NDTV Case: SAT Grants Relief To Prannoy, Radhika Roy Against SEBI Action

The Securities Appellate Tribunal on Tuesday granted a three-month stay on the market regulator’s order barring journalist Prannoy Roy and his wife Radhika Roy from continuing as directors of New Delhi Television Ltd., the operator of NDTV news channels.

The Roys, who own 63.17 percent of NDTV, moved the SAT citing that they were not provided with the certified copies of the order by the Securities and Exchange Board of India, and that the loan agreements that eventually led to the SEBI action didn’t violate rules.

While the SEBI counsel argued that the orders were uploaded on the regulator’s website on June 14, the tribunal observed that SEBI’s duties do not end by just uploading of the orders.

SEBI’s June 14 order barred Prannoy and Radhika Roy from accessing the capital markets for two years and also disallowed them from occupying position as a director or key managerial personnel in NDTV for two years. The regulator held that they violated provisions of the SEBI Act and the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003, by not disclosing loan agreements between RRPR Holdings Pvt. Ltd., a promoter entity of NDTV, with ICICI Bank Ltd. and Vishwapradhan Commercial Pvt. Ltd. to minority shareholders.

The loan availed from ICICI Bank had to be repaid in three years. For that, RRPR availed an interest-free loan from Vishwapradhan Commercial with a first right of refusal. The call option in the agreement, exercisable within 10 years, is still in force. But it did not amount to transfer or vesting of the controlling interest in NDTV to Vishwapradhan Commercial, the counsel for the Roys argued.

SEBI had initiated investigation after a complaint from Quantum Securities Pvt. Ltd., a shareholder in NDTV. The regulator held that the pact between Vishwapradhan and RRPL was signed much later than the repayment of loan to ICICI Bank, and amounted to transfer of control. Questioning the intent behind an interest-free loan, the SEBI counsel argued the agreement contained clauses which amounted to vesting of control.

Hearing both the parties, the SAT concluded that determination of the nature of loan agreements and transactions between RRPL and Vishwapradhan Commercial and whether the loan agreements amounted to transfer of controlling interest would require further examination. It directed SEBI to file a reply within six weeks of the order and granted three weeks thereafter for the Roys to file their response.

The tribunal stayed the SEBI order till the NDTV case is heard for final disposal on September 16.