TaxTMI 
TaxTMI 
2022 (7) TMI 1443
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.... Mr. P. N. Modi, Senior Advocate with Ms. Fereshte Sethna, Mr. Abhishek Tilak and Mr. Ameya Pant, Advocates i/b DMD for the Appellant. Per: Justice Tarun Agarwala, Presiding Officer 1. Eight (8) appeals have been filed against four orders. The impugned orders flow from the consequences of the loan agreement dated July 21, 2009 and call option agreements dated July 21, 2009. Since the matter is interlinked in one way or the other, all the eight appeals are being decided together. Appeal No. 293 of 2018 has been filed by Vishvapradhan Commercial Pvt. Ltd. ("VCPL" for convenience) against the order dated June 26, 2018 passed by the Whole Time Member ("WTM" for convenience) of the Securities and Exchange Board of India directing VCPL to make an open offer in terms of Regulation 44 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 and Regulation 32 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 ("SAST Regulations, 2011" for convenience) SAST Regulations, 2011. 2. Appeal Nos. 294, 295 and 296 of 2019 has been filed by Dr. Prannoy Roy ("PR"), Radhika Roy ("RR") and RRPR Holding Pvt. Ltd. ("RRPR") respectively against the o....
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....wo call option agreements dated July 21, 2009 were also executed for 1,63,05,404 equity shares of NDTV representing 26% of NDTV shares. The call option agreement between RRPR and Shyam Equities Private Limited ("SEPL" for convenience) in terms of which SEPL had the right to purchase 11.01% equity shares of NDTV from RRPR at a call option price of Rs. 214.65 per share. Another call option agreement of the same date was executed between RRPR and Subhgami Trading Private Limited ("STPL" for convenience) in terms of which STPL had a right to purchase 14.99% equity shares of NDTV from RRPR at a call option price at Rs. 214.65 per share. Needless to say here, SEPL and STPL are associates of VCPL. Another loan was taken by the promoters from VCPL on January 25, 2010 for Rs. 53.85 crores. 8. The terms of the loan agreement are as follows:- (i). The tenure of the loan is 10 years. (ii). The loan shall not carry any interest. (iii). RRPR will issue a convertible warrant to VCPL, convertible into equity shares aggregating to 99.99% of the fully diluted equity share capital of RRPR at the time of conversion, convertible at any time during the tenure of the loan or thereafter. (iv). VC....
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....6 Cr. (valuation at which lender has put money into the company). (b) Merger, amalgamation or consolidation of NDTV with any other entity. (c) Cause NDTV to take any steps towards bankruptcy, insolvency or reorganization, arrangement, adjustment, winding up, liquidation etc. (d) Buyback of equity securities, reduction or alteration of share capital of NDTV. (e) Take any action to issue any equity securities or enter into any agreement as a result of which the promoters cease to be in sole control of NDTV. 9. The terms of the call option agreements are as under:- i) SEPL and STPL have a right to purchase either by themselves or through nominees 11.01.% and 14.99% equity shares of NDTV respectively from RRPR at a call option price of Rs. 214.65 per share. ii) For a period of 5 years the promoters would only sell their shares after taking consent from the call option holders. If, the call option is exercised, the purchasers cannot sell those shares for a period of 5 years from the date of the loan agreement without prior consent of Prannoy Roy and Radhika Roy. iii) There is a right of first refusal for the call option holders and the promoters with respect to the NDTV s....
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....TM contended that the loan had an inbuilt agreement to purchase the company's stock at a fixed price over and above the prevailing current market price. Further, a perusal of clause 6 of the loan agreement indicated that even without exercising the conversion option of equity share capital of RRPR, VCPL had a right to purchase the shares of RRPR at par value. Further, the conversion of warrants even after the tenure of the loan indicated that VCPL had in fact acquired control over the company. The WTM held that the exercise of the right to convert warrants into the shares of RRPR was not dependent on the repayment of the loan and, whether or not the loan was repaid, VCPL could validly seek conversion of the warrants withheld with RRPR and, consequently, concluded that VCPL was indirectly holding 26% shares of NDTV. The WTM, thus, concluded that it was not a simple case of a secured loan or an instance of asset-recourse lending as contended by VCPL. 13. The WTM further held that the valuation of the collateral was very peculiar, namely, that the valuation of the shares at Rs. 214.65 per share which was above the market value of the NDTV shares could not be accepted and this unusual....
