Yes Bank Approaches Tribunal, Ministry And SEBI Alleging Mismanagement At Dish TV
Yes Bank has deployed a three-pronged strategy in its battle against Essel Group-promoted Dish TV.
Blindsided with a freeze on its voting rights once, Yes Bank Ltd. is now covering all bases in the battle against Dish TV India Ltd., its board and management. As the single largest shareholder with a 25.63% stake, Yes Bank has deployed a three-pronged strategy in its dispute against Essel Group-owned Dish TV.
The bank has filed an oppression and mismanagement case against Dish TV’s board before the Mumbai bench of the National Company Law Tribunal. It has also filed a caveat before the tribunal against Dish TV’s directors and promoter group against any adverse order on the bank's voting rights in the company. A caveat is a petition asking the court to not pass any ex-parte directions.
In this petition, Yes Bank has stated it apprehends that Dish TV, its directors or the promoter group could approach the tribunal for interim relief under company law provisions. The bank has asked the tribunal to not pass any directions without granting the bank a hearing.
Simultaneously, Yes Bank has written to the Ministry of Corporate Affairs and securities regulator SEBI seeking an investigation into the affairs of the company. BloombergQuint has reviewed copies of all three documents.
To recap, Yes Bank and Dish TV are locked in a dispute since September this year. The bank is seeking removal of directors on the company's board, including managing director Jawahar Goel, who is the younger brother of Subhash Chandra, the founder of the Essel Group — that includes the Zee media empire. Chandra’s son Punit Goenka is the managing director of Zee Entertainment Enterprises Ltd. The bank has also sought the appointment of new directors at Dish TV via a shareholder vote at an extraordinary general meeting.
Dish TV’s board declined Yes Bank’s requisition for an EGM. Also, in response to a criminal complaint filed by Chandra against several former officers of Yes Bank, the Noida police had recently barred Yes Bank from transferring its stake or exercise its voting rights in the broadcaster. The police’s direction was upheld by the Allahabad High Court but overturned by the Supreme Court in a prima facie order.
Consequent to that, Yes Bank has approached the tribunal, ministry and the Securities and Exchange Board of India to protect its interests.
In its petition, Yes Bank has alleged that Dish TV’s directors and the promoter group have connived, colluded and mismanaged the affairs of the company. And, that the directors have been acting at the behest of the Essel Group, which has only a minority stake in Dish TV. Their conduct has been oppressive resulting in unfairly prejudicing the bank’s rights.
For instance, it has claimed, the Dish TV board’s approval for a Rs 1,000 crore rights issue is an oppressive design to ensure that the bank’s strategic stake is diluted, resulting in erosion of its true value. Yes Bank is constrained in investing via a rights issue, hence any such issue will only benefit the promoter Essel Group, the bank contends.
The oppressive behaviour is of continuing nature since the company has proposed reappointment of Ashok Kurien, who recently resigned from Zee Entertainment’s board after facing opposition from that company's largest shareholder [Invesco Developing Markets Fund].
“…acts of oppression and mismanagement have been carried out with the fraudulent intent of stymying the Petitioner’s [Yes Bank] legitimate recovery efforts in respect of the loans advanced to the Essel Group. In effect, Dish TV is being used as a vehicle for such fraudulent conduct and to protect the interests of the Essel Group, at the cost of the interests of Dish TV and its shareholders...” - Yes Bank's petition.
The rights issue decision doesn’t add up given the recent investment decisions by the directors, the bank has pointed out as a second ground for moving the oppression and mismanagement application.
Dish TV is making investments which its own statutory auditors have raised questions about. The reference is to the over Rs 1,200 crore investment in OTT platform Watcho via Dish Infra Services Pvt. — Dish TV’s wholly-owned subsidiary. The subsidiary had recorded this amount under two heads — Rs 552 crore as intangible assets under development and Rs 685 crore as related capital advances as of June 30, 2021.
These investments are in blatant non-compliance of prescribed accounting standard as noted by the statutory auditor, the bank has pointed out.
