The Securities and Exchange Board of India (SEBI) imposed a total penalty of Rs. 27 crore on three NDTV promoters, Prannoy Roy, Radhika Roy and RRPR Holding Limited for failing to disclose price sensitive information to the shareholders of NDTV relating to three loan agreements entered into by them with Vishvapradhan Commercial Private Limited (VCPL) and ICICI bank.
Prannoy and Radhika Roy have to pay Rs. 1 crore separately and Rs 25 crores have been imposed jointly and severally on all three NDTV promoters.
The Adjudicating Officer Amit Pradhan ruled that there was 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).
NDTV promoters had entered into a loan agreement with ICICI in October 2008. NDTV promoters 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 and VPCL loan agreements also warranted transfer of shares of NDTV by the NDTV promoters which was carried out off market by way of various inter se bulk transactions.
The SEBI concluded,
“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.”
Non-availability of such information unjustly deprived shareholders of informed participation while dealing with shares of NDTV, it added.
It was argued by Roys 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. They 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.
On the same note, SEBI observed that agreements contained certain crucial, onerous and hostile stipulations pertaining to NDTV including its capital restructuring.
“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 further stated
“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.”