Breaking: Supreme Court Stays Recovery Of Rs. 27 Cr Penalty Imposed On NDTV, Prannoy Roy And Radhika Roy By SEBI
The Supreme Court on Friday stayed the recovery of the penalty of Rs 27 crore imposed by the SEBI on December 24, 2020 on NDTV promoters, Prannoy Roy and Radhika Roy, as well as on their holding company for allegedly violating various securities norms by concealing information from shareholders regarding certain loan agreements.
The bench of Justices DY Chandrachud and MR Shah also directed the appellants cooperate in the expeditious disposal of the appeals against the SEBI order by the SAT, which are listed for final disposal on April 6. On February 15, the SAT had directed that if the appellant deposits 50% of the amount minus interest within four weeks, the balance amount shall not be recovered during the pendency of the appeal. It was this order which in challenge before the top court on Friday.
Senior advocate Mukul Rohatgi, appearing for the appellants, advanced, "The running of a TV channel is a very difficult proposition. A lot of money is needed and the revenue is not good. That is why so many TV channels have been boarded up. It is only Times of India and the other big channels which are functioning because they have a big network. NDTV is run by a husband and wife- Pranav and Radhika Roy. They had take a loan from the ICICI bank in 2008 of 375 crores. It was repaid by another entity, VCPL, from which another loan was taken in 2009. They took over the loan and the loan to them is still continuing on which no interest is payable. Because no interest is payable, they think it to be a sham for the transfer of control of NDTV to the VCPL and have penalised me. I have not transferred my shares or my wife's shares or those of my holding company to VCPL! They said that you have a huge loan from an entity which repaid your earlier loan, how can it be without interest? They said it is a sham transaction and that I have transferred control! How can I transfer control without any transfer of shares? I have all the shares! They asked why have you taken a loan from private entity to repay ICICI? There seems to be some prejudice because of this! It was impossible for us to service the ICICI bank loan! Who have I cheated? Why is there a penalty of 25 crores and an individual penalty of 1-1 crores? This amounts to closing down the channel! We have no money!"
"So the allegation is only of taking over of an outstanding loan?", asked Justice Chandrachud
"It is not an allegation… There is 100 page decision of SEBI. Every time, the argument is that it is NDTV, Pranav Roy, Radhika Roy. They are not a separate class who deserve a separate treatment. The violations are of very serious nature. They are saying that they have not transferred the shares! Their shares are worthless! There is a reasoned and speaking judgement! There is a direction by a statutory regulatory body that penalty has to be paid! The Tribunal says that it is not a pre-deposit but one cannot challenge a money decree without some deposit. This is that 'some deposit'...This has been a practice in the tribunal! I would be guilty of not opposing the present appellants when I have opposed others!", argued SG Tushar Mehta.
"It is a case of penalty, not a decree owed to anybody else. Penalties are stayed, it is a decree which is not stayed. The complainant is a former employee/associate of NDTV. The same authority on the same question has earlier found no irregularity, they have said that there has been no transfer of control, they have even said that a case for stay is made out. There are different-different penalties on me for the same transaction on different show-cause notices. The point, the facts and the allegations are the same in all", pressed Mr. Rohatgi.
"There have been many cases where such an order has not been challenged and the deposit has been made. Merely because some half-truth are being placed before Your Lordships…TV journalism is not a class by itself! There cannot be arguments like 'we cannot run TV channel'…", argued the SG.
"The same tribunal in respect of the same transaction, in June 2019, said that a case for stay is made out. Earlier, it said that there is no transfer of control. It is brash on the part of the tribunal to ask for 50% deposit now. There has to be some consistency. Without any reason, you say 50% deposit... You are exercising the power of stay. You are asking for some amount. There have to be some observations!", observed Justice Chandrachud.
According to SEBI, certain loan agreements had clauses that have adversarial effect on the NDTV shareholders. The regulator said its probe began after receipt of complaints, in 2017 from Quantum Securities Pvt Ltd-- a shareholder of NDTV-- about an alleged violation of rules by non-disclosure of material information to the shareholders about loan agreements with VCPL. One loan agreement was with ICICI Bank, and two were with Vishvapradhan Commercial Private Ltd (VCPL).
As per SEBI, an agreement was signed in 2009 with VCPL for a loan of Rs 350 crore to repay the ICICI Bank loan and a second loan agreement with VCPL was signed for Rs 53.85 crore, a year later. These loan agreements included clauses and conditions that substantially affected the functioning of NDTV, Sebi said in its 52-page order. Further, one of the terms of loan agreements allowed VCPL to indirectly acquire 30 per cent shareholding of NDTV through conversion of warrants into equity shares of RRPR Holding.
The loan agreements were structured in such a manner that clauses on various matters pertaining to NDTV, which were material and price sensitive information, were concealed from the minority shareholders. The Roys have contended that NDTV was not a party hence there was no requirement for them to make disclosure of the agreement to the stock exchanges. Through such acts, the two propmoters and RRPR Holding have violated provisions of PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) norms, according to Sebi.
In addition, the Roys have entered into loan agreements which created conflict of their personal interest with the interest of NDTV, without making disclosure as required under the company's code of conduct. By doing so, they violated code of conduct of NDTV and provisions of equity listing agreement.
In addition, the Roys have entered into loan agreements which created conflict of their personal interest with the interest of NDTV, without making disclosure as required under the company's code of conduct. By doing so, they violated code of conduct of NDTV and provisions of equity listing agreement.
Accordingly, a fine of Rs 25 crore had been imposed on Roys and RRPR Holding, which needs to be paid jointly and severally. Besides, a penalty of Rs 1 crore each has been levied on Prannoy Roy and Radhika Roy.
In a relief to Prannoy & Radhika Roy, the Supreme Court had on February 15 exempted them from making deposit before the Securities Appellate Tribunal(SAT) for hearing their appeals against the penalty of over Rs 16.97 crores imposed by the Securities and Exchange Board of India(SEBI) in a different case related to insider trading.
A bench headed by the Chief Justice of India ordered that "no amount shall be coercively recovered from the appellants(Prannoy Roy and Radhika Roy) for hearing the case".
When the Solicitor General of India, Tushar Mehta, raised an apprehension on behalf of the SEBI that such an order is likely to be used in other similar pending cases, the bench clarified that the order "will not be treated as a precedent".
On Friday, Mr Rohatgi had argued that on a similar order by the SAT in relation to the same parties, Court no. 1 of the Supreme Court, that is, the bench headed by Chief Justice SA Bobde, had exempted them from the deposit. "The bench had said that it is not a precedent. So legally we can't say that we are bound by the three judgement", Justice Chandrachud had remarked.
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