Regulator Sebi on Friday barred NDTV Ltd's three key promoters -- Prannoy Roy, Radhika Roy and their holding firm -- from the capital markets for two years and also restrained the two individuals from holding any board or top management role at the company in this period.
The Roy couple has also been barred from holding a board or key managerial position at any other listed company for one year, Sebi said while coming down heavily on them and RRPR Holdings Pvt Ltd for what it termed as violation of various regulations by keeping minority shareholders in the dark about three loan agreements.
One such loan agreement was with ICICI Bank while two loans were from a little-known entity Vishvapradhan Commercial Private Ltd (VCPL).
The ownership of Delhi-based 'wholesale trading' firm VCPL, incorporated in 2008, is said to have later changed hands from RIL to the Nahata group, from which the Mukesh Ambani-led firm had bought Infotel Broadband in 2010 to re-enter the telecom business.
Earlier last year, Sebi had ordered VCPL to make an open offer for NDTV Ltd for indirectly acquiring control of up to 52 per cent stake through a convertible loan of Rs 350 crore in 2009 'sourced' from a subsidiary of Reliance Industries Ltd.
In its latest 51-page order, the Securities and Exchange Board of India (Sebi) said all its directions, including debarment of RRPR, Prannoy Roy and Radhika Roy from buying, selling or otherwise dealing directly or indirectly in securities, or being associated with the securities market, will come into effect immediately.
Their existing holdings, including mutual fund units, will remain frozen during the prohibition period, Sebi said.
Sebi said its probe began after receipt of complaints in 2017 from Quantum Securities Pvt Ltd, a shareholder of New Delhi Television Ltd (NDTV), about an alleged violation of rules by non-disclosure of material information to the shareholders about loan agreements with VCPL.
The ICICI Bank loan had a clause wherein the three promoters of NDTV had undertaken not to permit any major corporate restructuring, merger etc. without the prior written approval of the lender.
Investigations found that another loan agreement was signed with VCPL for a loan of Rs 350 crore later, which did not carry any interest rate, to repay the ICICI Bank loan that had an interest rate of 19 per cent.
However, one of the terms of the new loan effectively gave VCPL control over the entire shareholding of RRPR Holdings. The agreement gave further significant powers to VCPL and it was significantly material and price-sensitive in nature, as per the order.
A second loan agreement for Rs 53.85 crore was also signed with VCPL a year later that provided for the promoters of NDTV allowing the lender to indirectly acquire 30 per cent stake in the media company through the conversion of their warrants into equity shares of RRPR Holdings.
It was alleged that by concealing such material information from the public shareholders for a period when the promoters were themselves dealing in the company shares, they had committed a fraud on the minority public shareholders.
Noting that the company was bound to intimate such material information to the public shareholders to help them take informed investment decision, Sebi said "the loan agreements were unmistakably structured as a scheme to defraud the investors by camouflaging the information about the adversarial terms and conditions impinging upon the interest of NDTV's shareholders."
Sebi said Roys have been the face of NDTV and the prime movers of all its activities, while they were also actively running the day-to-day management as Chairman and Managing Director (MD).
Under the circumstances, they had "avowed duty to act in a fair and transparent manner to protect the interest of their minority shareholders and not to indulge in any fraudulent activity or any activity detrimental to the interest of the shareholders of NDTV".
"However, contrary to the same, in the present case, the noticees -- the promoters and directors of NDTV -- have been found to have indulged in fraudulent acts wherein they have bartered away the interests of NDTV by making them subject to prior written consent of ICICI/VCPL without disclosing the same to the company (NDTV)," Sebi said.
The regulator also accused them of having violated the Code of Conduct of NDTV, which they were supposed to abide by as Chairman and MD.
"Any fraudulent act directly designed to defraud such investors cannot be treated as good for the securities market and for the interest of investors. Such acts, if not dealt with adequately and sternly, will send a wrong signal to the violators having same or similar propensity and will not be good for the securities market," the regulator said in its order.