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TMI Blog2022 (7) TMI 1443X X X X Extracts X X X X X X X X Extracts X X X X ..... 1260 - SECURITIES APPELLATE TRIBUNAL, MUMBAI ] that the word control is a proactive and not a reactive power. That is to say, it is a positive power and not a negative power. The test of control was whether the acquirer was in the driving seat and whether the driver controlled the steering, accelerator, the gears and the brakes and, if the answer to these questions was in the affirmative, then alone would he be in control of the company. The Supreme Court [ 2011 (11) TMI 878 - SUPREME COURT ] while affirming the decision of this Tribunal in Shubhkam held that the expression control denotes only positive control and further the word control as contrasted with management means de facto control of actual management or de facto control of policy decisions. Needless to say here, that the definition of the term control in the IBC 2016 is the same/ identical as defined under Section 2(27) of the Companies Act, 2013 and Regulation 2(1)(c) of the SAST Regulations, 1997. In the present case various clauses are meant to protect the interest of VCPL and the investment made by it. The transaction in the agreement is an amalgamation of rights. It is a loan transaction with an opti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rores to Rs. 5 Crores. Further penalty reduced - As considering the factors involved under Section 23J of the SCRA is concerned, we find that the AO himself has held 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. Consequently, the penalty for mere violation of non-disclosure under Clause 36 of the listing agreement cannot be penalized to the maximum amount quoted in the provision. Considering the facts and circumstances, we are of the opinion that the penalty of Rs. 5 Crores is reduced to Rs. 10 lakhs under Section 23A(a) of the SCRA. - JUSTICE TARUN AGARWALA, PRESIDING OFFICER MS. MEERA SWARUP, TECHNICAL MEMBER Mr. Janak Dwarkadas, Senior Advocate with Mr. Somasekhar Sundaresan, Mr. Rahul Dutt and Mr. Zarnaab Aswaad, Advocates i/b Khaitan Co. for the Appellant. Mr. Gaurav Joshi, Senior Advocate with Mr. Abhiraj Arora, Mr. Harshvardhan Nankani, Mr. Shourya Tanay and Ms. Anshu Mehta, Advocates i/b ELP for the Respondent. Ms. Fereshte Sethna, Advocate with Mr. Abhishek Tilak and Mr. Ameya Pant, Advocates i/b DMD Advocates for the Appellant. Mr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Pvt. Ltd. ( RRPR for convenience) Prannoy Roy, Radhika Roy and RRPR Holding Pvt. Ltd. (hereinafter referred to as the promoters ) are promoters of New Delhi Television Limited ( NDTV for convenience), a public limited company holding 61.45% of the total shareholding of the Company. 6. In June 2008, the promoters of NDTV made an open offer for the shares of NDTV. To finance the open offer, they borrowed around Rs. 540 crores from Indiabulls Financial Services Limited, for which purpose, they pledged their shares in NDTV as security. In October 2008, the promoters took a loan of Rs. 375 crores from ICICI Bank Limited, in order to repay Indiabulls Financial Services Limited. The ICICI loan carried a rate of interest of 19% per annum. The promoters, in order to secure the borrowing of Rs. 375 crores, had encumbered their entire shareholding in NDTV by way of nondisposal undertakings with ICICI Bank. Individual promoters, i.e. Prannoy Roy and Radhika Roy also provided personal guarantees for this loan. 7. In July 2009, the promoters took a loan of Rs. 350 crores, from VCPL (the appellant) in order to repay ICICI Bank. RRPR, RR and PR and VCPL were signatories to the loan agre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o RRPR would require prior written consent of VCPL: (a) Issue or agreement to issue any equity securities in RRPR. (b) Buyback of equity securities, reduction or alteration of share capital of RRPR. (c) Borrowing or raising money or issue of any debenture or assumption of debt. (d) Amending the charter documents of RRPR (e) Merger, amalgamation or consolidation of RRPR with any other entity or any entity with RRPR. (f) Set up any subsidiary. (g) Cause RRPR to take any steps towards bankruptcy, insolvency or reorganization, arrangement, adjustment, winding up, liquidation, dissolution, composition or other relief with respect to it or its debts or seeking appointment of a receiver, trustee, custodian or other similar official for it or all or any substantial part of its property. (h) Sell or otherwise dispose of any asset of RRPR or transfer any equity securities of NDTV or create any encumbrance on the equity securities of NDTV. (i) Sell, transfer or create any encumbrance on the equity securities of RRPR. (j) Take any action to issue any equity securities or enter into any agreement as a result of which the promoters cease to be in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e replies filed by VCPL and, after considering the material evidence on record, passed the impugned order issuing the following directions:- 29. I, therefore, in exercise of powers conferred upon me under sections 11, 11B read with section 19 of the SEBI Act, 1992, 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, hereby issue the following directions to the noticee acquirers : a) The noticee shall make a public announcement to acquire shares of the target company in