In re New Delhi Television limited (SEBI)
Disclosure requirements have their root in the continuous listing requirements laid down in the listing agreement which prescribed that the information must be disclosed at the time of occurrence of the event in order to enable the shareholders and the public to appraise the position of the company, so as to enable them to take an informed investment or disinvestment decision in the securities of the listed entity and to avoid the establishment of a false market in its securities. The timelines for making disclosures of such information is of much significance as the delay or complete failure would defeat the very purpose of the regulatory requirements. While holding so, I have due regard to the preamble of the SEBI Act and the primary functions of the Board as defined under the SEBI Act. The same includes protection of interest of investors in securities and to promote the development of and to regulate the securities market and prohibiting fraudulent and unfair trade practices related to the securities market. I have also perused the Hon’ble Supreme Court judgment in the matter of SEBI v. Rakhi Trading (P) Ltd. (2018) 13 SCC 753 and Hon’ble SAT judgment in the case of Piramal Enterprises Ltd (Supra) on role of SEBI based on fairness, integrity and transparency while imposing penalty.
Any act of concealing the material and price sensitive information from the public shareholders of the Noticee in particular and from the investors in securities market in general, cannot be considered as good for the securities market and for the interest of investors. I also observe that the importance of non-disclosure of such a material event by the Noticee can be gauged from the fact that for similar non-disclosures by the Promoters of the Noticee were found to be in violation of SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market)) Regulations, 2003 (hereinafter referred to as PFUTP Regulations’) as per Ld. WTM order dated June 14, 2018 and SEBI Adjudicating Officer order dated December 24, 2020. Considering the role and responsibility of the Noticee in these regards and important obligations cast upon it under the Listing Agreements and SCRA, in my view, the default by the Noticee is grave and the seriousness of this matter cannot be ignored. Therefore, no lenient view should be taken in this matter and the case deserves imposition of deterrent monetary penalty to deal with the deliberate defiance, as found in this case.
Considering all the facts and circumstances of the case and exercising the powers conferred upon me under section 231 of the SCRA read with rule 5 of the SCR Adjudication Rules, I hereby impose a penalty of Rs 5,00,00,000/- (Rupees Five Crore only) on the Noticee New Delhi Television Limited under section 23E of the SCRA. In my view, the said penalty is commensurate with the violation committed by the Noticee in this case.”
FULL TEXT OF THE ORDER OF SEBI
BEFORE THE ADJUDICATING OFFICER
SECURITIES AND EXCHANGE BOARD OF INDIA
ADJUDICATION ORDER No. AP/AS/2020-21/10029 UNDER SECTION 23-1(2) OF THE SECURITIES CONTRACTS (REGULATION) ACT, 1956.
In respect of:
New Delhi Television Limited
(PAN No. —AAACNO865D)
207, Okhla Industrial Estate, Phase III,
New Delhi — 110020.
1. New Delhi Television Limited (hereinafter referred to as `Noticee’/ `NDTV’/ ‘Company’) is a listed company, whose scrip is listed on Bombay Stock Exchange Limited (`BSE’) and National Stock Exchange Limited (NSE’). Securities and Exchange Board of India (`SEBI’) received complaint dated August 26, 2017 from Quantum Securities Pvt. Ltd. relating to the loan agreements signed between the Noticee’s promoters namely; Mr. Prannoy Roy (hereinafter referred to as `Prannoy’), Ms. Radhika Roy (hereinafter referred to as `Radhika’) and RRPR Holding Pvt. Ltd. (hereinafter referred to as `RRPR’) (hereinafter Mr. Prannoy, Ms. Radhika and RRPR together referred as Promoters’) as one party and Vishvapradhan Commercial Private Limited (hereinafter referred to as TCPL’) as another party. Accordingly, the SEBI conducted an investigation in connection with the Noticee failure to disclose price sensitive material information, regarding aforesaid loan agreements signed by its promoters, to stock exchanges in a timely manner, to ascertain whether there was any violation of the provisions of the Equity Listing Agreement (hereinafter referred to as ‘Listing Agreement’) and Securities Contracts (Regulation) Act, 1956 (hereinafter referred to as `SCRA’) by the Noticee.