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....bered their entire shareholding and also provided personal guarantees. For the aforesaid purpose, a commercial loan was provided by VCPL. While granting the loan, certain collateral securities and protective rights were taken, namely, exercise of the warrant conversion option to acquire 99.99% equity shares of RRPR resulting in indirect acquisition of 26% equity shares. The same would also result when VCPL exercises the purchase option to purchase all the equity shares of RRPR held by Radhika Roy and Prannoy Roy. In addition, VCPL through its affiliates could directly purchase 26% equity shares of NDTV at a price of Rs. 214.65 per shares by paying Rs. 350 crores to RRPR which amount could be utilized by RRPR to repay the loan to VCPL. If, VCPL was interested in the media business of NDTV it could acquire 26% equity shares of NDTV at Rs. 214.65 per share irrespective of the prevailing market price. This arrangement was beneficial to both the parties, namely, VCPL and the promoters of NDTV. It was further contended that the WTM committed a manifest error in analyzing various provisions of the loan agreement to come to a conclusion that the loan agreement was nothing else but an indir....
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....In support of his contention the learned counsel has placed reliance upon the decision of this Tribunal in Subhkam Ventures (India) Pvt. Ltd. vs. SEBI (2010) SCC Online SAT 35, the decision of the WTM in Victor Fernandes vs. Network 18, dated 15 November 2019 which was affirmed by this Tribunal by its judgement dated September 28, 2021 in Appeal No. 618 of 2019 and, the decision of the Supreme Court in Arcelormittal India Private Limited vs. Satish Kumar Gupta & Ors. (2019) 2 SCC 1. 21. On the other hand, Shri Gaurav Joshi, the learned senior counsel for the respondent contended that under the garb of a loan agreement, VCPL had acquired voting rights in NDTV in as much as the loan did not carry any interest and that the loan was repayable at the end of 10 years. It was further contended that the conversion of warrants was not dependent on the loan agreement and even after the loan was repaid the conversion warrants could be exercised. Much emphasis was laid on the use of the word 'thereafter'. It was contended that from a perusal of clause 7, 8 & 20 of the loan agreement, it was clear that VCPL had indirectly taken control over NDTV and, therefore, was required to make an open off....
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...."control" Regulation 2(1)(c) "control shall include the right to appoint majority of the directors or to control the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements or in any other manner." Acquisition of control "Regulation 12. Irrespective of whether or not there has been any acquisition of shares or voting rights in a company, no acquirer shall acquire control over the target company, unless such person makes a public announcement to acquire shares and acquires such shares in accordance with the regulations: Provided that nothing contained herein shall apply to any change in control which takes place in pursuance to a special resolution passed by the shareholders in a general meeting: Provided further that for passing of the special resolution facility of voting through postal ballot as specified under the Companies (Passing of the Resolutions by Postal Ballot) Rules, 2001 shall also be provided. Explanation.- For the purposes of this regulation, acquisition shall include direct or ....
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.... indirectly. The word "control" as defined under Regulation 2(1)(c) includes the right to appoint majority of the directors or to control the management or policy decisions directly or indirectly, individually or in concert by virtue of the shareholding or management rights or shareholding agreements or voting agreements or in any other manner. Regulation 12 prescribes that no acquirer shall acquire control unless such person makes a public announcement to acquire shares. Regulation 14 prescribes that such public announcement should be made within four working days. 24. From the aforesaid, it is clear that the meaning and import of the term "control" as defined in Regulation 2(1)(c) of the SAST Regulations, 1997 is of vital importance. The term "control" was considered and explained by this Tribunal in the matter of M/s. Subhkam Ventures (I) Pvt. Ltd. vs. SEBI in Appeal No. 08 of 2009 decided on January 15, 2010. In this appeal, the question raised was whether the share subscription and shareholders agreement executed by Shubhkam gave control over the target company as per the Regulation 2(1)(c) of the SAST Regulations, 1997. This Tribunal examined and explained what the word "con....
