June 15, 2019:
They allegedly concealed material info from shareholders while entering into loan agreements between 2008 & 2010.
The Securities & Exchange Board of India (SEBI) has barred Prannoy Roy & his wife Radhika Roy from holding any directorship in New Delhi Television Ltd. (NDTV) for a period of two years.
Mrs. & Mr. Roy, along with their holding firm RRPR Holdings, have also been barred from accessing the securities’ market for two years for allegedly concealing material information from shareholders while entering into loan agreements between 2008 & 2010.
Mr. Roy & his wife have also been restrained from being directors in any listed entity for an year.
As per information available on the BSE, Mr. Roy is currently the executive director — chairperson of the listed media entity while Ms. Roy is an executive director.
“... the Noticee no. 2 (Mr. Roy) & 3 (Ms. Roy) had this avowed duty to act in a fair & transparent manner to protect the interest of their minority shareholders & not to indulge in any fraudulent activity or any activity detrimental to the interest of the shareholders of NDTV,” stated the SEBI order by whole-time member S.K. Mohanty.
“However, contrary to the same, in the present case, the Noticees i.e. the promoters & directors of NDTV have been found to have indulged in fraudulent acts wherein they have bartered away the interests of NDTV...,” it added.
Starts probe
SEBI initiated an investigation after receiving a complaint in 2017 wherein it was alleged that the three entities concealed material information from shareholders while entering into loan agreements with first, ICICI Bank & thereafter, Vishvapradhan Commercial Pvt. Ltd. (VCPL). The SEBI probe found that in August 2009, RRPR Holdings entered into a amended loan agreement with ICICI Bank to prepay a loan taken from the bank in October 2008. Under the loan agreement, the firm had undertaken not to permit any restructuring of the listed entity without the approval of the bank.
While the binding clauses of the agreement were not disclosed to the stock exchanges, Mr. Roy & Ms. Roy transferred their shares to the holding entity in off-market transactions.
Thereafter, another loan agreement for ₹350 crore was entered into with VCPL in July 2009 to repay the loan taken from ICICI Bank. The agreement with VCPL required RRPR Holdings to issue warrants, which were convertible into equity shares totalling 99.99% of the share capital of RRPR Holdings.
In January 2010, another loan worth ₹53.85 crore was taken from VCPL wherein apart from the earlier terms, it was stipulated that the NDTV promoters would allow VCPL to indirectly acquire 30% shares of NDTV through conversion of warrants into equity shares of RRPR Holdings.
According to the SEBI order, none of these loan agreements & their clauses was disclosed to the stock exchanges, leading to investors not being able to take an informed decision while dealing in shares of NDTV.
“The loan agreements were unmistakably structured as a scheme to defraud the investors by camouflaging the information about the adversarial terms & conditions impinging upon the interest of NDTV’s shareholders, thereby inducing innocent investors to continue to trade in the shares of NDTV oblivious to such adversarial developments in the shareholding of NDTV,” stated the SEBI order.
While Mr. Roy holds a stake of 15.94% in the company, Ms. Roy’s stake is pegged at 16.32%. RRPR Holding has a stake of 29.18% in the listed entity.
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