accordance with the provisions of the SAST Regulations, 1997, within a period of 45 days from the date of this order; b) The noticee shall along with the offer price, pay interest at the rate of 10% per annum from the date when they incurred the liability to make the public announcement till the date of payment of consideration, to the shareholders who were holding shares in the target company on the date of violation and whose shares are accepted in the open offer, after adjustment of dividend paid, if any. 12. The WTM held that the loan agreement was a fa a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the loan transaction. Further, the loan granted was without any interest which leads to an inference that it was not a commercial transaction and that the loan agreement was executed in order to acquire beneficial interest in the shares of NDTV. The WTM further concluded that the primary purpose that can be deciphered from the call option agreement was to acquire a stake or control in NDTV and that the option to exercise its rights under the call option agreements was not limited to any contingent event which would trigger its exercise. The WTM further concluded that non-compete clause in the agreement is generally found in share purchase agreement and not under the loan agreement and, therefore, such non-compete clause points out to a controlling stake in NDTV. The WTM, therefore, concluded that the loan transaction was used to shroud the true nature of the transaction and the entire purpose was to acquire control. 16. We have heard Shri Dwarkadas, the learned senior counsel assisted by Shri Somasekhar Sundaresan, the learned counsel for the appellants and Shri Gaurav Joshi, the learned senior counsel assisted by Shri Abhiraj Arora, the learned counsel for the respondent. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the directors, holding majority voting rights and/ or control over management and policy decisions of the company which in the instant case is non-existent nor any evidence has come on record to show that VCPL has control over NDTV through any of the aforesaid ingredients as per Regulation 2(1)(c) of the SAST Regulations. 19. It was urged that matters covered in the 3rd Schedule to the Loan Agreement are limited protected rights with a view to safeguard and protect the loan. The control or management and policy decisions of NDTV and RRPR continued to remain with Prannoy Roy and Radhika Roy and such control at no point of time came to VCPL nor was it exercised. Further, the act of securing its loan through warrant conversion option, purchase option and call option over NDTV equity shares were limited protective rights and did not amount to acquisition of indirect control by VCPL over NDTV. It was contended that only if the options stated aforesaid were exercised by VCPL only then 26% shares would come under the control of VCPL and/ or its associates. It was urged, that the loan agreement was a commercial bargain which is required to be interpreted in a business like manner and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have in fact ceded their voting rights on the 26% equity shares covered in the loan agreement and another 26% equity shares covered in the call option agreements. It was thus urged, that the voting on 52% equity shares of NDTV is controlled under these agreements by VCPL. 22. Having the heard the learned counsel for the parties at some length and upon a perusal of the impugned order, we find that the finding in the impugned order is, that VCPL acquired indirect control over NDTV by entering into a loan agreement and call option agreements thereby obligating VCPL to make a public announcement of an open offer under Regulation 12 read with Regulation 14(3) of the SAST Regulations. In our opinion, the matter is not one of acquisition of shares of voting rights of NDTV directly or indirectly or acquisition of control over NDVT directly. In fact, according to us, the limited issue for determination is, whether, the appellant acquired indirect control over NDTV by entering into these agreements. In this regard, before we proceed further, it would be appropriate to peruse Regulation 2(1)(b), 2(1)(c), 12 and 14(1),(2) and (3) of the SAST Regulations, 1997 which are extracted hereunder:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of shares or voting rights exceeding the percentage of shareholding referred to in regulation 10 or regulation 11 or the transfer of control over a target Public Sector Undertaking. (2) In the case of an acquirer acquiring securities, including Global Depository Receipts or American Depository Receipts which, when taken together with the voting rights, if any already held by him or persons acting in concert with him, would entitle him to voting rights, exceeding the percentage specified in regulation 10 or regulation 11, the public announcement referred to in sub-regulation (1) shall be made not later than four working days before he acquires voting rights on such securities upon conversion, or exercise of option, as the case may be. Provided that in case of American Depository Receipts or Global Depository Receipts entitling the holder thereof to exercise voting rights in excess of percentage specified in regulation 10 or regulation 11, on the shares underlying such depository receipts, public announcement shall be made within four