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July 13 To July 19, 2019 u Taxmann’s Corporate Professionals Today u Vol. 45 u 42human conduct, public and private business,
in their relation to the facts of the particular
case. Illustration (e) to the said Section 114
provides that the court may presume that
judicial and official acts have been regularly
performed. As per Section 4 of the said Act
the implication of “May presume” is that,
whenever it is provided by the Evidence Act
that the Court may presume a fact, it may
either regard such fact as proved, unless and
until it is disproved, or may call for proof
of it. Therefore, said contention of defense
argument was not tenable.
2.3.2 Invocation of provision of Sections 11(1),
11(4) and 11B of the SEBI Act, 1992 - The
defense argued that, provisions of Sections
11(1), 11(4) and 11B of the SEBI Act, 1992
are preventive/remedial in nature, hence, the
said provisions could not be invoked in the
instant case for the alleged non-disclosure of
certain agreements which were entered into
almost a decade ago.
2.3.2.1 SEBI’s Analysis -initiating a proceed-
ing under the appropriate provisions of the
SEBI Act is a regulatory prerogative of the
SEBI depending upon the facts and circum-
stances of a case. Just because the alleged
violation was committed in a distant past
could not provide a shield against initiation
of proceedings under a specific provisions
of the SEBI Act.
Moreover, serious allegation’s of fraud under
the PFUTP Regulations which emanated from
an agreement executed a decade ago, yet in
force and being honoured by the promoters
till date. Hence the said defence argument
was not tenable.
2.3.3 No requirement of disclosure - Defense
contended that since NDTV was not a party
there was no requirement for the promoters
to make disclosure of the agreements to the
stock exchange.
2.3.3.1 SEBI’s Analysis - SEBI said that,
though NDTV was not a party to those loan
agreements, yet contents and clauses of loan
agreements clearly exposed that the schemewas devised by the promoters in such a way
that, though NDTV would not be a party to
the said loan agreements, yet the loan agree-
ments would contain certain crucial, onerous
and antagonistic stipulations pertaining to
NDTV including its capital restructuring
which were agreed to be undertaken by the
Dr. Prannoy Roy and Ms. Radhika Roy, only
with the prior consent of ICICI/VCPL.
2.3.4 Commercial terms of the loan - Defense
contended that :
(a) this was an asset-recourse loan which was
backed up by the underlying collateral of
the shares of NDTV promoter. The call
option, Conversion Option and Purchase
Option were all aimed at securing the
interest in the underlined collateral.
(b) the commercial decision was that upon
exercise of the call option, the arbitrage
between the market price of NDTV’s
shares and the exercise price could be
capitalized on; and
(c) irrespective of the nature of commercial
terms, those terms per se could not
trigger the Takeover Code, 1997.
2.3.4.1 SEBI’s Analysis - While SEBI did not
conclude that ‘control’ was acquired merely
because of the non-market terms, SEBI placed
significant emphasis upon the following as-
pects in arriving at its decision:
(a) The exercise price of the call option was
far in excess of the market price (at the
time of entering into the Call Option
Agreements). Typically, collateral was
undervalued, and not overvalued. Fur-
ther, despite the constant value erosion
of NDTV’s shares, VCPL never took
efforts to enforce its collateral;
(b) NDTV’s share price history did not lend
credence to the argument that any price
arbitrage could be achieved (between
market price and exercise price); and
(c) VCPL’s admission that the loan was pro-
vided on the premise of value appre-SEBI V. NDTV - DOES FINANCING ARRANGEMENTS AMOUNTS TO EXERCISING ‘CONTROL’