Rs 27 Cr Penalty Imposed On NDTV Promoters Prannoy Roy & Radhika Roy For Concealment Of Information From Shareholders; Roys To Appeal

A year after the Securities and Exchange Board of India (SEBI) first barred NDTV promoters Radhika and Prannoy Roy from accessing securities markets, the regulatory body has imposed Rs. 27 crore as penalty on the the Roys and RRPR Holdings Pvt Ltd for concealing price sensitive information from NDTV shareholders.

While Rs. 25 crores have been imposed jointly and severally on the three promoters of the firm, Rs. 1 crore each has to be paid separately by the Roys.

Prannoy Roy and Radhika Roy said that they have never directly or indirectly surrendered control of the Company to another individual or entity.

They will appeal against the order and its findings at the Securities Appellate Tribunal

The Board found that the promoters had failed to disclose price sensitive information to the shareholders of NDTV, noting that the three promoters "were integral part of the loan agreements" and were facing charges of consciously and deliberately hiding material and price sensitive information from the company and its minority shareholders.

The Roys faced the charges for non-disclosure of loans availed by RRPR Holdings from the ICICI Bank and the Vishvapradhan Commercial Private Limited (VCPL). The ICICI bank loan had restrictive conditions binding upon the company requiring the approval of the bank before undertaking any corporate restructuring. The promoters failed to disclose information regarding this loan agreement to NDTV. The case against them alleges that they concealed such information from the public even while they were transferring/receiving shares of NDTV from RRPR Holdings in their off market deals.

The order passed by Adjudicating Officer Amit Pradhan ruled that by doing so, the Roys had prima facie committed fraud upon the minority shareholders of the company. He further held that they had acted in violation of Section 12A of the SEBI Act and the relevant rules of SEBI (Prohibition of Fraudulent Trade Practices relating to Securities Market) Regulations, 2003 (PFUTP Regulations) by failing to disclose the information related to the loan agreements.

The loan agreements with VCPL in 2009 and 2010 were for borrowing of Rs. 350 crores and Rs. 50 crores respectively. SEBI held that the ICICI loan agreement and VCPL loan agreements contained clauses and conditions which substantially affected the functioning of NDTV. The order also noted that the promoters had entered into various off market inter se bulk transactions warranted by the VCPL loan agreements.

"In the absence of material information relating to the loan agreements being made available to the public, the public shareholders were not in a position to take informed decision regarding dealing in the scrips of NDTV during the relevant period," SEBI found.

NDTV's reaction 

The founders and promoters of NDTV, have repeatedly said that they have never directly or indirectly surrendered control of the Company to another individual or entity.

The SEBI order issued against them alleging they surrendered control of the Company, is based on an incorrect assessment of facts.

The core issue of the alleged surrender of control is pending adjudication at the Securities Appellate Tribunal, which, in 2019, granted a stay in favour of the founders of NDTV till the tribunal decides the matter.

The founders' lawyers will appeal against the order and its baseless findings at the Securities Appellate Tribunal. Their lawyers have advised that the SEBI order will not withstand scrutiny in appeal. 

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