working days of acquisition of such depository receipts. (3) The public announcement referred to in regulation 12 shall be made by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ights or shareholders 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (c), denotes only positive control, which means that the mere power to block special resolutions of a company cannot amount to control. Control here, as contrasted with management , means de facto control of actual management or policy decisions that can be or are in fact taken. A judgment of the Securities Appellate Tribunal in M/s Subhkam Ventures (I) Private Limited v. The Securities and Exchange Board of India (Appeal No. 8 of 2009 decided on 15.1.2010), made the following observations qua control under the SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997, wherein control is defined in Regulation 2(1) (e) in similar terms as in Section 2(27) of the Companies Act, 2013. The Securities Appellate Tribunal held: (SCC OnLine SAT para 6) 6. The term control has been defined in Regulation 2(1)(c) of the takeover code to 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... control means effective control. 52. We think that these observations are apposite, and apply to the expression control in Section 29A(c). 26. This Tribunal in Shubhkam held that the word control is a proactive and not a reactive power. That is to say, it is a positive power and not a negative power. The test of control was whether the acquirer was in the driving seat and whether the driver controlled the steering, accelerator, the gears and the brakes and, if the answer to these questions was in the affirmative, then alone would he be in control of the company. The Supreme Court while affirming the decision of this Tribunal in Shubhkam held that the expression control denotes only positive control and further the word control as contrasted with management means de facto control of actual management or de facto control of policy decisions. 27. Needless to say here, that the definition of the term control in the IBC 2016 is the same/ identical as defined under Section 2(27) of the Companies Act, 2013 and Regulation 2(1)(c) of the SAST Regulations, 1997. 28. The respondent contended that the definition of control under the SAST Regulations is an inclusiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e., the word control and management , as used in the said section, which would seem to suggest positive or proactive control as opposed to mere negative or reactive control. It was also urged, that the decision in Shubhkam was challenged by SEBI before the Supreme Court which appeal was disposed of with the clarification that the decision of the Tribunal in Shubhkam will not be treated as a precedent and that the question of law would remain open. It was thus urged, that the decision of this Tribunal in Shubhkam cannot be treated as a precedent nor can it be relied upon to test the definition of the expression control . It was further contended, that the Supreme Court while disposing of SEBI s appeal in Shubhkam matter was passed by a three judge bench whereas the decision in Arcelormittal India Private Limited was passed by a two judge bench of the Supreme Court. It was suggested that the judgement of the Supreme Court in Arcelormittal India Private Limited has not overruled the order of the Supreme Court in SEBI vs. Shubhkam Ventures (I) P. Ltd. in Civil Appeal No(s). 3371 of 2010 dated November 16, 2011. 30. It was thus urged, that the order of this Tribunal in Shubhk ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Supreme Court in Arcelormittal s case, it therefore, does not lie in the mouth of the respondent to agitate that notwithstanding the decision of the Supreme Court, it is still open for the respondent to contend that the expression control in Regulation 2(1)(c) should be given an expansive meaning considering the object and purpose of the Act and the Regulations. Even though, no judgments were placed during the course of arguments, certain judgments have crept in the written submissions filed by the respondent. In our opinion, these judgments on the issue as to how a meaning of a word is to be discerned through a process of construction is meaningless in view of the meaning of the expression control explained by the Supreme Court in Arcelormittal s case. 34. Reliance on the decision of the Delhi High Court in the case of Future Retail (Supra) is also misplaced. The said decision is on its own facts and is clearly distinguishable and not applicable in the instant case. The Delhi High Court was faced with the question as to whether it was a fit case to grant an injunction. The Delhi High Court after perusing various clauses of the agreement prima facie came to a concl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... VCPL and the promoters of NDTV. 37. In our opinion, none of the aforesaid arrangement entails an acquisition of shares in NDTV, nor controls the management or policy decisions of NDTV. So long as the loan remains unpaid, VCPL continues to have the warrant conversion option, the purchase option and the call option under the call option agreements. It is a settled position of law that when there are options with convertibility, unless such options are exercised, the obligation to make an open offer under Regulation 14 is not triggered. In the matter of