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....hor further, the question would be whether he controls the steering, accelerator, the gears and the brakes. If the answer to these questions is in the affirmative, then alone would he be in control of the company. In other words, the question to be asked in each case would be whether the acquirer is the driving force behind the company and whether he is the one providing motion to the organization. If yes, he is in control but not otherwise. In short control means effective control." 25. The Supreme Court while considering the expression "control" in Section 29(A)(c) of the Insolvency and Bankruptcy Code, 2016 ("IBC 2016" for convenience) held:- "49. The expression "control" is defined in Section 2(27) of the Companies Act, 2013 as follows:- 2(27) "control" shall include the right to appoint majority of the directors or to control the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements or in any other manner; 50. The expression "control" is therefore defined in two parts. The first part refers ....
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....holders agreement or voting agreements or in any other manner. This definition appears to be similar to the one as given in Black's Law Dictionary (Eighth Edition) at page 353 where this term has been defined as under: "Control - The direct or indirect power to direct the management and policies of a person or entity, whether through ownership of voting securities, by contract, or otherwise; the power or authority to manage, direct, or oversee." Control, according to the definition, is a proactive and not a reactive power. It is a power by which an acquirer can command the target company to do what he wants it to do. Control really means creating or controlling a situation by taking the initiative. Power by which an acquirer can only prevent a company from doing what the latter wants to do is by itself not control. In that event, the acquirer is only reacting rather than taking the initiative. It is a positive power and not a negative power. In a board managed company, it is the board of Directors that is in control. If an acquirer were to have power to appoint majority of Directors, it is obvious that he would be in control of the company but that is not the only way to be....
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.... expression "control" in Justice P.N. Bhagwati Committee Report, 1997 found it prudent to define the word in an inclusive and wide sense in order for it to cover a wide array of real life situation where control of a listed company has changed. It was urged, that the legislative intent was not to provide a straitjacket definition of control keeping in mind the dynamics of the securities market and, therefore, the definition of control was kept open ended and SEBI was granted a discretion to determine change of control on a case to case basis. In support of his submission, reliance was made in the decision of Ashwin K. Doshi vs. SEBI in Appeal No. 44 of 2001 decided on October 25, 2002 wherein it was held that the expression "control" is not of a narrow magnitude and that the Justice P. N. Bhagwati Committee itself knew about the limitation and that is why it wanted SEBI to draw its own conclusion through investigation if necessary. It was further held that a narrow interpretation of the concept of control would frustrate the object of the Act and the Regulations. It was thus urged, that the expression "control" not only includes positive but also negative control and that the term ....
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....h has been approved by the Supreme Court in Arcelormittal India Private Limited. The extent of the expression "control" as given in Shubhkam, namely, positive and not negative has been approved by the Supreme Court in rcelormittal India Private Limited meaning positive control. In short, the Supreme Court has concluded that the expression "control" means effective control. 32. No doubt, when SEBI challenged the order of Shubhkam before the Supreme Court, the Supreme Court while disposing of the appeal by its order dated November 16, 2011 had clarified that the order of this Tribunal in Shubhkam will not be treated as a precedent and the question of law would remain open. To this extent, there is no dispute but the interpretation of the expression "control" as decided by this Tribunal in Shubhkam was approved by the Supreme Court in Acrelormittal's case. Once the decision of this Tribunal has been approved it can be considered as a precedent for subsequent cases. It can be considered as a precedent while considering the provision of Regulation 2(1)(c) of the SAST Regulations, 1997. The directions given by a three judge bench of the Supreme Court or a two judge bench of the Supreme ....
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.... background, we have to now examine whether the appellant in the facts and circumstances of the present case had acquired positive control over the target company so as to trigger Regulation 12 of the SAST Regulations, 1997. 36. We have carefully gone through each and every clause of the loan agreements and we find that there is a commercial rationale behind the entire arrangement. Admittedly, Prannoy Roy and Radhika Roy, being promoters of NDTV, required money to pay the loan availed from ICICI Bank Limited. Through this agreement, we find that if the share price of NDTV exceeds Rs. 214.65 per equity share, then VCPL could exercise any of the following option and acquire 26% of the equity shares of NDTV at a fixed price of Rs. 214.65 per share. The options that could be exercised were the warrant conversion option under which 99.99% equity shares of RRPR could be acquired which would result in indirect acquisition of 26% of the equity shares of NDTV. The same would also result when VCPL exercises the purchase option to purchase all the equity shares of RRPR held by Prannoy Roy and Radhika Roy at par value for a nominal amount of Rs. 1 lakh. In addition, VCPL through its affiliate....