2. The relevant findings and allegations against the Noticee, as observed from the investigation report are as follows:
2.1 The promoter / directors of the Noticee, namely, Mr. Prannoy and Ms. Radhika are the directors and sole promoters of RRPR.
2.2 It was observed that the Loan agreements entered by RRPR with VCPL contained certain clauses related to NDTV which, prima facie, appear to be material and price sensitive. The aforesaid Loan agreements allegedly contained various clauses which were binding on the Noticee in such a way that it could adversely affect the interest of its public shareholders.
2.3 The allegations against the Noticee have been made with respect to following two loan agreements:
a. Loan Agreement dated July 21, 2009 entered between the Promoters of the Noticee and VCPL [hereinafter referred to as “VCPL loan agreement (2009)’ for lending an amount of Rs. 350 crores (Rupees Three Hundred and Fifty Crores) by VCPL to RRPR.
b. Loan Agreement dated January 25, 2010 entered between the Promoters of the Noticee and VCPL [hereinafter referred to as TCPL loan agreement (2010)1 for lending an amount of Rs. 53.85 crores (Rupees Fifty-Three Crores and Eighty-Five Lakhs) by VCPL to RRPR.
2.4 The relevant clauses of the aforesaid loan agreements between VCPL and RRPR as observed during investigation are reproduced below
A. Loan Agreement
At the Borrower’s request, subject to the terms and conditions set out in this Agreement, the Lender agrees to lend and advance to the Borrower and the Borrower agrees to borrow the sum of Rs.3 50,00,00,000 (Rupees Three Hundred and Fifty Crore only) (being, the Loan). The Loan shall not carry any interest. Notwithstanding anything contrary in this Agreement, the Loan disbursed shall be repayable on the Maturity Date.
3. AUTHORISED PURPOSE
The Borrower shall utilke the Loan in full for repayment of an existing loan availed by the Borrower from ICICI Bank Limited pursuant to a loan agreement executed between ICICI Bank Limited and the Borrower dated 14th October 2008.
6. WARRANT AND OPTION
6.1 The Borrower shall issue a convertible warrant (the “Warrant’), convertible into Equity Shares aggregating to 99.99% of the fully diluted Share Capital of the Borrower at the time of conversion, to the Lender immediately upon execution of this Agreement. The Warrant shall be subject to the terms and conditions set out in Schedule 1.
6.2 The Lender shall have the right to purchase from the Promoters all the Equity Shares of the Borrower held by the Promoters at par value.
6.3 The Lender and its Affiliates shall not purchase shares ofNDTV which will increase their holding in the aggregate to more than 26 percent of the paid up Equity Share Capital ofNDTV without the consent of the other Parties.
9. CONDITIONS PRECEDENT
9.2 The Borrower and the Promoters having undertaken the following actions in a form and substance satisfactory to the Lender:
(c) Completion of the due diligence to the satisfaction of Lender of (i) investment ofUS1 85 million by NDTV Four Holdings Limited in NDTV Studios Private Limited (ii) the abilio to transfer to NDTV and utilize US 1 85 million either by merger of NDTV Studios Private Limited with NDTV or by any other method to the satisfaction of Lender
(e) Sale of 1,15,63,683 (one crore fifteen lakhs sixty three thousand six hundred & eighty three only equity shares of NDTV from the Promoters to the Borrower such that upon such sale the Borrower holds 1,63,05,404 (one crore sixty three lakhs five thousand four hundred & four only) Equi0 Shares ofNDTV aggregating to 26% of the equity share capital ofNDTV (adjusted forAdjustment Events) & such transfer qualing under Regulation 3(1) of the Securities & Exchange Board of India (SAST) Regulations, 1997 (as amended, varied or supplemented from time to time).
SCHEDULE I
TERMS OF THE WARRANT
(a) At the sole option of the Lender, the Warrant may be converted, into such number of Equity Shares at par aggregating to 99.99% of the fully diluted Equity Share Capital at the time of conversion of the Borrower at any time during the tenure of the Loan or thereafter without requiring any further act or deed on the part of the Lender.