Victor Fernandes vs. Network 18, the WTM passed an order dated 15 November 2019 holding that when there are options with convertibility unless such options are exercised, the obligation to make an open offer is not triggered. This finding was affirmed by this Tribunal in its order dated September 28, 2021 passed in Appeal 618 of 2019 Victor Fernandes Anr. vs. SEBI Ors. 38. The finding that the price of Rs. 214.65 per share considered in the loan agreement and the call option agreements was higher than the prevailing market price at Rs. 130 per share and, therefore, it leads to a conclusion that the transaction was one of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it. These protective rights under Schedule 3 are meant to ensure standards of good governance and to protect the interest not only of the shareholders but also the interest of VCPL. These limited rights are not in the nature of day to day operational control over the business of NDTV nor are in the nature of control over the management of NDTV or policy decisions. If VCPL desires that the particular scheme of arrangement ought to be promulgated or that a particular acquisition of another company should be effected or that any suitable course of action ought to be adopted, VCPL has no right to have the same implemented and, therefore, VCPL does not have any control over NDTV. The mere fact that amendment to the memorandum or article of association of NDTV could not be carried out without the consent of NDTV does not become an indicator of having control over NDTV. It is a common practice. We are of the opinion that amendment of Article and Memorandum of Association of a company does not fall within the scope of its day to day corporate activity. The mere fact that an amendment requires an affirmative vote from the VCPL is only indicative of the fact that it wants to protect its inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. Similarly, non-disposal undertaking is to ensure that the promoters continue to manage NDTV and remain favoured to protect the collateral. 43. Similar provisions as stated aforesaid was also examined in Shubhkam (Supra). This Tribunal while dealing with similar provisions held that the provision does not result in control directly or indirectly of the company and that these provisions are protective provisions. For facility, paragraph 8 of the said judgment is extracted hereunder:- 8. The Deputy General Manager in the impugned communication has also referred to sub-clauses (a) to (o) of this clause to hold that the appellant will be in a position to influence major policy decisions of the target company by virtue of its affirmative vote . She also holds that the appellant would be having veto rights on crucial matters pertaining to policy decisions which would confer control. In order to understand the implication of this clause, it is necessary to refer to its text which reads as under : 9. PROTECTIVE PROVISIONS: The parties hereby agree that until such time as the Investor equity shareholding in the Company does not fall below 10% of the paid equity shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the determination of their remuneration and powers; (o) any capital expenditures in excess of 5% of the networth other than as approved in the Annual Business Plan; (p) any authorization, creation, grant, issue, allotment redemption of any Shares or convertible instruments of any class, debentures or warrants, grants, options over Shares, or approval of the terms of a public issue by the Company, or approval or disapproval of any transfers thereof, except as provided under this Agreement; (q) filing of all offering materials to be utilized in connection with any public offering of shares of the Company; (r) any strategic alliance/joint venture proposal to be entered into by the Company; (s) approval of the annual financial statements, distribution of profits and coverage of losses of the Company and its Subsidiaries; (t) transactions with affiliates; (u) incorporation of subsidiaries, the acquisition of interests in any company or business or to acquire or sell shares, debentures, bonds or other securities/instruments in any company; (v) to settle, compromise or abandon any legal or arbitration proceedings, claims, actions or suits relating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany. We are unable to agree with the learned counsel. It is quite usual for any corporate entity to prepare an Annual Business Plan to be implemented in the coming fiscal year and have the same approved from its board of directors before the commencement of that year. In the case before us, the target company also prepares an Annual Business Plan which lays down broad contours of the corporate activity to be implemented in the coming year which is approved by its board of directors where the appellant is in a minority. This business plan has to be rolled out in the coming fiscal year and its day to day implementation is looked after by the board of directors. If after approving the plan, the target company wants to deviate from it or make any changes therein, the same would require an affirmative vote from the appellant. We do not think that this provision gives any control to the appellant. On the contrary, it only enables the appellant to safeguard its own investment and the interests of the shareholders in general. Amendment of articles and memorandum of association of a company does not fall within the scope of its day to day corporate activity. The mere fact that any such am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the appellant incorporate this regulation in the letter of offer. The question posed in the opening part of our order is, thus, answered in the negative. 