The auditor- Walker Chandiok & Co. LLP — had opined that the management is required to carry out impairment test of intangible assets under development at least annually. Since that wasn’t done, the auditor couldn’t comment on the adjustments that may be required to the carrying values of such intangible assets under development and the related advances.
Third, the oppressive behaviour and mismanagement also manifested in the way Dish TV scheduled and rescheduled its annual general meeting, Yes Bank has claimed.
The AGM was scheduled for Sept. 27, but the management obtained an extension of two months. The voting window for the AGM, though, was kept open. There was no clarity given by Dish TV on whether the votes already submitted will be considered by them. Yes Bank and several other shareholders, the petition says, voted on the agenda items, namely approval of financial results and rights issue proposal, reappointment of Kurien, etc.
"Dish TV appears to have amassed critical data pertaining to shareholders’ voting preferences before calling off the actual AGM, when it presumably realised that the votes weren’t being cast in favour of the resolutions proposed by their Board.” - Yes Bank's petition.
Further, the petition claimed, when the Dish TV management realised that as a result of the police order Yes Bank won’t be able to vote, it “hurriedly” informed the exchanges that the meeting will be held on Nov. 30.
This is further buttressed by the fact that the decision to hold the AGM was made on a Sunday at 9:57 p.m.Yes Bank's Petition
The AGM is now scheduled to be held before Dec. 31.
It is abundantly clear that such oppressive conduct is aimed at ensuring that Yes Bank cannot raise relevant issues of corporate governance and mismanagement before the shareholders, the petition argued.
Finally, Dish TV’s share price has fallen by over 85% from its peak price of Rs 110 in March 2017 to its current market price of Rs 17.
“This in itself reveals the mismanagement by Dish TV’s directors,” Yes Bank has said in its petition before the tribunal.
Yes Bank To Ministry Of Corporate Affairs
In its letter to the ministry, Yes Bank has reiterated governance concerns at Dish TV and argued the board has utterly failed to discharge its duties.
Dish TV’s board, the letter said, is not a fair representation of significant shareholders, namely banks and financial institutions, which hold around 45%. The board is “purportedly acting at the behest of certain minority shareholders holding merely 6% of the shares in Dish TV.”
The board, it has pointed out, has disregarded other viable and possible options for fund raising. The means of fund raising should be taken by a reconstituted board, it has said.
Basis these grounds, Yes Bank has sought following reliefs from the ministry:
Order an investigation into the affairs of Dish TV. Section 210 of the Companies Act, 2013, gives the government power to initiate an investigation basis the Registrar’s report, special resolution by the company’s shareholders or in public interest.
Initiate an action under section 241-242 of company law. The provisions deal with prevention of oppression and mismanagement. The directions from the NCLT, the bank has said, may provide for regulation of conduct of affairs of Dish TV, removal of managing director, and other directors.
Direct the Registrar of Companies to call for information, documents, inspect the books of accounts of Dish TV, its subsidiary companies, and related entities.
Yes Bank has made similar asks in its letter to the Securities and Exchange Board of India. It has asked the market regulator to question the company and its directors on the alleged irregularities related to the rights issue, Watcho investment, and the AGM.
Dish TV's Response
No investigation has been initiated against the company on any purported inquiry of Yes Bank, Dish TV said in an emailed response to BloombergQuint's queries. 'We would like to apprise you that the company has adequately replied to the communications sent by Yes Bank from time to time.'
While declining to comment on the specifics of the tribunal proceedings since they are subjudice, Dish TV said Yes Bank's allegations are wrong and baseless. 'We would also like to apprise you that certain shareholders had reached out to the company expressing their objections on the voting rights of Yes Bank.'
The reference is to the suit brought by World Crest Advisors LLP — a promoter entity of Dish TV — before the Bombay High Court. World Crest is seeking a declaration that it is the owner of 44,00,54,852 equity shares of Dish TV which are presently held by Yes Bank in its demat account.
Yes Bank did not respond to BloombergQuint's request for a comment.