The Securities Appellate Tribunal (SAT) has directed the Securities and Exchange Board of India to re-examine the manner in which Reliance Industries Ltd. (RIL) acquired control of Network 18 Media & Investments (NW18) and TV18 Broadcast (TV18) and ascertain whether there were any violations of the Listing Agreement.
Two minority investors of NW18 had in a complaint to the tribunal, claimed that RIL had failed to disclose that it had acquired indirect control over NW18 and TV18 through Independent Media Trust (IMT), a trust established for the exclusive benefit of RIL.
The investors had moved SAT after SEBI had disposed their complaint in January 2017 by stating that the trust was not a subsidiary of the listed company and hence no disclosures were required to be made under Clause 36 of the Listing Agreement.
“The complaint has been disposed of [by SEBI] on the basis of a wholly unsustainable ground that IMT was not a subsidiary of RIL and therefore RIL was not required to make disclosures under Clause 36 of the Listing Agreement,” SAT observed. “In our opinion, Clause 36 of the Listing Agreement mandates that when a listed company acquires indirect control over another listed company either through a Trust or through any other entity, then, such acquisition has to be disclosed to the stock exchanges.”
Not the first time
Incidentally, this is not the first time that the tribunal has ordered the capital markets watchdog to reappraise this matter.
In April 2016, SAT told SEBI to ascertain whether RIL had got control of the two companies without following the Takeover Regulations. In February 2012, IMT — whose sole beneficiary is RIL — entered into an investment agreement with six holding companies of Raghav Bahl and the Bahl Group. The investment was made through the issuance of Zero Coupon, Optionally & Fully Convertible Debentures (ZOCDs).
“Admittedly, after reconsidering the issue, SEBI has not passed any quasi judicial order but has only filed an affidavit on the issue raised by the appellants,” said SAT.
“In these circumstances, While setting aside the impugned decision of SEBI... we deem it proper to direct SEBI to decide afresh the question as to whether RIL violated Clause 36 of the Listing Agreement by failing to disclose that it had acquired indirect control over NW18 through IMT by subscribing to the ZOCDs under the ZOCD Agreement,” SAT ruled.
The Competition Commission of India had in May 2012 passed an order wherein it had specifically held that by subscribing to the ZOCDs, IMT had acquired control over the holding companies and consequently indirect control over NW18 and TV18.
An e-mail to an RIL spokesperson seeking comment on SAT’s directive to SEBI remained unanswered till the time of going to press.
