The case relates to a loan of ₹359 crore taken by the promoters of
– Prannoy Roy, Radhika Roy and RRPR Holding – from VCPL to repay a loan taken from ICICI Bank.
Sebi had held that the loan agreement was a facade in the form of a loan transaction and was executed to shroud the true nature of the transaction – acquire indirect control of NDTV.
Sebi said RRPR, Radhika Roy and Prannoy Roy and VCPL were signatories to the loan agreement.
Through this loan agreement, ₹350 crore was advanced to RRPR to enable it to discharge its liability to
Simultaneously, two call option agreements dated July 21, 2009, were also executed for 16.3 million shares of NDTV representing a 26% stake of the company.
The first was between RRPR and Shyam Equities (SEPL) where the latter had the right to purchase shares amounting to an 11.01% stake in NDTV from RRPR at a call option price of ₹214.65 a share.
The second agreement was executed between RRPR and Subhgami Trading (STPL) giving the latter a right to buy shares amounting to a 14.99% stake in NDTV from RRPR at the same call option price.
SEPL and STPL are associates of VCPL.
Another loan was taken by the promoters from VCPL on January 25, 2010, for ₹53.85 crore, Sebi said.
The tribunal said after eight years a show cause notice dated December 20, 2016, was issued against VCPL.
Sebi had alleged that VCPL had acquired veto rights in RRPR and NDTV indirectly over the 26% shareholding held by RRPR, which resulted in the acquisition of “control” in RRPR and indirect control in NDTV by VCPL. Besides, VCPL on account of indirect acquisition also failed to announce an open offer.
“The contention that since no interest was charged on the loan given, it was not a loan but an indirect acquisition is erroneous. The bargain in the agreement has to be understood from a commercial point of view. This is the upshot of the commercial rationale in the loan agreement which suited all parties ie VCPL and the promoters of NDTV,” SAT said in its order on Thursday.
The tribunal said the arrangement entails the acquisition of shares in NDTV but does not control 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 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 is not triggered, said SAT.
“The finding that the price of ₹214.65 per share considered in the loan agreement and the call option agreements was higher than the prevailing market price at ₹130 per share and, therefore, leads to a conclusion that the transaction was one of acquisition of control and was not a loan is misconceived and cannot be accepted,” SAT said.
“In our opinion, the transaction has to be considered from a commercial rationale and has to be interpreted in a business-like manner,” the tribunal said.