Questioning Sebi’s decision to halt an extraordinary general meeting (EGM) of
Housing, the tribunal asked whether it was fair for the regulator to step in before the shareholders took a decision and if it thought that they were “dummies”. The tribunal was hearing an appeal by PNB Housing against Sebi’s decision to stall a Rs 4,000-crore preferential allotment to private equity investors led by Carlyle. Sebi had said that the process was not consistent with the company’s articles of association and asked the firm to undertake a valuation exercise. The tribunal adjourned the hearing to Friday at the request of Sebi’s advocate.
Pointing out that the first question to be addressed was at what stage can Sebi step in, the tribunal said that the regulator could have passed an order after the EGM. Sebi’s advocate argued that the allotment would result in a change in control and consequently an open offer. He said that the price of shares in the preferential issue would also have a bearing on the open offer price and result in small investors being short-changed.
Sebi’s counsel cited the letter written by PNB to its subsidiary, asking it to abide by the articles of association.
Last month, Sebi had written two letters to PNB Housing, one to the company to put on hold its scheduled EGM on June 22. This was allowed by SAT, but it asked the company not to announce the voting outcome. The other one was on June 25 that asked all the directors on its board to explain why they allowed the process and pricing of the preferential allotment to Carlyle, which is alleged to have flouted the law.