In a temporary relief to Prannoy Roy and Radhika Roy, the Securities Appellate Tribunal has stayed the June 14 order issued by Securities and Exchange Board of India restraining them from holding manegerial or directorial posts in New Delhi Television Ltd (NDTV). Admitting the appeal filed by Roys and RPPR Ltd, the promoters of NDTV, the Appellate Tribunal yesterday observed that “a listed company which is managed by the appellants holding more than 61% of the total shares cannot remain headless”.
The Tribunal also criticised the SEBI for not supplying the certified copy of the order to the appellants. “In the instant case, we find that the whole world knows about the impugned order except the appellants. Till date they have not been supplied a copy of the impugned order in spite of the oral direction given by this Tribunal yesterday. We are constrained to observe that the system undertaken by SEBI needs a revisit. Their liability and their onerous duty does not end the moment they upload the order on their website”, observed the Tribunal.
The SEBI passed the order in a 2017 case filed by Quantum Securities Ltd, an NDTV shareholder, alleging that RRPR Holdings, Prannoy Roy and Radhika Roy didn’t disclose information about loan agreements entered into by them with Vishvapradhan Commercial Private Ltd (VCPL) and ICICI. According to the SEBI, “the loan agreements were unmistakably structured as a scheme to defraud the investors by camouflaging the information about the adversarial terms and conditions impinging upon the interest of NDTV’s shareholders, thereby inducing innocent investors to continue to trade in the shares of NDTV oblivious to such adversarial developments in the shareholding of NDTV” Roys argued that the agreements were for taking private loans in exercise of their shareholding rights and that since shareholders rights are personal property, the agreements did not affect NDTV or its operations in any manner.
They added that the loan agreements were private agreements in which NDTV was not a party, and hence, there was no requirement for the Noticees to make disclosure of the same to the stock exchanges. But this was not accepted by the SEBI, which found that they had agreed “to transfer a substantial controlling stake in NDTV to the VCPL behind the back of the shareholders of NDTV”. It ruled that the loan agreements were used to deceitfully transfers shares of NDTV upto 30 percent to VCPL without the knowledge of Board or its shareholders, amounting to unfair trade practice and was in stark violation of Section 12A of SEBI Act and Regulations 3(a), 3(b) and 4(1) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Markets) Regulations.