NEW DELHI: The Securities Appellate Tribunal on Monday delivered a split verdict on the tussle between PNB Housing Finance and markets watchdog Sebi over the proposed Rs 4,000 crore-investment by Carlyle Group, a development that will continue to keep the much-needed deal for the funds-starved lender in limbo.
The tribunal also said that its interim order passed in June, wherein the PNB Housing Finance was restrained from disclosing the results of shareholders' voting on the deal, would continue.
While there was no immediate comments from PNB Housing Finance on the verdict, the matter is likely to move to the Supreme Court since the tribunal did not provide a clear verdict on the way forward for the deal.
The Rs 4,000 crore-deal, stitched together after majority shareholder Punjab National Bank expressed its inability to infuse funds in February this year, that would see investment major Carlyle Group taking control of the lender was announced in May.
The proposed transaction has been contested by Sebi over valuation of shares and PNB Housing Finance had moved the tribunal against the regulator's directive passed in June.
The two-member Securities Appellate Tribunal (SAT) bench of Justice Tarun Agarwala and Justice M T Joshi has delivered a split verdict on the matter.
This means that the fate of the deal, which will see infusion of funds into PNB Housing Finance, remains uncertain at least for now.
"In view of the difference of opinion between the members of the bench we direct the interim order dated 21st June, 2021 to continue till further order," the tribunal said in a 56-page order on Monday.
While the transaction was cleared by PNB Housing Finance's board, it came under the lens of the Securities and Exchange Board of India (Sebi) after a proxy advisory firm raised red flags saying the deal was not in favour of the minority shareholders as well as Punjab National Bank, and about certain corporate governance issues.
Soon after Sebi issued a directive on June 18 asking the listed PNB Housing Finance not to go ahead with shareholders' voting on the deal with Carlyle Group on grounds of valuation issues, the lender moved the SAT against the watchdog.
The company's Extraordinary General Meeting (EGM) or shareholders' meet was held on June 22.
Prior to that, SAT passed an order wherein it set aside the Sebi directive and allowed the lender to conduct the meet with the condition that results of the voting on the deal will not be disclosed till further orders.
Amid the continuing uncertainty, the tribunal, on Monday, reiterated that its June order will continue to be in force as the two-member bench expressed different opinions on the case leading to a split verdict.
In the interim order issued on June 21, SAT said that no factual dispute exists and only an interpretation of the provisions of the ICDR (Issue of Capital and Disclosure Requirements) Regulations and Companies Act read with Articles of Association is required to be considered.
On May 31, PNB Housing Finance announced the deal of Rs 4,000 crore capital infusion led by existing investor US-based Carlyle group, alongside a clutch of other investors, by way of issuing shares and warrants.
In the preferential allotment, PNB Housing Finance shares and warrants are to be issued at a price of Rs 390 apiece which was lower than the price when the deal was announced in May.
In the 56-page order, Agarwala said Sebi directive of June 18 "cannot be sustained and is quashed" while Joshi was of the view that the regulator's move was to "safeguard the interest of the investors".
"The impugned communication/order of the General Manager dated 18th June, 2021 holding that agenda no.1 being ultra vires the Articles of Association shall not be acted upon until the appellant obtains a report from a registered valuer in terms of Article 19 (2) of the Articles of Association is patently illegal and cannot be sustained," Agarwala said.
The agenda no.1 of the EGM was related to seeking shareholders' nod for allotting preferential shares to the Carlyle-led investors.
Agarwala also said that Sebi had passed the impugned order without hearing the appellant.
However, Joshi said that in view of the impending EGM, Sebi had passed the order and the "procedure adopted by Sebi therefore cannot be faulted with".
The right of the shareholders to accept or reject an agenda is supreme and paramount which cannot be whittled by any executive action of the respondent (Sebi), Agarwala said.
"We are also of the opinion that the respondent (Sebi) had no jurisdiction to issue such a direction at that stage before any decision could be taken in the extraordinary general meeting (EGM) by the shareholders," he said.
Such unilateral decision taken by the authority is patently erroneous and smacks of arbitrariness quite apart from the fact that the same was also violative of the principles of natural justice, he added.
However, Joshi said that Sebi's order "in my view the same cannot be called illegal or unjustified".
Stock of PNB Housing Finance declined over two per cent to close at Rs 692.55 apiece on BSE on Monday.