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....price of Rs. 214.65 per share, VCPL could exercise the option and release the loan. Thus, a shortfall in the collateral at the beginning of the loan tenure could not be a reason to conclude that the transaction was one for acquisition of control. In our opinion, the transaction has to be considered from a commercial rationale and has to be interpreted in a business like manner. 39. The finding that the warrant conversion option is not dependent on the repayment of the loan and that it does not lapse even on the repayment of the loan and, hence, it is a perpetual warrant conversion option is patently erroneous. In our opinion, the warrant conversion option, the purchase option and the call option under the call option agreement are in consideration for repayment of the loan. From a reading of the loan agreement and the call option agreements, it is clear that either the loan has to be repaid or the call option or the conversion option or the purchase option is exercised. Much reliance has been placed on the term "thereafter" appearing in clause (a) of Schedule 1. In our opinion, the word "thereafter" means that if the loan remains unpaid at the end of the tenure, then VCPL could st....
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....L in relation to the collateral and may hamper the ability of the promoters of NDTV to perform their obligations under the loan agreement and call option agreements. Similarly, borrowing or raising funds may jeopardize RRPR's ability to repay the loan extended by VCPL. Similarly, setting up a subsidiary is not in the interest of VCPL as it may allow RRPR to divert its money. Therefore, previous approval is required from VCPL. Such fetters placed is only to protect the interest of VCPL and does not indicate any direct or indirect control. 42. The aforesaid clauses as spelt out in the previous paragraphs does not make VCPL in a position to influence major policy decisions of NDTV by virtue of its affirmative vote nor has any say in matters pertaining to policy decision which would confer control. All these provisions make it clear that it does not want NDTV to undergo any major shift from its present position without VCPL's knowledge and approval. In our opinion, these are protective rights which does not result in acquisition of control of NDTV. These protective provisions are meant to ensure standards of good corporate governance. The aforesaid provision does not in any way contro....
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....nt, purchase or other acquisition by the Company of any Shares of the Company; (d) approval of the Annual Business Plan and any deviation, revisions therefrom; (e) the sale or disposition by the Company of any its assets, except for sales of assets: (i) which are in the ordinary course of business; or (ii) if outside the ordinary course of business, which, during any Fiscal year of the Company, have a fair market value of less than Rupees One Crore only; (f) the making of any loan or advance by the Company to any Shareholder or any third party, or the entry by the Company into any guaranty, indemnity, or surety contract or any contract of a similar nature in favour of or for the benefit of any Shareholder or any third party outside the ordinary course of business, of a value in excess of Rupees Two Crores; (g) the acquisition by the Company through subscription, purchase or otherwise, of the securities of any other body corporate; (h) to create any lien or to lease, mortgage, charge, pledge, licence any assets, rights, titles, intellectual property etc. of the Company or its Subsidiaries valued in excess of 5% of the networth of the company; (i) the conduct by the C....
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.... clause, it becomes more than clear that it does not want the target company to undergo any paradigm shift from its present position without the appellant's knowledge and approval. We are in agreement with the learned counsel for the appellant that the protective provisions under clause 9 are meant to ensure standards of good corporate governance and to protect the interests of the shareholders including that of the appellant from the whims and fancies of the promoters of the target company. The list of matters provided in clauses 9(a) to 9(o) are not in the nature of day to day operational control over the business of the target company. So also, they are not in the nature of control over either the management or policy decisions of the target company. These provisions merely enable the acquirer to oppose a proposal and not carry any proposal on its bidding. For instance, if the appellant desires that a particular scheme of arrangement ought to be promulgated or that a particular acquisition of another company should be effected or that the Annual Business Plan should contain a particular strategy or that any suitable course of action ought to be adopted, the appellant has no righ....