44. A contention was raised that Clause 8 of the loan agreement indicates that the call option will continue to remain valid even after the repayment of the loan and therefore it amounts to control. This interpretation is totally erroneous. The ambiguity created by the words till the later of can be cleared by a simple reading of clause 8 to mean that the agreement shall be binding on the parties till the loan is fully paid by the borrower or if the call option is exercised. The word till the later of has to be read whichever is earlier in order to bring out the correct meaning and object of the clause. In any case, the part relating to call option does not by itself result in indirect control of NDVT unless it is exercised. 45. The finding in the impugned order that Clause 20 of the loan agreement does not give any discretion to the promoters of NDTV with respect to exercise of their voting rights in NDTV as they would have exercised their voting rights prior to entering into the loan agreement and, therefore, Cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entures Agreement ( ZOCD ) was executed between six private limited companies and holding companies owned by Raghav Bahl and IMT. Under this ZOCD Agreement, IMT was to invest funds received from RIL by subscribing to the ZOCD of the holding companies and the holding companies were obliged to utilize ZOCD subscription amount for subscribing to the rights issue of NW18 and TV18. 48. In accordance with the terms of the ZOCD agreement, the holding company deployed Rs. 2076.34 crore from the proceeds of the ZOCD issuance to subscribe to 69,21,11,850 equity shares of NW18 and the balance of Rs. 135.46 crore were used to subscribe to 6,77,31,686 equity shares of TV18. In this way the holding companies represented 71.25% of the emerging voting capital of NW18. 49. A complaint was filed alleging that IMT which is for the benefit of RIL had acquired control over the holding companies and consequently acquired indirect control over NW18 and TV18. The complaint alleged that on the basis of SUA and ZOCD, RIL had failed to disclose various events relating to IMT under Clause 36 of the listing agreement. 50. The clauses of the agreements was analysed as under:- (i) Under the terms an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l and also SEBI that such clauses per se do not result in any change in control. (vi). Clause 12.1 of the ZOCD dealing with confidentiality/non-disclosure is a usual clause in such loan agreements. In so far as disclosure to the Regulatory Authority is concerned, the execution of ZOCD was made known to the Exchanges and was in the public domain. Further, various documents referred to in draft Letter of offer for acquisition of shares of NW18, including the ZOCD agreement was submitted to SEBI. On receipt of the Complaint filed by Appellant, SEBI had re-examined its content and reached the conclusion similar as to those as set out herein. (vii). Clauses 7.1, 13.1 and 14.3 of the ZOCD agreement are not in the nature of granting rights which enable IMT to proactively control the affairs and policies of the target Co. These are the provisions relating to 6 holding companies (not to the target Co.) and contain certain negative stipulations relating to conduct of business of 6 holding companies. Such clauses are used in regular loan agreement. (viii). Further, as specified in Regulation 2(1)(e) of the SAST Regulations, SEBI has uniformly regarded the following 2 indicia to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ercised on conduct of affairs of the company, etc. could be used as litmus test benchmarks to determine any change in control. On none of the above counts, I could find any direct or remote evidence of the control having been passed on to RIL, as a result of the ZOCD agreement and this is elaborated in the next two paragraphs. 7.9. The question therefore is when IMT's shareholding in NW18 is in the control of the trustee (being NCPL or DCPL i.e. a Raghav Bahl entity), can it be said that the subscription to the ZOCDs of the holding companies of Raghav Bahl group entities by IMT confers RIL with the power to indirectly exercise control over the target company? I am of the view that even upon execution of the ZOCD agreement, Raghav Bahl continued to be in control of NW18, both on behalf of his related companies as well as IMT. There was no semblance of a hold in the management of affairs of NW 18 by RIL arising out of the ZOCD. The underlying (existing) shareholding based on which the rights issue subscription took place continued to be in the hands of Raghav Bahl and related entities, as on date of the ZOCD. Moreover, the ZOCDs did not carry any voting rights and the ZOCD a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her, the learned WTM had considered the report in form of an affidavit which was filed before this Tribunal in the earlier proceedings as well as the observation made by the CCI. Upon going through the terms and conditions of ZOCD Agreement, the learned WTM found that Mr. Raghav Bahl continued to be in control of TV 18, NW18 etc. on behalf of the holding companies. IMT and RIL did not had any say in the management affairs of TV 18, NW18 under the said ZOCD Agreement. The underlying existing shareholding continued to be in the hands of Mr. Raghav Bahl and the holding entities. It was found that ZOCD Agreement did not carry any voting rights. The voting rights of Mr. Raghav Bahl entities were not stifled by the said agreement. Thus, there was not any effective change in control of NW18 as a result of the execution of the ZOCD Agreement. 