Companies & Sectors
Why NDTV did not disclose Rs450 crore tax notice to exchanges
NDTV has argued that the matter was “sub-judice” and that it has received a stay. Other listed companies, including Infosys, however, time and again have disclosed such information to the bourses
 
Prannoy Roy-led New Delhi Television Ltd (NDTV), was served a Rs450 crore demand notice by income tax (I-T) in February this year. However, NDTV did not inform the BSE or National Stock Exchange (NSE) about this, which it is a alleged violation of listing norms. When BSE and NSE asked NDTV about this, the company argued that the demand notice was "without any basis or justification and contrary to provisions of Income Tax Act, 1961 and had resulted only due to erroneous and incorrect view taken by the tax department". Hence NDTV saw it fit not to disclose anything about it. 
 
Although all listed companies are mandated to provide every piece of  information relating with them through regulatory filings, NDTV says, "it was felt that the disclosure of these events in isolation, without any reference to the steps proposed to be taken by the Company, was not desirable. In the event of ongoing proceedings before Income Tax Appellate Tribunal (ITAT), where a stay has been granted by ITAT, the claim made by the tax department cannot be deemed as an enforceable tax demand against NDTV due and payable by it. The demand has resulted only due to erroneous and incorrect view taken by the tax department."
 
Earlier in February 2014, in a major crackdown against listed companies not complying with regulatory disclosure norms, NSE and BSE imposed fines or suspended trading in over 1,100 cases of non-compliance, involving nearly 600 companies. After finding hundreds of companies of not adhering to various provisions of listing agreement, market regulator Securities and Exchange Board of India (SEBI) had asked the stock exchanges to put a stronger mechanism in place to ensure compliance. 
 
In March 2014, Vardhman Textiles Ltd, a listed company, also received a Rs97.64 crore demand notice from the I-T department and it conveyed the same to the bourses. Similarly, when Redington (India) Ltd received a Rs138 crore demand notice from I-T dept, it also informed the BSE.
 
Even, Infosys, the country's second largest IT company, was slapped with a Rs582 crore demand notice. This was in addition to the tax demands of Rs1,175 crore for FY2005 to FY2008, the company was contesting. Infosys in its regulatory filing informed the bourses about the tax notice and also its position to contest it.
 
The question then is why NDTV did not think it fit and proper to give the relevant information to the bourses? This non-disclosure of information prompted NSE and BSE to seek clarification from the company. While BSE has mentioned the notices it sent to NDTV, there are no details available at NSE. NSE just says that it sought clarification from NDTV based on a complaint. 
 
When NDTV failed to provide specific response to its query, BSE again sent an email on 27th May to the company asking it to give point-wise reply. In its reply, NDTV said, "...we have clarified our position with respect to the queries of exchange on various disclosures under listing agreement vide Company's letters dated 16 May 2014 and 22 May 2014, wherein the company categorically explained the position as to how the company has not violated the provisions of clause 36 of the listing agreement."
 
Here are the specific queries sent by BSE and the replies provided by NDTV...
 
1) Non-Disclosure of the tax demand of Rs450 crore raised vide the Assessment order dated 21 February 2014 at the time the same was raised.
 
NDTV Response: As stated in our earlier submissions, the matter relates to tax demand of Rs450 crore raised vide the Assessment order dated 21 February 2014 issued by the tax department for the assessment year 2009-10 (Financial Year 2008-09). The aforesaid tax demand has resulted due to erroneous and incorrect view taken by the tax department that the transaction vide which an investment of $150 Million was made by NBC Universal Inc and Universal Studios International BV in an overseas subsidiary of NDTV, is a 'sham' transaction.
 
NDTV submits that the said transaction was indeed a bonafide and genuine transaction, where funds were transferred from Universal Studios International BV, which was a GE Company at that time, an organization of international prestige and repute, for subscription of shares in overseas subsidiary of NDTV. The funds were raised with the involvement of intermediaries like law firms and bankers on the end of both the parties. The funds were transferred through normal banking channels and all the required compliances made in respect thereof. Further, the documents and confirmations required by the tax department during the course of assessment and investigation proceedings were provided to the tax department, including an apostilled copy of the confirmation from Universal Studios International BV to the effect that the investment of $150 Million was made by Universal Studios International BV, for subscription of shares in overseas subsidiary of NDTV.
 
