- Apprentice Lawyer
The Securities and Exchange Board of India (SEBI) on Thursday imposed a total penalty of Rs. 27 crore on the three NDTV promoters, Prannoy Roy, Radhika Roy and RRPR Holding Limited for failing to disclose price sensitive information to the shareholders of NDTV.
While Rs. 25 crores have been imposed jointly and severally on all three promoters, Rs. 1 crore each has to be paid separately by Prannoy and Radhika Roy.
The order passed by Adjudicating Officer Amit Pradhan ruled that the Roys acted in violation of Section 12A of the SEBI Act and the relevant rules of SEBI (Prohibition of Fraudulent Trade Practices relating to Securities Market) Regulations, 2003 (PFUTP Regulations) by failing to disclose information relating to three loan agreements entered into by them with Vishvapradhan Commercial Private Limited (VCPL) and ICICI bank.
RRPR Holdings had entered into a loan agreement with ICICI in October 2008. It had entered into two loan agreements with VCPL in 2009 and 2010 for borrowing Rs. 350 crores and Rs. 50 crores respectively.
SEBI held that the ICICI loan agreement and two VCPL loan agreements contained clauses and conditions which substantially affected the functioning of NDTV.
Additionally it noted that the VPCL loan agreements also warranted transfer of shares of NDTV by the promoters which was carried out off market by way of various inter se bulk transactions.
"Consequently, information about the said agreements and off-market transactions were essentially material, price sensitive information which would have influenced decision of investors about trading in shares of NDTV," SEBI concluded.
Non-availability of such information unjustly deprived shareholders of informed participation while dealing with shares of NDTV, it added.
Roys had vehemently argued that NDTV was not a party to the loan agreements and hence there was no requirement to make disclosure of the agreements to the stock exchange.
SEBI while agreeing that NDTV was not a party to the agreements noted that the agreements contained certain crucial, onerous and hostile stipulations pertaining to NDTV including its capital restructuring. The promoter were able to push them through since they were majority shareholders and enjoyed dominant position as Chairman and Managing Director.
"The loan agreements were structured in such a manner that clauses pertaining to NDTV, which were material and price sensitive information, were concealed from minority shareholders, thereby inducing investors to trade in shares of NDTV oblivious about such shift in de facto control over NDTV," the order said.
Besides the above, Roys had also contended that at the time of execution of the loan agreements, there was no statutory or regulatory duty cast upon promoters of listed companies to disclose loan agreements either to the concerned listed entity or to the stock exchange.
This argument was also turned down by SEBI citing clause 49 (I)(D) of the Listing Agreement introduced in 2004 as well as the Code of Conduct of NDTV itself.
"As per the provisions of the Code of Conduct framed by NDTV itself, Board members and senior management of NDTV were required to make full disclosure of all facts and circumstance before making any investment, accepting any position or benefits, participating in any transaction or business arrangement or acting in a manner that creates or appears to create any conflict of interest," SEBI said.
In June 2019, the SEBI had barred Radhika Roy and Prannoy Roy from accessing securities markets for two years on the same issue concerning the three contentious loan agreements.
Roys were also restrained from holding or occupying position as Director or any key managerial personnel in NDTV for a period of two years by the 2019 order.
The said order was later stayed by Securities Appellate Tribunal where the matter is still pending.