13. CCI had observed that in view of the conversion option contained in ZOCD Agreement to receive equity shares of the target company, the said amounted to the indirect acquisition of shares of the target company. The learned WTM considered the same. He observed that the ZOCDs were in the nature of convertible into equity shares at any time, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the written submissions. In the instant case, the written submissions filed by the respondent has not been vetted by the arguing counsel. Consequently, it is not open nor worthwhile to deal with such contentions raised in the written submissions which were not argued. In any case, the order in Victor Fernandes, based on SAST Regulations, is fully applicable in the instant case. 55. We may also note that in the recent past, a tendency has arisen to file compilation of judgments which are not referred to in the arguments. Further contentions are raised for the first time in the written submissions which was never raised /argued by the counsel. Such practice adopted is depreciated and parties are advised to file the written submissions which contains only their oral submissions argued by their counsel. 56. Thus, upon a careful reading of various clauses in the agreements, we are of the opinion, that various clauses are meant to protect the interest of VCPL and the investment made by it. The transaction in the agreement is an amalgamation of rights. It is a loan transaction with an option to acquire 26% equity shares of NDTV as consideration for the provision of the loan. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shareholders. Accordingly, a show cause notice was issued alleging that these persons, by concealing material evidence, have committed a fraud on the minority shareholders and, therefore, violated Section 12A of the SEBI Act and Regulations 3 and 4 of the PFUTP Regulations and Clause 49(I)(D) of the Listing Agreement read with Section 21 of the SCRA. 61. The appellants replied contending that the loan agreements were private loan agreements which was not required to be disclosed and that the board meeting of NDTV held on August 05, 2015 had clarified that there was no change in control of NDTV. Further at the relevant time, there was no requirement to make disclosure in respect of the loan agreement. It was also urged, that such alleged violation of non-disclosure cannot be raised after 10 years and, therefore there is an inordinate delay in the initiation of the proceedings. It was also contended that Clause 49(I)(D) of the Listing Agreement came into effect only in the year 2014 and, therefore there was no requirement to make a disclosure of an event happening before 2014. It was contended that at the relevant time the only requirement on the company was to have a Code of Cond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On a similar finding, the AO in its order of December 24, 2020 imposed a maximum penalty of Rs. 25 crores under Section 15HA to be paid jointly and severally by the appellants and a further sum of Rs. 1 crore to be paid by PR and RR under Section 23H of the SCRA. 64. We have heard Ms. Fereshte Sethna, the learned counsel for the appellants and Shri Shyam Mehta, the learned senior counsel for the respondent. 65. In Appeal No. 293 of 2018 in the matter of VCPL, we have already held that the loan agreement did not in any manner transfer control of NDTV to VCPL either directly or indirectly. Thus, the findings given by the WTM upon reading the clauses of the loan agreement does not survive. 66. Further, the finding that the concealment of the loan agreement which gave de facto control to VCPL was concealed from the shareholders and, therefore, such arrangement deployed by the appellants to transfer their substantial stake in NDTV was fraudulent and was violative of 12A(a) to (b) of the SEBI Act read with Regulation 3(a) to (d) of the PFUTP Regulations also cannot survive since we have already held that there was no direct or indirect control over NDTV by VCPL. Further, the fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng insider trading, engage in and promote honest and ethical conduct and abide by the policies and procedures that govern the conduct of the Company s business. Officer s responsibilities include helping to create and maintain culture of high ethical standards and commitment to compliance. Prevent Conflicts of Interest Officers should not make any investment, accept any position or benefits, participate in any transaction or business arrangement or otherwise act in a manner that creates or appears to create a conflict of interest unless they makes full disclosure of all facts and circumstances. A conflict of interest arises when you take actions or have interests that conflict in any way with the interests of the Company. 