It has also been highlighted by the Company earlier that the complainant Mr Sanjay Dutt, of Quantum Securities Pvt Ltd, has raised various matters with the Stock Exchanges and the income tax department, which also include the demand made by the tax department against NDTV. This demand has resulted from an investment made by NBC Universal Inc (NBCU) and Universal Studios International BV in an overseas subsidiary of NDTV. It may be noted that at that time, Mr Dutt headed, negotiated and closed various activities for the aforesaid investment, including negotiations on behalf of NDTV with the management and officers of NBCU. Further, the company had made the required disclosures with the Stock Exchanges and in its financial statements, with respect to the aforesaid investment made by NBC Universal and Universal Studios International BV.
 
In view of the above, it was concluded that the said demand was without any basis or justification and contrary to provisions of Income Tax Act, 1961 and had resulted only due to erroneous and incorrect view taken by the tax department. Based on the advise from external counsels, the Company is confident of a favourable outcome in the proceedings before Income Tax Appellate Tribunal (ITAT) challenging the aforesaid Assessment order. The Company filed an appeal before the ITAT challenging the aforesaid Assessment Order. The understanding of the Company was affirmed when the ITAT passed a stay order on the said demand in favor of the Company. Further, it may be noted that the challenge of the said claim, made by NDTV, is pending final determination before the ITAT and is currently sub-judice. 
 
Therefore, it was felt that the disclosure of these events in isolation, without any reference to the steps proposed to be taken by the Company, was not desirable. Such a disclosure would also be against the spirit of the Listing Agreement as an issue which is sub-judice, would lead to an incomplete representation of the matter to be made to the shareholders, before the relevant forum before whom the matter is pending has given its decision. Therefore, the Company was of the view that no disclosure was required in the matter, the same being sub-judice. It was deemed appropriate that a disclosure of the matter be made at a time when a decision has been taken by ITAT. 
 
2) Non-Disclosure of Company payment of Rs5 crore to the Income Tax Authorities pursuant to tax demand of Rs450 crore raised vide the Assessment order dated 21 February 2014 at the time of payment thereof.
 
NDTV Response: It may be noted that the Company didn't make any payment when the tax demand notice of Rs450 crore raised vide the Assessment order dated 21 February 2014 was received. Instead, as mentioned earlier, the Company filed an appeal before ITAT against the aforesaid Assessment order vide which the demand was made. In the course of the proceedings before ITAT, a stay order was passed by the ITAT (order dated 26 March 2014 and 21 April 2014), vide which an interim stay has been granted on the demand made by the tax department. It may be noted that in the present case, ITAT allowed the demand to be stayed on payment of an amount of Rs5 crore only. 
 
As highlighted earlier, the challenge of the said claim, made by NDTV, is pending final determination before the ITAT and is currently sub-judice. 
 
Therefore, in our opinion there was no requirement of a disclosure in this case.
 
3) Non-Disclosure of Rs450 crore as a Contingent Liability pursuant to the income tax demand of Rs450 crore raised vide the Assessment order dated 21 February 2014 when the company submitted its Audited Financial Results for the year ended 31 March 2014. 
 
NDTV Response: As already highlighted, the matter is presently sub-judice before the ITAT and based on the view of the external counsels, NDTV has a strong case on merits. In the event of ongoing proceedings before ITAT, where a stay has been granted by ITAT, the claim made by the tax department cannot be deemed as an enforceable tax demand against NDTV due and payable by it. The demand has resulted only due to erroneous and incorrect view taken by the tax department.
 
Further, according to a Senior counsel who has opined on the matter, the issues before the ITAT are presently pending final adjudication and NDTV has a strong arguable case, and in all likelihood the issues involved deserve to be decided in NDTV's favour.
 
Therefore no disclosure was applicable in this case. 
 
In view of the foregoing submissions, the contention of the Complainant that a violation of clause 36 of the listing agreement has been committed by NDTV, is baseless and without merit as the demand was levied on erroneous and incorrect view taken by the tax department . Further, it is reiterated that no violation of provisions of the Listing Agreement has been committed by NDTV as alleged by the Complainant or at all.
 
In June 2013, Moneylife wrote how Sanjay Dutt, director of Quantum Securities, has levelled a series of allegations about wrong practices and poor governance at NDTV. He made these charges in writing to almost every regulatory authority in India – the Ministry of Corporate Affairs, the Securities & Exchange Board of India (SEBI), the Reserve Bank of India (RBI) and other institutional investors. See our report: Allegations of NDTV’s Many Shenanigans.
 
