Securities Appellate Tribunal Slashes SEBI Penalties On NDTV, Promoters In Loan Agreement Case
SAT upheld SEBI's finding of violation of the listing agreement but cut the penalty amount, saying it was "excessive."
The Securities Appellate Tribunal has reduced the penalties imposed by SEBI on NDTV and its promoters Prannoy Roy, Radhika Roy and RRPR Holding to Rs 5 crore from Rs 25 crore in a case related to non-disclosure of a loan agreement.
Also, the appellate tribunal slashed the fine levied on NDTV to Rs 10 lakh from Rs 5 crore regarding its failure to disclose about the loan agreements with Vishvapradhan Commercial Pvt. Ltd.
The appellate tribunal upheld SEBI's finding of violation of the listing agreement but cut the penalty amount, saying it was "excessive."
Further, SAT set aside a SEBI order passed in June 2018 that had directed VCPL to make an open offer to the shareholders of NDTV.
"The combined reading of the agreement, call option agreements, warrant conversion option and the purchase option does not in any way lead to a conclusion of VCPL acquiring indirect control over NDTV. Thus the direction to VCPL to make an open offer in terms of... SAST Regulations... does not arise," SAT said in its 91-page order passed on Wednesday.
The latest ruling comes after eight appeals were filed against four SEBI orders passed from June 2018 to December 2020.
In June 2018, the regulator had directed VCPL to make an open offer. In June 2019, SEBI restrained Prannoy Roy, Radhika Roy and RRPR from accessing the securities market for a period of two years and further barred Roys from holding or occupying any position as director or as key managerial personnel in NDTV for a period of two years or in any other listed company for a period of one year.
RRPR Holding is a promoter entity of New Delhi Television Ltd.
On Dec. 24, 2020, the regulator had imposed fines totalling Rs 25 crore on Roys and RRPR Holding. Besides, a penalty of Rs 1 crore each was imposed on the couple. Again on Dec. 29, 2020, the regulator levied a fine of Rs 5 crore on NDTV.
The investigation in the case began in 2017 after SEBI received complaints from Quantum Securities Private Ltd. -- a shareholder of NDTV -- about alleged violation of rules by non-disclosure of material information to the shareholders of NDTV regarding the loan agreements with VCPL.
In the probe, it was revealed that Prannoy Roy, Radhika Roy and RRPR did not disclose the loan agreement with ICICI Bank, and the loan agreement with VCPL, to the company, to the stock exchanges and to the shareholders.
One loan agreement of NDTV was with ICICI Bank, and two agreements were with VCPL. An agreement was signed in 2009 with VCPL for a loan of Rs 350 crore to repay the ICICI Bank loan and a second loan agreement with VCPL was signed for Rs 53.85 crore, a year later.
Further, one of the terms of loan agreements allowed VCPL to indirectly acquire 30% shareholding of NDTV through conversion of warrants into equity shares of RRPR Holding.
In its order, SAT noted that appellants were required to disclose the loan agreement under the Clause 49 of the listing agreement, especially when Prannoy Roy and Radhika Roy were the Chairman and Managing Director of NDTV, respectively.
It noted that the loan agreement did not in any manner transfer control of NDTV to VCPL either directly or indirectly.
"The finding that the concealment of the loan agreement which gave de facto control to VCPL was concealed from the shareholders and, therefore, such arrangement deployed by the appellants to transfer their substantial stake in NDTV was fraudulent and was violative of .... the PFUTP Regulations also cannot survive since we have already held that there was no direct or indirect control over NDTV by VCPL," the tribunal said.
According to the appellate tribunal, with respect to the violation of the Code of Conduct, SEBI's order restraining them from accessing the securities market or from accepting any position of a director is totally out of context and does not commensurate with the alleged violation especially when no fraud has been committed nor does the loan agreement defraud the investors.
Further, it said the imposition of penalty of Rs 25 crore by SEBI is also "high, excessive and disproportionate" to the alleged violation and accordingly reduced the amount to Rs 5 crore.
In addition, the directions given by the SEBI being excessive have been set aside.
SAT said that NDTV by not disclosing the minutes of the meeting, dated Aug. 5, 2015, related to loan agreement executed by RRPR with VCPL, to the stock exchanges violated Clause 36 of the listing agreement.
While confirming the order of SEBI only with regard to the violation of the Clause 36 of the listing agreement, SAT found that the penalty of Rs 5 crore on NDTV is excessive and accordingly reduced the fine amount to Rs 10 lakh.