SCHEDULE 2
REPRESENTATIONS AND WARRANTIES
6. Assets
(a) The Borrower does not own or hold any assets other than 47,41,721 (Fort’-seven lakhs, forth one
thousand seven hundred and tweno-one only) Equity shares of NDTV.
SCHEDULE 3 PRIOR CONSENTS
2. Matters relating to NDTV of NDTV Group which require prior written consent of the Lender
(a) Issue any Equio Securities of NDTV which results in the aggregate valuation of NDTV being less than Rs 1346 crores (valuation at which Lender has put money into the Company);
(b) Merger, amalgamation or consolidation of NDTV with any other enti*;
(c) Cause NDTV or any Person in NDTV Group to take any steps towards bankruptcy, insolvency or reorganisation, arrangement, adjustment, winding up, liquidation, dissolution, composition or other relief with respect to it or its debts or seeking appointment of a receiver, trustee, custodian or other similar official for it or all or any substantial part of its proper.
(d) Buy back of Equity Securities, reduction or alteration of the share capital of NDTV;
(e) Take any action to issue any Equity Securities or enter into any agreement as a result of which the Promoters cease to be in sole control of NDTV or the NDTV Group.
2.5 A brief summary of findings and allegations with respect to VCPL loan agreements is as follows:
a. It was observed that VCPL loan agreement (2009) was entered between VCPL (gender’) and the Promoters, wherein, VCPL extended a loan of Rs.350 crores to the RRPR, subject to terms and conditions as mentioned in the said agreement. The aforementioned loan was taken by the RRPR to repay the previous loan taken by it from ICICI Bank Ltd. (`ICICI’) on October 14, 2008. It was observed that the VCPL loan agreement (2009) did not carry any interest rate on the loan while the loan taken by RRPR from ICICI carried an interest rate of 19.0%.
b. As per Clause 6 of the VCPL loan agreements, RRPR was required to issue ‘convertible warrant.? to VCPL, which were convertible into equity shares aggregating to 99.99% of share capital of RRPR at the time of conversion. Further, as per the terms of the said agreement, VCPL, at its sole option, was entitled to convert warrants into equity shares of RRPR at any time during the tenure of the loan.
c. Further, as per Clause 9 of the said agreement, one of the pre-condition for the execution of VCPL loan agreement (2009) was that the promoters of RRPR and also of NDTV vig, Prannoy and Ms. Radhika shall transfer 1,15,63.683 shares of NDTV to RRPR so that the total shareholding in NDTV held by RRPR increases from 47,41,721 shares to 1,63,05,404 shares, which were 26% of equity share capital of NDTV at the time of execution of VCPL loan agreement (2009),It was observed that at the time of execution of VCPL loan agreement (2009), RRPR did not own any assets other than 47,41,721 shares of NDTV.
d. There were certain other pre-conditions in the VCPL loan agreements, which appears to be material and price sensitive with respect to the scrip of NDTV, such as the completion of due diligence by VCPL of the investment by the NDTV Four Holdings Limited of US$ 85 million in NDTV Studios Private Limited and the ability to transfer to NDTV and utilize US $ 85 million either by merger of NDTV Studios Private Limited with NDTV or by any other method to the satisfaction of VCPL.
e. Further, Schedule 3 of the said agreement makes a mention of matters pertaining to NDTV or NDTV Group for which prior approval of VCPL was required to be taken. Such matters are given in Para 2 of Schedule 3 of the VCPL loan agreements and includes matters such as issue of equity shares of NDTV, which results in aggregate valuation of NDTV being less than Rs. 1346 crores (valuation at which VCPL put money into the Company), buyback of equity shares by NDTV, merger, amalgamation or consolidation of NDTV with any other entity etc.
f. Based on the aforesaid observations, it was alleged that the VCPL loan agreements had certain clauses which imposed certain binding conditions on NDTV and which, prima facie, required prior written consent of VCPL for such matter pertaining to NDTV. This, prima facie, affected the interest of public shareholders of NDTV. Therefore, the VCPL loan agreements were material and price sensitive in nature and the same ought to have been disclosed to the Company by the Promoters, which in turn should have disclosed the same to the stock exchanges.