Following our article, on 27 June 2013, NDTV sent a legal notice to Quantum Securities, Sanjay Dutt and directors of the company, through its law firm Amarchand Mangaldas accusing him of making defamatory statements, writing to various regulators and ‘launching a tirade’ against NDTV because he bears a ‘grudge’ against the broadcaster. This is probably the first time that charges by a significant shareholder have been termed ‘defamatory’ by a company, mainly because he was a ‘remunerated consultant’ sometime in the past. Mr Dutt and his firm Quantum Securities hold a significant stake in NDTV.
 
NDTV got listed on May 2004. Its first trade was at Rs100, a substantial premium over its issue price of Rs70 for its initial public offering (IPO). At that time, the NDTV IPO was oversubscribed within 15 minutes of opening the books. After hitting an all time high of Rs511.75 in 2008, NDTV shares are trading below its IPO price 2011 onwards. In fact, during 2011, NDTV recorded its all time low of Rs24.75 on the BSE.
 
In August 2011, Moneylife wrote: “NDTV got listed in 2004 and was trading below its listed price after seven years. It had given a negative return of 19% compounded in the past five years and a total shareholder return (TSR) of negative 66% for the same period. Its viewership claims, like those of all TV channels, are impossible to verify. Its credibility is at a nadir (after the phone-tapping controversy) and its finances are in a mess. NDTV has rarely made money from operations. For the past few years, its consolidated operations have been making cash losses and it has been running on money made by selling loss-making subsidiaries to strategic investors.”
 
We further pointed out how marquee institutional investors always line up to acquire this loss-making company’s bits and pieces and exit at a loss at regular intervals, only to make way for other big name investors! The latest was DE Shaw, which provided an exit to Goldman Sachs in 2011 by acquiring a 14.2% stake. After this, NDTV acquired a significant investor—Abhay Oswal, who owns nearly 15% of its equity but seems to have no presence on NDTV’s board of directors. Mr Oswal happens to be the father-in-law of Navin Jindal, an industrialist and Congress Member of Parliament.
 
In all these years, no investor has complained, or uttered a word of public criticism, about the losses and operations of this strange company. Then last year in June, Mr Dutt, in an email to Moneylife, made some startling allegations about NDTV’s capital structure. He alleged that chairman Prannoy Roy received irregular promoter funding to the tune of a massive Rs375 crore by pledging NDTV shares which, according to him, is against the Reserve Bank of India (RBI) rules. The loan was made to a company called RRPR Holdings Private Limited in October 2008 against the pledge of NDTV shares. (Read more Allegations of NDTV’s Many Shenanigans)
 
As per the listing agreement, companies are required to submit documents like annual reports, shareholding pattern data, quarterly and full-year financial results, as also corporate governance compliance reports within stipulated time periods. The question is now, will NSE and BSE, the first line of regulators would initiate any action against NDTV, similar to the one the bourses took on several companies for failing to disclose the information on tax notice? In addition, will market regulator SEBI also probe NDTV and its apparent violation of listing norms?

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COMMENTS

Ramesh Patil

2 months ago

Like Mr Bugde's comment But have some Q so called his office nos27823685 and 2285 1549(as printed on his letter head ) Tried calling when called -was told tHESE NOs DON"T EXIST -Can Mr Bugde explain if new nos are available
Ad Bugde office nos not existing Any new nos pl

Ramesh Patil

2 months ago

Like Mr Bugde's comment But have some Q so called his office nos27823685 and 2285 1549(as printed on his letter head ) Tried calling when called -was told tHESE NOs DON"T EXIST -Can Mr Bugde explain if new nos are available
Ad Bugde office nos not existing Any new nos pl

Raj

3 years ago

RRPR Holdings Private Limited = Radhika Roy Prannoy Roy Holdings.

V K JAIN

3 years ago

NDTV justification in not submitting info to stock exchanges (?bse & nse) is blizzard. It is to be
be disclosed under clause 36 of listing agreement.
This is not merely non-compliance but wilfull suppression of information which MAY be price sensitive.

Virendra jain
Midas touch investors association

Moneylife IMPACT: Pune's SOS Balgram to be given a second chance?
The Maharashtra Women and Child Welfare department, which had cancelled the permission of Pune’s SOS Balgram, is likely to re-issue its license to the orphanage 
 
The smile on the faces of 220-odd girls and boys between five years and 18 years, who are all residents of the unique Balgram, Save Our Soul (SOS) Children’s Village in Pune, may just come back. 
 
