Punjab National Bank managing director and CEO SS Mallikarjuna Rao said there was no error of judgement with regard to the fund infusion decision of PNB Housing Finance.

The bank never objected to the Rs 4,000-crore PNB Housing Finance-Carlyle deal but only asked the subsidiary to follow the directives of the market regulator Sebi, Rao told reporters.

Punjab National bank holds a 32.6% stake in the housing finance firm.

“When Sebi issued the letter, we asked the board to restructure the deal accordingly,” Rao said, adding that the bank’s future course of action would depend on the Securities Appellate Tribunal’s (SAT) order.

After hearing all parties, SAT has kept its order reserve. Earlier, Sebi had directed PNB Housing to carry out the valuation process of shares from an independent valuer. PNB Housing had contested that it has followed Sebi norms in deciding the issue price at Rs 390 apiece.

Defending the decision taken at the PNB Housing Finance board meeting on 31 May, Rao said: "If you have seen the share price of PNB Housing Finance in the last 2-2.5 years, it was hovering at below rate. ICDR guidelines clearly indicate the kind of formula to be used for pricing for listed entities. As on the date of taking a decision, it would never have been thought by anyone of us that the price would increase so high in the subsequent days based on the decision taken by the company. So, there was no error of judgement."

On 31 May, PNB Housing Finance said that the Carlyle Group, along with its affiliates, existing investors, and former HDFC chief executive Aditya Puri’s family investment vehicle will together invest up to Rs 4,000 crore in the company.

When PNB Housing Finance consulted the legal firms, Rao said there was an opinion that the ICDR (Issue of Capital and Disclosure Requirements) guidelines prevail over the Articles of Association (AoA) clause.

Separately, PNB also sought an opinion where an eminent lawyer said there may not be any conflict of interest between the clause in AoA and ICDR guidelines. "The interpretation will be put to rest by judiciary, quasi-judiciary or regulator. We await the judgment by SAT for any implementation and we will be following that in letter and spirit," Rao said.

Clarifying on PNB's direction to PNB Housing Finance on 4 July to consider restructuring the proposed Rs 4,000 crore capital infusion deal led by US-based Carlyle group, Rao said, after discussion at PNB Board taking into account various factors, PNB Housing Finance was asked to clearly follow the Sebi guidance. "It is not the question of going diametrically opposite of what we have done. We have only told them that the Sebi communication may be looked into in terms of reconstruction of the entire process. Now it is in the SAT's domain for giving a final judgment and we are all bound to follow the judgment," he said.