68. As per the Code of Conduct, the Board members and senior management of NDTV were expected to comply with all applicable Laws, Rules and Regulations and engage in and promote honest and ethical conduct which is free from fraud or deception. Further, the Board members were required to make full disclosure of all facts and circumstances before making any investment or business arrangement which might create or appear to create a conflict of int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ority shareholding. This information given to the stock exchange was disseminated by the stock exchange on its platform to all investors. Subsequently, the Board of Directors passed a resolution on August 05, 2015 recording the statement of Prannoy Roy that there was no change in the control of the management of NDTV. 72. A show cause notice was issued upon a prima facie satisfaction being arrived at that the loan agreement executed by RRPR with VCPL was a material and price sensitive information which fact was disclosed in the minutes of the Board of Directors on August 05, 2015 for the first time and such information ought to have been disclosed under Clause 36 of the listing agreement. NDTV contended that they are not party to the loan agreements and, therefore, there was no obligation on the part of NDTV to make a disclosure either in 2009-2010 when the loan agreement was executed or even in 2015 the when same was discussed in the Board s minutes of August 05, 2015. It was contended that the loan agreement executed by the promoters with VCPL was not a material event to be disclosed under Clause 36(7) of the listing agreement and that such requirement only became mandatory w. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b. Disruption of operations due to natural calamity. c. Commencement of Commercial Production/Commercial Operations. d. Developments with respect to pricing/realisation arising out of change in the regulatory framework. e. Litigation /dispute with a material impact The Company will promptly after the event inform the Exchange of the developments with respect to any dispute in conciliation proceedings, litigation, assessment, adjudication or arbitration to which it is a party or the outcome of which can reasonably be expected to have a material impact on its present or future operations or its profitability or financials. f. Revision in Ratings g. Any other information having bearing on the operation/performance of the company as well as price sensitive information which includes but not restricted to; Issue of any class of securities. Acquisition, merger, de-merger, amalgamation, restructuring, scheme of arrangement, spin off of setting divisions of the company, etc. Change in market lot of the company's shares, sub-division of equity shares of the company. Voluntary delisting by the company from the stock exchange(s). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or semantics. 79. In view of the aforesaid, we are of the view that NDTV by not disclosing the minutes of the meeting dated August 05, 2015 to the stock exchange violated Clause 36 of the listing agreement. 80. A penalty of Rs. 5 Crores have been imposed under Section 23E read with Section 23(I) of the SCRA. For facility, the said provisions are extracted hereunder:- Penalty for failure to comply with provision of listing conditions or delisting conditions or grounds:- 23E. If a company or any person managing collective investment scheme or mutual fund, fails to comply with the listing conditions or delisting conditions or grounds or commits a breach thereof, it or he shall be liable to a penalty not exceeding twenty-five crore rupees. 23-I (1) For the purpose of adjudging under sections 23A, 23B, 23C, 23D, 23E, 23F, 23G and 23H, the Securities and Exchange Board of India shall appoint any officer not below the rank of a Division Chief of the Securities and Exchange Board of India to be an adjudicating officer for holding an inquiry in the prescribed manner after giving any person concerned a reasonable opportunity of being heard for the purpose of imposing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure to furnish information, return, etc.- 23A. Any person, who is required under this Act or any rules made thereunder, (a) to furnish any information, document, books, returns or report to a recognised stock exchange, fails to furnish the same within the time specified therefor in the listing agreement or conditions or bye-laws of the recognised stock exchange, shall be liable to a penalty [which shall not be less than one lakh rupees but which may extend to one lakh rupees for each day during which such failure continues subject to a maximum of one crore rupees] for each such failure; 83. Thus, while confirming the order of the AO only with regard to the violation of the Clause 36 of the listing agreement we find that the penalty of Rs. 5 Crores is excessive. A maximum penalty of Rs. 1 Crore could be imposed under Section 23A(a). In the given facts and circumstances of the case, and considering the factors involved under Section 23J of the SCRA is concerned, we find that the AO himself has held 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. Consequently, the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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