[NDTV Promoters v. SEBI] "We are a struggling news channel:" NDTV promoters tell Supreme Court; agree to furnish shares as security

Promoters of New Delhi Television (NDTV), Prannoy Roy and Radhika Roy, told the Supreme Court on Thursday that they will give a statement of shares that they are willing to furnish as security in the case against them in relation to failure to disclose price sensitive information to shareholders (Prannoy Roy v. SEBI). .Senior Counsel Mukul Rohtagi, representing the Roys, told the top court that NDTV is a struggling news channel with no other resources and the only guarantee it can provide is the shares of the channel. The response came on a query by Chief Justice of India, SA Bobde on the amount of "security the promoters would be willing to furnish"."I have no security or money, I cannot hand over shares without leave of (Securities Appellate) Tribunal. We will argue the appeal, its a matter of 10 days," Rohatgi said. ."The Tribunal may not hear you after 10 days if you don't give security. You give some security. Can you give some guarantee," the CJI insisted. ."I can give guarantee of shares. We are struggling news channel, we don't have any other resources," Rohatgi replied..The Bench agreed with CJI Bobde remarking that he "understands the predicament.".The Bench was hearing an appeal against an interim order passed by the Securities Appellate Tribunal (SAT) on January 4, 2021, which had ordered NDTV to deposit 50 percent of the fine imposed earlier by the Securities and Exchange Board of India (SEBI). SEBI had imposed Rs. 27 crore penalty 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 a Rs. 25 crore penalty was imposed jointly and severally on all three promoters, Rs. 1 crore each has to be paid separately by Prannoy and Radhika Roy..The SAT had agreed to hear the appeal filed by Roys against the SEBI order but had asked them to deposit 50 percent of the disgorged amount within 4 weeks. .The Supreme Court on Thursday asked Roy about the value of shares of NTDV. "This morning shares was trading at 37.35 on NSE and 37.25 on BSE. We can provide 50 lakh shares. Total would be around 18 crores. The amount directed to be deposited is 27 crores," said advocate Fereshte D Sethna of DMD Advocates. .The Court, therefore, adjourned the matter for February 1 noting that Roys have agreed to provide a statement of shares that they are willing to furnish as security in view of deposits ordered by SAT. .The SEBI order was passed by Adjudicating Officer Amit Pradhan, who 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 with Vishvapradhan Commercial Private Limited (VCPL) and ICICI bank..RRPR Holdings had entered into a loan agreement with ICICI in October 2008, and two others with VCPL in 2009 and 2010 for borrowing Rs. 350 crores and Rs. 50 crore respectively..SEBI imposes Rs. 27 crore penalty on Prannoy Roy, Radhika Roy, RRPR Holding for concealing price sensitive information from NDTV shareholders.SEBI held that the ICICI loan agreement and the two VCPL loan agreements contained clauses and conditions that 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", the SEBI order said. .The 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 promoters were able to push them through since they were majority shareholders and enjoyed dominant positions 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 states..The 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.They were also restrained from holding or occupying positions 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 the Securities Appellate Tribunal, where the matter is still pending.