Control of NDTV not transferred to VCPL via loan agreement, says SAT


A Securities and Appeals Tribunal (SAT) order dated July 20, 2022 is particularly important in the context of an attempted takeover of NDTV by Adani Media Works.

NDTV’s share price hovered at Rs 388 on Wednesday. The SAT found that the loan agreement signed by NDTV’s promoters with VCPL did not transfer control of NDTV to VCPL either directly or indirectly and, therefore, the AO’s findings on whether the agreement loan is structured in such a way that it in effect indirectly transfers control to VCPL cannot be sustained. The findings in this regard were rescinded.

The issue to be decided is whether the minutes and content of the minutes of the August 5, 2015 NDTV Board of Directors were required to be disclosed 83 under Article 36 of the Listing Agreement, said the SAT in its July 20 statement. order.

In this case, the AO found that the information relating to VCPL’s loan agreements was material and price sensitive due to the de facto control exercised by VCPL.

“We have already ruled that there was no de facto control by VCPL over NDTV and therefore on this short ground the finding that the content of the loan agreements was price sensitive in nature cannot be sustained,” the court said.

“However, given the particular structure of the loan agreement, coupled with the fact that the exercise of the warrant option or the call option, if invoked, would affect the performance /operation of the company and therefore, to that extent, when the matter was discussed in the minutes of the board meeting of August 5, 2015, said minutes should have been disclosed in accordance with Article 36 of the Listing Agreement. Such disclosure would enable shareholders and the public to make an informed decision about investing or divesting in NDTV’s securities,” the SAT said.

In light of the foregoing, we are of the opinion that NDTV, by not disclosing the minutes of the meeting of August 5, 2015 to the stock exchange, violated clause 36 of the listing agreement, said the SAT.

Thus, while upholding the order of the AO only with respect to breach of clause 36 of the Listing Agreement, we find that the penalty of Rs 5 crore is excessive. A maximum penalty of Rs 1 crore could be imposed under Section 23A(a). Considering the facts and circumstances of the case, and considering the factors at issue under Section 23J of the SCRA, we find that the AO itself considered that the quantifiable gain or undue advantage accruing to NDTV or the magnitude of the loss suffered by investors as a result of the default cannot be calculated. Therefore, the penalty for mere violation of non-disclosure under Section 36 of the Listing Agreement may only be penalized to the maximum amount stated in the provision.

Considering the facts and circumstances, we are of the opinion that the penalty of Rs 5 crore is reduced to Rs 10 lakhs under Section 23A(a) of the SCRA, the SAT said in an order.

In light of the foregoing, the impugned order dated June 26, 2018 issued by the WTM in 2018 VCPL v. SEBI Appeal No. 293 cannot stand and is set aside. The appeal is allowed without an order as to costs.

Consequently, the indications given by the WTM being excessive are rejected. Since a sanction has been imposed, we see no reason to issue further instructions under Section 11, 11B of the SEBI Act. The appeals are allowed in part without an order as to costs.

Appeal No. 80 of 2021 NDTV v. SEBI against the order of December 29, 2020 issued by the AO is partially upheld. The violation of article 36 of the registration contract is confirmed. However, the Rs 5 crore penalty is reduced to Rs 10 lakhs, the SAT said.

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