2.6 It was observed from the submissions of the Promoters of the Noticee that the VCPL loan agreements and the salient features thereof were disclosed by the Promoters to the Noticee during its Board meeting on August 05, 2015. As the said VCPL Loan agreements were material information which was also price sensitive in nature, the same should have been disclosed by the Noticee to the stock exchanges immediately on becoming aware of such Loan agreements. However, the Noticee failed to disclose the information pertaining to the said Loan agreements between RPRR and VCPL to the stock exchanges. Therefore, in view of the failure of the Noticee to disclose the aforementioned material and price sensitive information to the stock exchanges on an immediate basis, it was alleged that the Noticee had failed to comply with provision of clause 36 of the Equity Listing Agreement (hereinafter referred to as ‘Listing Agreement’) read with Section 21 of the Securities Contracts (Regulation) Act, 1956 (hereinafter referred to as `SCRA’).
3. By a communication-order dated January 07, 2020, this case which was pending before erstwhile Adjudicating Officers, was transferred to the undersigned with an advice that except for the change of the Adjudicating Officer, the other terms and conditions of the original orders ‘shall remain unchanged and shall be in full force and Oct’.
4. On receipt of records, it was noted that on being prima facie satisfied that there are sufficient grounds to inquire and adjudicate certain alleged violations of the provisions of the Listing Agreement and SCRA, by the Noticee, SEBI, vide a communication – order dated March 19, 2018, appointed Shri Suresh B. Menon, Chief General Manager (`then AO’), under section 231 of the SCRA as adjudicating officer under Rule 3 of the Securities Contracts (Regulation) (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 2005 (hereinafter referred to as `SCRA Adjudication Rules’), to inquire and adjudge under Section 23E of the SCRA for the alleged violations of various provisions of the Listing Agreement read with Section 21 of the SCRA by the Noticee. The relevant provisions of the Listing Agreement read with Section 21 of the SCRA are as follows:
Equity Listing Agreement
36. Apart from complying with all specific requirements as above, the Company will keep the Exchange informed of events such as strikes, lock-outs, closure on account of power cuts, etc. both at the time of occurrence of the event and subsequently after the cessation of the event in order to enable the shareholders and the public to appraise the position of the Company and to avoid the establishment of a false market in its securities. In addition, the Company will furnish to the Exchange on request such information concerning the Company as the Exchange may reasonably require. The Company will also immediately inform the Exchange of all the events, which will have bearing on the performance/ operations of the company as well as price sensitive information….
SCR Act
Conditions for listing.
21. Where securities are listed on the application of any person in any recognised stock exchange, such person shall comply with the conditions of the listing agreement with that stock exchange.
5. Accordingly, in terms of Rule 4(1) of the SCRA Adjudication Rules read with section 23(1) of the
SCRA, the notice to show cause no. SEBI/EAD-1/SBM/23218/2018 dated August 20, 2018 (hereinafter referred as `SCN’) was issued to the Noticee by the then AO, calling upon it to show cause as to why an inquiry should not be held against it in terms of Rule 4of the SCRA Adjudication Rules and penalty be not imposed under Section 23E of the SCRA for the aforesaid alleged violations of the provisions the Listing Agreement read with section 21 of the SCRA by the Noticee.
6. The SCN was duly served upon the Noticee via Speed Post Acknowledgement Due. Vide letter dated September 11, 2018, the Noticee submitted that DMD Advocates will be its authorized representatives in the instant proceedings and also requested for inspection of all the documents/ records, including internal file noting’s, relevant to or supporting or adverse to the charges of facts made in the SCN. Vide letter dated October 08, 2018, then AO granted inspection of documents to the Noticee and the authorized representative of the Noticee had undertaken the inspection of the relied upon documents, investigation report and its annexures on October 30, 2018. Thereafter, in terms of Rule 4(3) of the SCRA Adjudication Rules, then AO granted an opportunity of personal hearing to the Noticee on January 10, 2019, however, vide e-mail dated*dvocate Pawan Sharma, DMD Advocates submitted that the inspection of the file containing the decision of the competent authority to appoint Adjudicating Officer in the matter and the internal file noting’s has not been granted to the Noticees and thus, requested to fix the hearing only after the granting the complete inspection of documents to the Noticee.
