PNB Hsg Fin, 12 individuals settle with Sebi a case related to Carlyle deal

The housing finance player, part of state-owned PNB, and the 12 individuals, who were directors of the company as on May 31, 2021, jointly paid Rs 72.76 lakh towards settlement

PNB Housing Finance and 12 individuals have settled with markets regulator Sebi a case of alleged violations of norms in preferential securities issuance to US-based Carlyle Group for a deal that was scrapped later.

The housing finance player, part of state-owned Punjab National Bank, and the 12 individuals, who were directors of the company as on May 31, 2021, jointly paid Rs 72.76 lakh towards settlement. The amount includes Rs 44.26 lakh as legal costs, the Securities and Exchange Board of India (Sebi) said in an order on Tuesday.

The order came after PNB Housing Finance along with its directors approached Sebi proposing to settle the alleged violations of LODR (Listing Obligations and Disclosure Requirement) rules in Carlye Group case "without admitting or denying the findings" through a settlement order.

"The proceedings that may have been initiated for the alleged defaults... are settled qua the applicants (13 applicants)," the regulator said in the settlement order.

It was alleged that the applicants had failed to obtain a registered valuer's report in accordance with the company's Articles of Association (AoA) and also failed to take into account the interests of all the stakeholders by not accounting for control premium in the pricing of the preferential issue.

In addition, the applicants had allegedly failed to make adequate and timely disclosures to the stock exchanges about material information. Through such acts, they allegedly flouted LODR rules.

The case relates to PNB Housing Finance making a corporate announcement that its board of directors in May 2021 about approving preferential issue of shares and warrants to entities belonging to the Carlyle Group.

Soon after the preference issue of shares was announced, controversy erupted with regard to the valuation of the shares to be offered to the investors. Sebi raised concerns and put the deal on hold and called for revaluation of the shares.

Subsequently, PNB Housing Finance approached the Securities Appellate Tribunal (SAT) which gave a split verdict in August 2021.

Later, Sebi approached the Supreme Court in the matter.

However, PNB Housing Finance, later, decided not to proceed with the preferential issue.

Apart from PNB Housing Finance, those settled the case with Sebi include Rajneesh Karnatak, Sunil Kaul, Neeraj Vyas, CH SS Mallikarjuna Rao, Chandrasekaran Ramakrishnan and Gita Nayyar. Other individuals are Sudarshan Sen, Nilesh S Vikamsey, Tejendra Mohan Bhasin, Hardayal Prasad, Ashwani Kumar Gupta and Kapil Modi

All the 12 individuals were directors of PNB Housing Finance as of May 31, 2021, the regulator noted.

In June 2021. Sebi through separate letters to the company and 12 individuals had sought their explanations.

"... 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," as per the similarly-worded letters.

In response, the applicants had filed for settlement of the case.