RoC imposes penalty on PTC India Financial Services, MD Pawan Singh

New Delhi: The Registrar of Companies (RoC), Delhi and Haryana, on Tuesday imposed penalties on PTC India Financial Services Ltd and its MD and chief executive officer Pawan Singh, who is on a forced leave, for allegedly defaulting on having a functional nomination and remuneration committee in the state-run company as required under law.

The development comes just days after the board of the company sent Singh on leave till his superannuation in October, on the direction of RBI.

Pawan Singh is expected to appeal against the order, said a person close the MD, requesting anonymity.

The nomination and remuneration committee in a company, which has to have three or more non-executive directors out of which not less than half have to be independent directors, plays a key role in appointment of directors and persons in senior management and their compensation. Non-executive directors are those who are not involved in day-to-day management of the company and independent directors are a subset of them having to follow stricter norms to ensure their independence, lack of pecuniary relationship with the company and objectivity.

The RoC order said posted on the website of the ministry of corporate affairs said that the company allegedly did not have a functional nomination and remuneration committee between early December 2021 and early April 2022.

"Evidently, the constitution of the nomination and remuneration committee (NRC) fell short on 10 December, 2021. Even after that swift steps were not taken to re-constitute the NRC," the RoC order alleged. The company and its MD & CEO have failed to discharge their obligation under Sections 178 of the Companies Act, 2013, the order alleged.

The company has to pay a penalty of ₹500,000 and Singh has to pay ₹100,000 within 90 days for the alleged default. The company and Singh have the right to appeal against the order to the Regional Director attached to the ministry of corporate affairs, within 60 days.

The penalty comes after the matter was examined by the RoC based on the concerns raised by three independent directors on the board of the company who had resigned on the same day last January, alleging corporate governance issues in the company.

Eventually, independent directors sitting on the Board of PTC India Limited, the parent company of PFS, were appointed as independent directors of PFS in March 2022. At the first meeting of the newly constituted Board on 6 April 2022, the NRC was constituted.

"Quite clearly, the role of the NRC is seminal in identifying persons who are suitable for becoming directors in a company. It is also responsible for laying down the criteria qualifications, positive attributes and independence of a director, besides laying down policies for syncing remuneration with the performance benchmarks," the order said.

On 20 June, the board of controversy-hit PFS sent its Pawan Singh on leave amid persistent allegations of corporate misgovernance. PFS has already initiated the process of selecting a new MD & CEO.

Mahendra Lodha, the Director (Finance) and CFO of the company was given the additional responsibilities of the MD & CEO till a regular MD is appointed.

The company has been surrounded by controversies amid a series of allegations of corporate misgovernance since last year. Late last year, former secretary in the finance ministry Sushma Nath, former principal chief commissioner of income tax, Mumbai, Devendra Swaroop Saksena and Jayant Purushottam Gokhale, founder of Gokhale & Sathe, resigned from its board.

Independent directors on the board of its parent company PTC India also have raised concerns on the governance issues in PFS.

In his resignation letter from the board of PFS, Devendra Swaroop Saksena had said the PTC India subsidiary follows deficient governance practices as shown by findings of forensic audit conducted between July 2022 and November 2022, non-constitution or delayed constitution of statutory committees that have resulted in penal actions by regulators among others.

Queries sent to PFS, PTC India, and Pawan Singh remained unanswered till press time. 

In response to e-mailed queries, a power ministry spokesperson said, "Ministry has no comments. The board is competent to take all necessary actions."