Markets regulator Securities and Exchange Board of India (SEBI) on Thursday imposed a penalty of Rs 25 crore on controversial news outlet NDTV and Rs 1 crore each on its promoters. SEBI has imposed fines on NDTV and its promoters Prannoy Roy and Radhika Roy for “violating various securities” norms by hiding information from shareholders regarding certain loan agreements.
According to the reports, RRPR Holding, the promoter entity of New Delhi Television Ltd (NDTV), has been fined by SEBI after they concealed information about loan agreements that had clauses having an adversarial effect on the NDTV shareholders.
Ordering the Roys to pay the penalty for the violation, the SEBI said it began an investigation after receipt of complaints from Quantum Securities Pvt Ltd, a shareholder of NDTV in 2017, about the 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).
According to the regulator, the 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.
One of the terms of loan agreements allowed VCPL to indirectly acquire 30 per cent shareholding of NDTV through the conversion of warrants into equity shares of RRPR Holding.
The loan agreements were structured that clauses on matters pertaining to NDTV, which had price-sensitive information, were concealed from the minority shareholders.
Meanwhile, the promoters – Prannoy Roy and Radhika Roy, who are also accused of committing crores of tax fraud, have claimed that NDTV was not a party hence there was no requirement for them to make disclosure of the agreement to the stock exchanges.
SEBI fines NDTV, here is why: Roys entered loan agreements creating a conflict of interests, violated provisions
SEBI Adjudicating Officer Amit Pradhan said that thought NDTV was not a party to these loan agreement, however, contents and clauses of loan agreement clearly demonstrates that the scheme was devised by the notices in such a way that though NDTV would not be a party to the said loan agreements, yet the loan agreements would contain certain crucial, onerous and hostile stipulations pertaining to NDTV.
“Such stipulations included NDTV’s capital restructuring, which was agreed to be undertaken by Prannoy Roy and Radhika Roy, only with the prior consent of ICICI Bank/ VCPL,” he added.
Through such acts, Prannoy Roy, Radhika Roy and RRPR Holding violated provisions of PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) norms, SEBI said in its order.
The accused Roys had also entered into loan agreements which created a conflict of their personal interest with the interest of NDTV, however, failed to make disclosure as required under the company’s code of conduct. They violated the code of conduct of NDTV and provisions of equity listing agreement.
“Accordingly, a fine of Rs 25 crore has 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,” the SEBI said in its order.
NDTV promoters accused of ‘insider trading’
In November this year, in yet another blow to controversial media network NDTV, Securities and Exchange Board of India (SEBI) had found its promoters Prannoy Roy and Radhika Roy guilty of making undue gain from insider trading. As a penalty for the financial crime, SEBI has barred them from trading in the securities market for two years and directed them to return the illegal gain of Rs 16.97 crore they had made from the insider trading more than 12 years ago.
Apart from Pranoy Roy and Radhika Roy, former NDTV CEO Vikramaditya Chandra, senior advisor Ishwari Prasad Bajpai, group CFO Saurav Banerjee also have been found guilty of insider trading.
According to an investigation conducted by SEBI, Pranoy Roy and his wife Radhika Roy have violated the Prohibition of Insider Trading (PIT) Regulations. They are accused of possessing Unpublished Price Sensitive Information (UPSI) during 2007-2008 relating to discussion on the reorganisation of New Delhi Television Ltd.
NDTV accused of tax fraud, financial irregularities
The controversial far-left alleged news channel – NDTV in recent times has been embroiled in controversies over alleged financial irregularities. NDTV is facing multiple cases related to violation of FDI norms, Income Tax violation, and non-compliance with disclosure norms. CBI is probing a case against NDTV in relation to a Rs 375 crore loan from ICICI Bank and a corresponding wrongful loss of Rs 46 crore to the bank.
There is a chain of borrow, repay and borrow where Roys took a series of loans in 2008 as they sought to buy back a large chunk of NDTV shares from the market, allegedly violating foreign direct investment (FDI) rules in a 2007-09 investment, a charge denied by the company.
In August 2019, NDTV founders Prannoy Roy and his wife, Radhika Roy, were prevented from leaving the country after authorities had suspected that the accused Roys could run away from the country amidst massive tax fraud allegations against them.