In a complete U-turn, the Maharashtra Women and Child Welfare department has assured the trustees that Balgram will be given another chance, which in effect means that its license which was cancelled, would be re-issued.  The official order is awaited, stated President of the Trust, Rajnikant  Nancee, after the encouraging meeting of trustees that was held early this week with minister of state for Women and Child Welfare, Varsha Gaikwad in Mumbai.
 
Just to recall, in February this year, the license to operate the orphanage was abruptly cancelled, citing mal-administration by the Trust due to two incidents of alleged molestation, death of a young girl and general apathy in maintaining records in the institute. Trustees pleaded with the state government and sought legal intervention through a petition in the High Court, praying for re-issue of the license as for three decades; the SOS Balgram has had an impeccable record of administration. Trustees also alleged that mischievous elements were trying to disrepute the institution. (Read: Pune’s SOS Balgram under threat from vested interest?
 
The orphanage, which shares a common wall with the elite Poona Golf Course, is also allegedly being eyed by vested interests as the nine acres on which it rests, is in a prime neighbourhood, besides overlooking the premier golf course.  
 
Mr Nancee said, “The High Court has directed the state government to take a decision on the re-issuance of the license. We do not have the copy of the HC order but Ms Gaikwad (the minister) called us for a meeting and apprised us of the HC directive. She had invited the Commissioner, women and child welfare and other officers of the department. She has assured us that we would be given another chance to run the Balgram trust. The official order is expected in the next few days.’’
 
Rahul More, deputy commissioner of Women and Child Welfare, declined to comment but indicated that the official order would be out soon. Raju Kharat, who has been residing in the orphanage ever since he was a child and spearheaded a campaign to save the Balgram from closure stated that, “We are very glad that our mission has been achieved. Our efforts to halt the closure of Balgram has paid off.’’
 
However, now, even if the Balgram begins its operations (Balgram has not closed down as Trustees had asked for time until most of the children, who have relatives, went for their holidays to their relatives ), it is deep into financial crisis. The main funding comes from SOS international organization which provides Rs7,000 per child per month as also salaries for the administrative staff. However, it mandates that boys and girls under a caretaker 'Mother' must stay together as a family like in normal homes. However, the state government has recently amended the rules for orphanages due to incidences of rapes amongst the children. Balgram was compelled to abide by the amended state rules if it has to keep its license. Since SOS, the Swedish-based NGO, also is adamant about its policy, it may soon withdraw its financial support to the Pune Balgram. As for state funding, it is Rs700 per month and that is a worrying point for the trustees. 
 
Nancee though is hopeful that once the official order comes in their favour, sponsorship should not be a problem.
 
You may also want to read...
 
(Vinita Deshmukh is consulting editor of Moneylife, an RTI activist and convener of the Pune Metro Jagruti Abhiyaan. She is the recipient of prestigious awards like the Statesman Award for Rural Reporting which she won twice in 1998 and 2005 and the Chameli Devi Jain award for outstanding media person for her investigation series on Dow Chemicals. She co-authored the book “To The Last Bullet - The Inspiring Story of A Braveheart - Ashok Kamte” with Vinita Kamte and is the author of “The Mighty Fall”.)  

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COMMENTS

Ad. Anil N. Bugde

1 year ago

With regards to the present news article posted by vinita deshmukh in the subject matter of sos village, pune it has written that sos had filed writ petition and then high court had given direction to the government to reconsider the issuance of license for to run orphanage, but in fact this writer had not taken pain to read the high court order which was passed on 8th JUne 2014 and it has been read as the said writ petition has been withdrawn by the president rajnikant nancee and high court had not passed any directives with regards to the reissue of any license, not to misguide the society at large with the help of platform of moneylife but be careful with the subject matter and present the correct picture.

Victor Painadath

3 years ago

Good to know that finally the Minister has been kind and considerate to the children by renewing the license so that the many children who were in care/who will need such care with no right place back home can still look forward to live with opportunities. The management should now take better care and the government should keep monitoring on the caring process in compliance with laws. The two child to child abuses apparently were the concern. On the other side, one has to appreciate that such cases are reported which is not the case in most institutions where child abuse goes unreported and children just fearfully suffer, the management has apparently systems in place for children to report child abuse which is to be seen as a positive aspect. The government should learn from that rather than punishing the management and all innocent children in care for having such reporting system in child care. The endeavors of all like ex student Raju Kharaat and reporter Vinita Deshmukh who advocated/reported for the cause children are highly appreciated. Victor Painadath

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