NDTV Promoters Prannoy Roy & Radhika Roy Move Bombay HC Against SEBI Notices

While hearing the writ petition filed by Prannoy Roy and Radhika Roy against show cause notice issued to them by the Securities and Exchange Board of India (SEBI) for alleged violation of Sections 12 a(d) and 12 a(e) of Securities and Exchange Board of India Act read with Prohibition of Insider Trading) Regulations, 1992, the Bombay high Court observed that petitioners should face the notice and attend hearings before SEBI and if there is no material against them then the notices will fail.

Division bench of Justice SC Dharmadhikari and Justice RI Chagla made the above observation after hearing Advocates Fershte Sethna and Adhiraj Malhotra of DMD Advocates for the petitioners and Senior Counsel JJ Bhatt along with Arnav Misra for SEBI.

Court will pass orders in the matter on Monday.

On August 31, 2019 SEBI issued the notice alleging that the petitioners had traded shares of NDTV while being in possession of "unpublished price sensitive information". Roys have also sought to inspect all the documents, records and internal files and notings upon which the market regulator had relied before issuing the said notice.

"The show cause notice is arbitrary, unreasonable and issued in gross abuse of power and puts the petitioner to risk of detriment, jeopardy, prejudice and hardship.", petition states.

Chronology of SEBI Actions against NDTV

First show-cause notice issued by SEBI against NDTV was on February 12, 2015 alleging violation of clause 36 of listing agreement on the ground that there was non-disclosure of a tax demand of Rs.450 crores which was raised under an assessment order against the company for the year 2009-2010. SEBI thereafter issued a corrigendum to the first show-cause notice on March 17, 2015.

NDTV filed its reply before SEBI contending that they were under legal advice and bona fide belief that the tax demand was not required to be reported under clause 36 of the listing agreement. They submitted additional documents under communications dated April 10, 2015 and May 12,2015. On June 6, 2015, SEBI passed order holding the petitioner liable for violation of clause 36 of the listing agreement and imposed a penalty of Rs.25 lakhs under section 23A of the Securities Contracts (Regulation) Act, 1956.

NDTV filed an appeal against the said order and on August 20, 2015 second show-cause notice was issued against the petitioner company and its Directors with additional allegation of delayed disclosure of certain sale of shares by KVL Narayan Rao, Group CEO and Executive Vice-Chairman and delayed disclosure by the petitioner under the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992. On June 8, 2016 a third show-cause notice was issued by SEBI alleging further non-disclosures by NDTV.

In June this year, SEBI barred both Prannoy Roy and Radhika Roy from holding any managerial positions in NDTV for two years. Within a week, Securities Appellate Tribunal stayed SEBI's order.

Thereafter, in September, the Bombay High Court set aside orders passed by SEBI rejecting NDTV's applications for condonation of delay in filing settlement applications after first initiated adjudication proceedings against the channel for alleged violations of the Securities Contract (Regulation) Act, 1956 observing that the Board had committed a serious error.