SEBI Drops Proceedings Against NDTV After SAT Set Aside Finding That It Was Controlled By VCPL

The Securities and Exchange Board of India (SEBI) has disposed of adjudication proceedings initiated against New Delhi Television Limited (NDTV).

The proceedings concerned alleged non-disclosure of a purported change in control of the company. SEBI noted that the Securities Appellate Tribunal (SAT) had set aside an earlier SEBI order that formed the basis of the proceedings and held that Vishvapradhan Commercial Private Limited (VCPL) had not acquired direct or indirect control of NDTV.

Adjudicating Officer Jai Sebastian passed the order on Friday (May 29).

“The allegation in the SCN rested on the premise that the 2018 SEBI Order established VCPL as the entity in indirect control of the Noticee, thereby triggering a mandatory disclosure under LODR Regulations. As noted above, Hon'ble SAT subsequently quashed the 2018 SEBI Order and explicitly ruled that the 2009 Loan Agreement did not constitute an acquisition of control, direct or indirect. Therefore, the very foundation of the disclosure requirement has been undermined. Accordingly, I am of the opinion that in the absence of a legally recognized change in control, the disclosure mandates of the LODR Regulation read with SEBI Circular dated September 09, 2015 does not arise.”

NDTV, which is listed on the BSE and NSE, was subjected to adjudication proceedings following a shareholder complaint. The complaint alleged non-disclosure of a material event arising from SEBI's June 26, 2018 order against VCPL.

In that order, SEBI had concluded that VCPL had indirectly acquired control over NDTV. The finding was based on a loan agreement and call option agreement dated July 21, 2009. The agreements were entered into among the company's promoters, Dr. Prannoy Roy and Radhika Roy, RRPR Holding Pvt. Ltd. and VCPL.

After the 2018 order, NDTV informed the stock exchanges that its promoters, Dr. Prannoy Roy and Mrs. Radhika Roy, individually and through RRPR Holding Pvt. Ltd., continued to own and control 61.45% of the company's paid-up share capital. It also stated that they continued to control NDTV.

The shareholder complaint alleged that NDTV had failed to disclose a material event concerning the purported change in control reflected in the 2018 SEBI order. Following an investigation, SEBI initiated adjudication proceedings alleging violations of disclosure requirements.

NDTV contended that it was neither a party to the proceedings against VCPL nor a recipient of the 2018 SEBI order. It also argued that the order had been passed against a third party. According to NDTV, the order did not impose any disclosure obligation on the company.

The Adjudicating Officer noted that the 2009 loan agreement had been executed between the promoters of NDTV, RRPR Holding Pvt. Ltd. and VCPL. NDTV itself was not a party to the agreement.

“It is a fact that the Noticee was neither a party to the proceedings against VCPL which ultimately culminated in the abovementioned 2018 SEBI Order nor was officially served with the said order.”, the regulator noted.

The order further recorded that NDTV had issued clarifications to stock exchanges after media reports concerning the 2018 SEBI order.

“Despite this, the Noticee pointed out that it acted with abundant caution by issuing prompt clarifications to the stock exchanges within 24 hours of media reports in June 2018, confirming that the original promoters still held a 61.45% stake and maintained full control of the Noticee," it noted.

During the pendency of the proceedings, SAT, by its judgment dated July 21, 2022, set aside SEBI's 2018 order. It held that VCPL had not acquired direct or indirect control of NDTV. The Adjudicating Officer noted that the SAT order had not been stayed by the Supreme Court.

The Adjudicating Officer noted that the issue of whether the 2009 loan agreement resulted in a change of control had already been examined by SAT. SAT had held that the agreement did not result in the acquisition of control by VCPL.

Taking note of the SAT ruling, the Adjudicating Officer concluded that the foundation of the proceedings no longer survived. The order stated that, in the absence of a legally recognised change in control, the disclosure requirement relied upon in the show cause notice did not arise.

The proceedings were accordingly disposed of without imposition of any monetary penalty on NDTV.