appropriate actions in terms of law be not considered for such failure.”

Following Sebi’s letter in June, PNB Housing and its board filed an application before Sebi to settle the matter through the consent route. Of the total penalty, Rs 44 lakh is towards legal fees.

Shares of PNB Housing have more than halved in the past one year. Its shares last closed at Rs 338.