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....equivalent designation could be appointed without the affirmative vote of the appellant and this, according to him, vests significant control in the appellant. Here again, we are unable to agree with Sh. Desai. It is true that the affirmative vote of the appellant is required for the appointment of any of these key officers but even this provision does not mean that the appellant can get its candidate appointed. Affirmative vote of the investor in these matters is necessary for protecting its investment. We cannot infer from this provision that the appellant has gained control over the target company. 9. Provisions of clause 9 do impose fetters on the target company for purposes of good governance and it is conventional for financial investors to protect their investment and, indeed, the target company itself from the whims and fancies of the promoters who manage the target company. Such fetters fall far short of the existence of "control" over the target company. It must be remembered that every fetter of any nature in the hands of any person over a listed company cannot result in "control" of that person over that company. We also cannot lose sight of the fact that in the insta....
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....lt in VCPL acquiring direct control over RRPR or indirect control over NDTV. 46. The finding in the impugned order that the borrowers and promoters have in fact ceded their voting rights atleast, by 26% covered in the loan agreement and another 26% covered in the call option agreement upon the execution of these agreements is patently erroneous. The finding that upon the execution of these agreements the exercise of voting rights in NDTV was controlled by the terms of the transaction documents is wholly erroneous. The finding that through these documents VCPL had acquired control over 52% of NDTV shares is nothing but a figment of its imagination and against the material evidence on record. These loan agreement/ call option agreements can only acquire 26% equity shares of NDTV by VCPL and the finding that VCPL has acquired 52% of NDTV shares is not based on any cogent evidence nor does this transaction allow VCPL to acquire direct or indirect control over NDTV. 47. The learned senior counsel for the appellant placed heavy reliance on a decision of this Tribunal dated 28.09.2021 in Victor Fernandes vs. SEBI & Ors. in Appeal No. 618 of 2019 contending that the controversy in square....
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....ahl and his wife. The 6 holding companies were also wholly owned by Raghav Bahl and his wife. Therefore, IMT was ultimately controlled by Raghav Bahl who was also in control of NW18 at the time of ZOCD Agreement. In these circumstances, under the ZOCD agreement, there was no change in control of the 6 holding companies and even indirectly of the Target Co. (iii) Clause 2.1 of the ZOCD agreement itself discloses that the purpose for infusion was to enable the 6 holding companies to subscribe to rights issue of NW18 and TV18. The provision stating that if the actual amount required by the six holding companies for subscribing to the rights issue is more than the amount estimated earlier by them, then IMT shall remit such difference to them and if it is less than the amount estimated earlier, then the holding companies will refund the difference to IMT, might have been on account of the fact that price at which rights issue had not been crystallized at the time of entering into the ZOCD agreement. It is customary for lenders to specify the object for which the loan amount is to be utilized. (iv). Clause 6.1 is a stand still clause which is not unusual in such transactions. The obj....
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....ired joint control over NW18 not by way of the ZOCD Agreement dated February 27, 2012, but even before that by way of the Single Unit Agreement dated November 23, 2011 whereby IMT along with the holding companies of NW18 and other promoters of NW18 had agreed to act as a single unit in managing the matters of NW18 and acquired the right to appoint the majority of the board of directors of NW18. Thus IMT (Respondent No. 2) was part of the promoter group, however this fact was not included in any disclosure made under SAST Regulations/ clause 35 of the Listing agreement made to the exchanges." 51. After analyzing various clauses of the agreement, the WTM held:- "7.7. Independent of the assertions made as above in the affidavit of SEBI, I have examined the ZOCD agreement and the covenants therein. As such, in the case of convertible instruments with a freely exercisable option, it is necessary to examine the covenants of the Agreement, to determine whether it gives rise to a "control" trigger or not, from the SAST perspective. This is all the more so, because Regulation 13(2)(b) mandates, in the case of convertible securities without a fixed date of maturity, an open offer to be ma....
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....1.89%, at the time of allotment of ZOCDs. It is relevant to mention that in the case of IMT, any conversion of ZOCDs would require the concurrence of Raghav Bahl of NMPL/DCPL as its Trustee. Hence, as affirmed in the affidavit referred to above, IMT was ultimately under the control of Raghav Bahl, at the time of ZOCD agreement. I therefore find no reason brought forth by the Appellant that negates the observations made in the said Affidavit. It is also an undisputed fact that IMT had not, during the period between the ZOCD agreement and the SPA, independently implemented or exercised any rights that are indicative of exercise of control, as enlisted under regulation 2(1)(e) of the SAST Regulations. 8... I am convinced that a control trigger cannot be attributed to the acquirer at the point of time of execution of ZOCD, in the facts and circumstances of this case. 16. Thus, to sum up, the ZOCD Agreement read independently or combined with the SUA, it does not trigger an open offer. The trust deed does not confer the powers of a trustee to RIL." 52. The order of the WTM was affirmed by this Tribunal in Appeal No. 618 of 2019 filed by Victor Fernandes and Anr. Vs. SEBI decided on....
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....right to IMT, the subscriber of the ZOCDs to convert ZOCDs into equity in a given period. The control of TV18 and NW18, continued with Mr. Raghav Bahl and his entities. IT had no say in the voting rights etc. and, therefore, the conclusion of the learned WTM cannot be faulted with." 53. We have perused the order of WTM in Victor Fernandes and we find that the terms and conditions in the ZOCD agreement is similar and more or less the same as given in the present loan agreement. The issue in Victor Fernandes was whether the ZOCD agreement triggered the open offer obligation under the SAST Regulations. The WTM upon analyzing various provisions of the agreement (which is similar to the provisions in the loan agreement) held that upon execution of the ZOCD agreement, the control of NW18 remained with Raghav Bahl, nor the ZOCD agreement stifled the voting rights of Raghav Bahl and therefore there was no effective change in control of NW18 as a result of execution of the ZOCD agreement and therefore the ZOCD agreement does not trigger an open offer. We are of the opinion, that the controversy involved in the present appeal is squarely covered by the decision in Victor Fernandes case. 54....
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....V. No evidence has come to light to indicate that VCPL is exercising control over the management or policies of NDTV. In the absence of any evidence, the impugned order passed by the WTM cannot be sustained. In our view, the combined reading of the agreement, call option agreements, warrant conversion option and the purchase option does not in any way lead to a conclusion of VCPL acquiring indirect control over NDTV. Thus the direction to VCPL to make an open offer in terms of Regulation 44 of SAST Regulations, 1997 and Regulation 32 of SAST Regulations, 2011 does not arise. 58. Appeal Nos. 294 of 2019, 295 of 2019 and 296 of 2019 has been filed by Dr. Prannoy Roy, Radhika Roy and RRPR respectively against the order dated June 14, 2019 passed by the WTM. In addition to the aforesaid, Appeal Nos. 77 of 2021, 78 of 2021 and 79 of 2021 has been filed by PR, RR and RRPR respectively against the order dated December 24, 2020 passed by the AO. All these six appeals raise a common issue and are being taken up together. 59. The facts leading to the filing of the aforesaid appeals is that a complaint dated August 26, 2017 and December 26, 2017 and representation dated December 24, 2017 wa....
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....ing various clauses of the loan agreement came to a conclusion that it was not a loan agreement but under the garb of the loan agreement the acts of the appellants amounted to commissions of a fraud upon the shareholders. The WTM held that upon a scrutiny of various clauses of the loan agreement, the appellants have effectively transferred 30% of the shares of NDTV to VCPL and that the transactions have been deliberately structured as a loan transaction so as to conceal the said sale of 30% stake in NDTV. The WTM further found that the loan agreement structure was material and very sensitive information which was concealed from the minority shareholders, thereby inducing the investors to trade in the shares of NDTV in ignorance regarding de facto control over NDTV by VCPL and, therefore such transaction has been made under Section 12A and Regulation 3(a) to (d) of the PFUTP Regulations. The WTM further found that the appellants had violated the Code of Conduct. The disclosures were required to be made under the Code of Conduct and by not making disclosures the appellants conduct was not in accordance with the Code of Conduct. 63. On the basis of the aforesaid, the WTM accordingly ....
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....neous in as much as we find that vide SEBI Circular dated February 21, 2000 Clause 49 was introduced as under:- "Clause 49 - Corporate Governance The company agrees to comply with the following provisions: I. Board of Directors (D) Code of Conduct (i) The Board shall lay down a code of conduct for all Board members and senior management of the company. The code of conduct shall be posted on the website of the company. (ii) All Board members and senior management personnel shall affirm compliance with the code on an annual basis. The Annual Report of the company shall contain a declaration to this effect signed by the CEO. Explanation: For this purpose, the term "senior management" shall mean personnel of the company who are members of its core management team excluding Board of Directors.. Normally, this would comprise all members of management one level below the executive directors, including all functional heads." Under Clause 49 of the listing agreement, the board was required to lay down the Code of Conduct for all Board members and senior management of the company. We find that NDTV had its Code of Conduct in place during the relevant period. Relevant extract ....
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....he WTM restraining them from accessing the securities market or from accepting any position of a Director is totally out of context and does not commensurate with the alleged violation especially when no fraud has been committed nor does the loan agreement defraud the investors. The imposition of penalty of Rs. 25 crores by the AO is also high, excessive and disproportionate to the alleged violation. We find that the AO while considering the factors under Section 25J has noted that the quantifiable gain or unfair advantage accrued to NDTV or extent of loss suffered by the investors as a result of the default cannot be computed. In the absence of any quantification, we are of the opinion, that in the absence of any concealment or causing fraud to the investors or to the minority shareholders, the violation of Clause 49 of the listing agreement only invites a penalty. Considering the factors brought on record, we reduce the penalty from Rs. 25 Crores to Rs. 5 Crores. Misc. Applications are disposed of accordingly. 70. Appeal No. 80 of 2021 has been filed by NDTV against the order dated December 29, 2020 passed by the AO imposing a penalty of Rs. 5 Crores under Section 23E of the SCR....
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.... counsel for the appellant and Shri Shyam Mehta, the learned senior counsel for the respondent. 75. As we have already held in Appeal No. 293 of 2018 the loan agreement executed by the promoters with VCPL did not transfer control of NDTV to VCPL either directly or indirectly and, therefore, the findings given by the AO on the issue that the loan agreement is structured in such a way that in fact it transfers control to VCPL indirectly cannot be sustained. The findings in this regard are set aside. 76. The question which needs to be decided is, whether the minutes and the contents of the minutes of August 05, 2015 of the Board of Directors of NDTV was required to be disclosed under Clause 36 of the listing agreement. For facility, Clause 36 of the listing agreement is extracted hereunder. "Apart from complying with all specific requirements, the Issuer will intimate to the Stock Exchanges, where the company is listed immediately of events such as strikes, lock outs, closure on account of power cuts, etc. and all events which will have a bearing on the performance / operations of the company as well as price sensitive information both at the time of occurrence of the event and su....
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.... material and price sensitive in nature on account of de facto control by VCPL. We have already held that there was no de facto control of VCPL on NDTV and, therefore, on this short ground the finding that the contents of the loan agreements were price sensitive in nature cannot be sustained. However, considering the peculiar structure of the loan agreement, coupled with the fact that the exercise of the warrant option or the call option if invoked would have a bearing on the performance/ operations of the company and therefore, to that extent, when the matter was discussed in the minutes of the Boards' meeting on August 05, 2015, the said minutes should have been disclosed under Clause 36 of the listing agreement. Such disclosure would enable the shareholders and the public to take a informed decision on the investment or disinvestment in the securities of NDTV. 78. It was urged, that it was not a material event or information which required disclosure under Clause 36 of the listing agreement. This Tribunal in ICICI Bank Limited vs. SEBI decided on 08.07.2020 in Appeal No. 583 of 2019 has held that when in doubt as to whether a particular event is material or not warranting discl....
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.... nothing to do with the violation of the provisions of the Listing Agreement especially Clause 36. Section 23E provides that where a Company fails to comply with the listing conditions or delisting conditions or grounds or commits a breach thereof then penalty would be a minimum of Rs. 5 lakh upto maximum of Rs. 25 crore. The words "fails to comply with the listing conditions" cannot mean failure to comply with the conditions in the Listing Agreement. One of the requirements in the Listing Agreement which is required to be complied with is Clause 36 whereas Section 23E refers to the conditions which are imposed upon a Company when it is applying for its shares to be listed on the stock exchange platform. Section 23E has to be read along with Rule 19 of the Securities Contracts (Regulation) Rules, 1957 ('SCRR' for short). Rule 19 of the SCRR provides certain requirements with respect to a listing of securities on a recognized stock exchange. Rule 19A provides that a Company has to continuously maintain listing requirements. Rule 21 provides conditions for delisting of securities. Failure to comply with the listing conditions which are stated in Rule 19 would entail a penalty as prov....