Case BriefsTribunals/Commissions/Regulatory Bodies

Securities Appellate Tribunal, Mumbai : A Coram of Tarun Agarwala (Presiding Officer) J., Dr C.K.G. Nair (Member),  M.T. Joshi (Judicial Member), J. allowed three appeals filed by Dr Prannoy Roy, Radhika Roy and RRPR Holding Pvt. Ltd. against a common order passed by the Whole Time Member ( herein ‘WTM’) of Securities and Exchange Board of India (herein ‘SEBI’).

Quantum Securities Pvt. Ltd. made a complaint which led SEBI to investigate and on the basis of an investigation report, a show cause notice was issued to the appellants to file their reply and the impugned order[1] was passed stating that the appellants had acted fraudulently in a manner detrimental to the interests of New Delhi Television Limited (herein ‘NDTV’) and its shareholders by omitting to disclose material information to the shareholders about loan agreements entered into by them with Vishvapradhan Commercial Private Limited (herein ‘VCPL’) and ICICI Bank Limited (herein ‘ICICI’). Accordingly, SEBI ordered that the Roys were restrained from accessing the securities market and were further prohibited from buying, selling or otherwise dealing in securities, directly or indirectly, or being associated with the securities market in any manner, whatsoever, for a period of two years. It also directed that they were restrained from holding or occupying a position as Director or any Key Managerial personnel in NDTV for a period of two years.

The facts that led to the order were that RRPR Holding Pvt. Ltd. took a loan of Rs 350 crore from ICICI. This loan was required to be repaid within a stipulated period. Finding it difficult to repay the interest and principal amount RRPR Holding Pvt. Ltd. took two loans from Vishvapradhan Commercial Private Limited (herein ‘VCPL’) totaling approximately Rs 400 crore. RRPR Holding Pvt. Ltd. held shares in NDTV. Based on the loan taken from VCPL it was alleged that the loan of ICICI was liquidated. While taking a loan from VCPL certain agreements were entered, namely, that VCPL will give interest free loan for a period of 10 years on the condition that the principal amount would be paid within 10 years and that the VCPL will have a right of first refusal on 50% of the shares in the event the said shares are sold in the market. Further, a call option agreement was made whereby an option was given to two associates of VCPL for transfer of 30% of the shareholding of RRPR Holding Pvt. Ltd. to it at the price of Rs 214.65 per share. It was stated that at the time when the loan agreement was executed the price of the NDTV share was Rs 130 per share. It was also stated that the price of 214.65 per share was fixed in order to cover the loan amount of Rs 403.85 crore. The agreement further stipulated that RRPR Holding Pvt. Ltd. would have the sole control and will not sell the shares without the right of the first refusal by VCPL. It came on record that the call option was never exercised. SEBI considered the loan agreement in detail and gave a finding that the said loan agreement was nothing else but a sham agreement and that no prudent person/entity would enter into such an agreement giving a loan without any interest. In fact, SEBI further found that the transfer of money, in fact, was to control the listed company NDTV. SEBI further found that the transfer of 9% individual shares of Prannoy Roy and Radhika Roy to its holding company, namely, RRPR Holding Pvt. Ltd. amounted to non-disclosure of transfer of shares inviting violations of disclosure obligations.

This Tribunal noted that whether the loan agreement was a sham transaction or not and whether the loan agreement, in fact, wrested control of NDTV to VCPL was a question which was required to be considered in detail. Whether the call option gives an unfettered right of controlling the company without exercising the right of call option was also required to be considered.

However, upon the interpretation of the loan agreement at this stage, it was of the opinion that these agreements had remained in existence for the past 10 years. The loan agreements were executed in the year 2009 and 2010.remarked that at this stage, prime-facie, NDTV which was managed by the appellants holding more than 61% of the total shares could not remain headless. Thus, the impugned order restraining the appellants from occupying a position as a Director or in any Key Managerial personnel in NDTV for a period of two years would not be in the interest of the shareholders of the NDTV, or for that matter the investors at this stage.