7. Subsequently, vide a communique dated March 25, 2019, this case was transferred to Shri Santosh Shukla (hereinafter referred to as ‘erstwhile AO’) upon transfer of then AO with the advice that except for the change of the Adjudicating Officer, the other terms and conditions of the original orders ‘shall remain unchanged and shall be in full force and Oct’ and that the “Adjudicating Officer shall proceed in accordance with the terms of reference made in the original orders”. Thereafter, vide hearing notice dated May 29, 2019, the erstwhile AO in terms of Rule 4(3) of the SCRA Adjudication Rules, granted an opportunity of personal hearing to the Noticee on June 19, 2019. In the aforesaid notice, the erstwhile AO communicated to the Noticee his decision of rejecting the request of inspection of internal file noting’s of the Noticee and noted that, since all the relevant material relied upon in the instant proceedings have been provided to the Noticee, the request for further inspection of non-material and non-relevant documents as requested in e-mail dated January 08, 2019 has been declined. Accordingly, vide e-mail dated June 04, 2019, Advocate Pawan Sharma, DMD Advocates requested for 4 weeks’ time to file the reply to the SCN on behalf of the Noticee and adjourn the hearing till first week of July, 2019. Considering the same, another opportunity of hearing was granted to the Noticee and same held on July 10, 2019. On scheduled date of hearing, Authorised Representative of the Noticee submitted that the Noticee filed an appeal before the Hon’ble Securities Appellate Tribunal (SAT’) against the order dated June 14, 2019 of the learned Whole Time Member (“WTM”) of SEBI in the proceedings against its Promoters. He further submitted that the instant matter is on same identical facts which are pending adjudication by Hon’ble SAT and therefore, the instant proceedings may be kept on hold till disposal of aforesaid appeal by Hon’ble SAT. He further requested for granting two weeks’ time to file reply to the SCN. The erstwhile AO recorded in the hearing minutes of said date that there is no embargo on instant proceedings by Hon’ble SAT and allowed two weeks’ additional time to the Noticee for filing reply to the SCN. After several reminders the Noticee finally filed its reply on July 31, 2019.
8. Thereafter, another opportunity of hearing was availed by the Noticee before erstwhile AO on September 11, 2019, wherein authorized representatives of the Noticee reiterated their earlier submission regarding matter pending before Hon’ble SAT and hearing was adjourned accordingly. Further, vide letter dated November 07, 2019, request of the Noticee regarding inspection of internal file noting made earlier and during hearings before erstwhile AO was rejected mentioning the judgements of Hon’ble Supreme Court in the matter of KanwarNatwar Singh v. Directorate of Enforcement [(2010) 2 SCC 497] and Chandrama Tewari v. Union of India, Through General Manger, Eastern Railway, (1988) 1 SCR 1102, wherein it was held that it is not necessary that each and every document must be supplied to the Noticee facing charges. Only material and relevant documents are necessary to be supplied. Since, all relevant material relied upon in the instant proceedings have been provided to the Noticee, the erstwhile AO found the request as not reasonable.
9. Subsequently, since January 07, 2020, the instant proceedings are inquired and adjudged by the undersigned. In accordance with the principle of natural justice and in terms of Rule 4(3) of the SCRA Adjudication Rules, an opportunity of personal hearing was granted to the Noticee on Match 20, 2020, which was later adjourned due to ongoing pandemic situation. Meanwhile, the Noticee again reiterated their earlier request of inspection of internal file noting, which was rejected vide e-mail dated March 04, 2020. Thereafter, several opportunity of hearings were granted to the Noticee and finally hearing with respect to the Noticees in the matter got concluded on October 27, 2020. During such hearings the Noticee was represented by Ms. Fereshte D Sethna, Advocate, Mr. Adhiraj Malhotra, Advocate and Mr. Shreyash Taparia, Advocate (hereinafter together referred as ARs’). The details of all the hearing before me are tabulated hereunder:
