Housing’s articles of association (AoA) stipulate that the valuation should be conducted by a registered valuer, this is not required under the Companies Law for a listed company. “The golden rule of law is to follow what the legislature says. Sebi can’t say what the legislature says is wholly excluded is required to be followed because of the AoA,” Dwarkadas said. “I submit there is no room for ambiguity. Listed company as a class is concerned — they are wholly taken out. What is excluded is excluded. It can’t be brought through the back door.”
Listed companies are required to determine the price as per Sebi’s Issue of Capital and Disclosure Requirements (ICDR) regulations. “If a listed company doesn’t have a valuation clause in its AoA, then how will you calculate? The rule has to be the same for all listed companies,” Dwarkadas said.
The Companies Law mandates an unlisted company to determine the valuation by a registered valuer.
Tribunal Reserves Order
Counsel for Sebi and PNB Housing concluded arguments on Monday. The tribunal reserved its order in the matter.
Fredun Devitre, senior counsel for Sebi, said there was no conflict and that the rule of harmonious construction would apply in reconciling the two points. Sebi has a right to intervene because there are 99,000 individual investors in PNB Housing. Arriving at a floor price under ICDR regulations doesn’t bar the company from conducting the pricing exercise under its AoA and arriving at a higher price, Devitre said. The Sebi counsel questioned the affidavit filed by the company and said the AoA had been specifically introduced at the time of listing.
The opposing counsel argued against harmonisation. “Sebi is trying to put the cart before the horse. You can’t have an interpretation by the regulator, where you do one and you fall foul of another,” Dwarkadas said. “Sebi is saying let’s have two prices — higher will be taken and not lower. There is no need for this kind of harmonisation.”
PNB Housing’s board approved a preferential allotment to investors led by Carlyle, which holds a 32% stake, in May. Carlyle’s holding was projected to cross the 50% threshold, triggering an open offer. Proxy advisory firms raised red flags over the pricing of the deal, saying it was too low. Sebi told the housing finance company to put the shareholder vote on the deal on hold and get an independent valuation. PNB Housing moved SAT against the Sebi order.
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