Considering the aforesaid, the Tribunal stayed the effect and operation of the impugned order dated till the next date of hearing and granted the respondent six weeks time to file a reply, and three weeks thereafter to the appellant to file a rejoinder.

The matter has been listed for admission and for final disposal on 16-09-2019. SAT further ordered SEBI to supply a copy of the impugned order to the appellants and accordingly, directed the appellants to apply for a certified copy of the impugned order.[Dr Prannoy Roy v. Securities and Exchange Board of India, 2019 SCC OnLine SAT 37, decided on 18-06-2019]


Further reading:

[1] https://blog.scconline.com/post/2019/06/16/sebi-dr-prannoy-roy-chairman-and-radhika-roy-md-of-ndtv-guilty-of-committing-fraud-barred-from-accessing-securities-market-for-2-years/

Appointments & TransfersNews

Dr A.K. Mohanty, distinguished Scientist and Director, physics group of the Bhabha Atomic Research Centre (BARC) and Director, Saha Institute of Nuclear Physics, Kolkata, took over as Director, BARC on 12-03-2019 from Shri K.N. Vyas, Chairman, Atomic Energy Commission and Secretary to the Government of India, Department of Atomic Energy.  Dr Mohanty graduated from the 26thbatch of the BARC Training School and joined the Nuclear Physics Division of Bhabha Atomic Research Centre in 1983.  During the past 36 years, Dr. Mohanty has worked in several areas of nuclear physics covering collision energy from sub-Coulomb barrier to the relativistic regime.

Dr Mohanty is the recipient of Young Scientists Award of Indian Physical Society (1988), Young Physicist Award by Indian National Science Academy (1991) and Department of Atomic EnergyHomi Bhabha Science & Technology Award (2001).

While taking over as Director-BARC, Dr Mohanty has expressed gratitude towards his predecessors in Physics Group who have helped him in understanding finer nuances of low and high energy nuclear physics. He also gratefully acknowledged the efforts put in by his seniors which have helped in the completion of projects of national and international importance in which he could contribute, and said he is committed to continue further the work of BARC in the fields of societal importance.

Ministry of Science & Technology

Case BriefsHigh Courts

Patna High Court: The Bench of Ahsanuddin Amanullah, J. allowed an application filed under Section 482 of the Code of Criminal Procedure, 1973 seeking quashing of a criminal case.

Respondent 2 herein had filed a complaint against petitioner and few other people alleging that he had induced him to invest Rs 28 lakhs in a construction company. The Magistrate took cognizance of the said offence under Sections 120 B, 420 of the Penal Code, 1860 and Section 138 of the Negotiable Instruments Act, 1881 and issued summon against the petitioner. Aggrieved thereby, the instant application was filed.

The petitioner’s case was that there was no material on record to show that he had induced respondent 2 to invest in the company. It was argued that making the petitioner an accused in the case, only because he was a Director of the Company, was abuse of process of the Court.

The Court noted that there being absolutely no allegation against petitioner in the entire complaint with regard to either inducement or entrustment of money or even issuance of cheque; just because he was a Director in the concerned company, it would not make him liable for any of the allegations levelled against other co-accused. It was concluded that prosecution against the petitioner was with malafide intention and only to harass him. Accordingly, the entire criminal proceeding against him was quashed.[Ramanjee Jha v. State Of Bihar, 2019 SCC OnLine Pat 228, Order dated 21-02-2019]

Case BriefsTribunals/Commissions/Regulatory Bodies

Securities Appellate Tribunal: The Bench of Tarun Agarwala, Presiding Officer and Dr C.K.G. Nair, Member rejected an application filed at a later stage wherein the applicant had failed to provide documents so as to prove that he had resigned as a director from two other companies. 

The facts of the case are that the applicant had prayed for rectification of the order passed in 2004 by Securities Appellate Tribunal. By the rectification application, the applicant sought that an error had crept in the order which needed rectification. It was stated that the appellant was a director of various companies whereas the applicant urged that he was the director of only one company and not in the other two companies, and, therefore, this error which was apparent on the face of the record needed to be rectified. 

