Is Sebi asking regulated entities not to follow its own rules? This was one of the questions that came up on Monday as PNB Housing Finance concluded its argument against the market regulator’s direction that it should not proceed with the transaction with Carlyle till a valuation is done by an independent valuer.

Last month, PNB Housing had filed an appeal with the Securities Appellate Tribunal. During Monday’s hearing, senior counsel for the company, Janak Dwarkadas, cited the Companies Act to conclude that listed firms should follow Sebi’s guidelines on pricing for preferential issues.

He quoted section 62(1)(c) of the Companies Act read with the Companies (Share capital and Debenture Rules) to say that in the case of a preferential issue by a listed firm, the pricing shall not be required to be determined by a registered valuer. Dwarkadas went on to add that listed firms have to follow the pricing formula under the Sebi’s ICDR regulations.

Sebi had in its June order asked PNB Housing Finance to put on hold the Rs 4,000-crore deal with Carlyle saying it was ultra-vires of the articles of association (AoA) of the housing finance firm. It said the company should undertake valuation of shares as prescribed under 19(2) of its AOA, for purpose of preferential allotment.

This was also questioned by Dwarkadas. According to a Bloomberg Quint report, the lead counsel said he did not understand how Sebi was asking the company to follow its AoA instead of complying with its regulations.