The Tribunal found out that the Securities and Exchange Board of India had initiated proceedings under Section 11C(2) of the Act which required the appellant to produce the books, registers and other documents and records relating to the company. In this proceeding, the appellant failed to produce any documents to show that he had resigned as director or was never appointed as a director of the two other companies. The Tribunal held that at a belated stage, it was not open to the applicant to file a rectification application which amounted to reviewing the order of 2004. [Anil D. Doshi v. SEBI, Misc. Application No. 253 of 2018, Order dated 19-02-2019]

Case BriefsSupreme Court

Supreme Court: The Bench comprising of CJ Ranjan Gogoi and Sanjay Kishan Kaul and K.M. Joseph, JJ., laid down some interim arrangement in order to govern the present situation.

Background:

The Central Government divested the CBI Director Alok Verma and his deputy Special Director Rakesh Asthana of all their powers and sent them on leave pending enquiry against them in the alleged corruption charges.

The decision was taken on the recommendation of the Central Vigilance Commission which stated that Alok Verma was not cooperating in inquiry in the allegations of corruption and criminal misconduct levelled against him by Rakesh Asthana and it would be only fair to take both off duty till the charges are probed. Furthermore, M. Nageswara Rao, a 1986 Odisha cadre IPS officer who joined the CBI in 2016 was appointed as interim Director of India’s premier investigating the agency.

Alok Verma has approached the Supreme Court against the order of the Central Government that stripped him off his powers and sent him on forced leave.

The interim directions by the court are as follows:

  • Enquiry in regard to the allegations made against the present Director, Central Bureau of Investigation (CBI) Alok Verma shall be completed by the Central Vigilance Commission (CVC) within a period of two weeks.
  • The stated enquiry will be conducted under the supervision of the retired judge of the Supreme Court of India, Justice A.K. Patnaik.
  • M. Nageswara Rao who has been entrusted with the task of looking after the duties of the Director of the CBI shall not take any policy decisions or any major decisions and will perform the routine tasks that are essential to keep the functionality of CBI.

Further, the Supreme Court made it clear that the supervision of on-going enquiry by the CVC to a former judge is an exception being taken due to the necessity being felt on considering the facts of the present case.

The matter has been listed immediately after the Diwali holidays i.e. on 12-11-2018. Alok Verma is represented by veteran advocate Fali S. Nariman, while Attorney General K.K. Venugopal is appearing for the Central Government. [Alok Kumar Verma v. Union of India,2018 SCC OnLine SC 2249, Order dated 26-10-2018]

Hot Off The PressNews

Amidst the unprecedented tussle between the top two officers of the Central Bureau of Investigation, the Central Government divested the CBI Director Alok Verma and his deputy Special Director Rakesh Asthana of all their powers and sent them on leave pending enquiry against them in the alleged corruption charges.

The decision was taken on the recommendation of the Central Vigilance Commission which stated that Alok Verma was not cooperating in inquiry in the allegations of corruption and criminal misconduct levelled against him by Rakesh Asthana and it would be only fair to take both off duty till the charges are probed. Furthermore, M. Nageswara Rao, a 1986 Odisha cadre IPS officer who joined the CBI in 2016 was appointed as interim Director of India’s premier investigating agency.

Rakesh Asthana had complained of corruption against the CBI Director. Per contra, the Bureau filed a case under Prevention of Corruption Act, 1968 against its own Special Director Rakesh Asthana and his deputy DSP Devender Kumar. Asthana had approached the Delhi High Court challenging the FIR filed against him in the said bribery case. The Court while ordering the status quo has posted the matter for next hearing on October 29. The matter relates to a case involving meat exporter Moin Qureshi, which was headed by Asthana, while Kumar was its chief investigating officer. The CBI has accused the duo of forgery in recording the statement of Satish Sana, another accused in the case.

Alok Verma has approached the Supreme Court against the order of the Central Government that stripped him off his powers and sent him on forced leave. The Supreme Court is likely to take up the matter today.