NDTV Insider Trading: SAT Sets Aside SEBI Order against Prannoy Roy, Radhika Roy
Moneylife Digital Team 05 October 2023
The securities appellate tribunal (SAT) on Thursday quashed the insider trading order issued by Securities and Exchange Board of India (SEBI) against New Delhi Television Ltd (NDTV)'s former promoters Dr Prannoy Roy and Radhika Roy. In November 2020, SEBI had asked the Roys to disgorge Rs16.97 crore, the money earned through insider trades while barring NDTV and the company's key executives from the securities market. (Read: NDTV Insider Trading: Disgorge Money Earned, Says SEBI; Bars Prannoy Roy, Radhika Roy, Vikram Chandra and whistleblower Sanjay Dutt from Markets)
In an order, the SAT bench of justice Tarun Agarwala (presiding officer) and Meera Swarup (technical member) says, "We find that Prannoy Roy and Radhika Roy had secured pre-trade clearance from the compliance officer of NDTV, which is an admitted fact in the show cause notice (SCN) and, therefore, the trades executed by these two entities was in conformity with the NDTVs code of conduct and the Prohibition of Insider Trading Regulations (PIT Regulations). There is no finding in the impugned order to the effect that the compliance office had acted improperly in granting permission to these two entities to sell during the period when the trading window was closed."
As per the SCN, between 7 September 2007 and 16 April 2008, the unpublished price sensitive information (PSI)-6 period, the Roys bought shares of NDTV. PSI-6 refers to a decision of the NDTV board on 7 September 2007 to evaluate options for reorganisation of the company, including de-merger or split of the company into news-related businesses and investments in 'beyond news' businesses, which were held through its subsidiary NDTV Networks Plc at that time.
The SEBI whole-time  member (WTM) found that Prannoy Roy and Radhika Roy had traded while possessing price-sensitive information and accordingly directed them to disgorge the unlawful gains and prohibited them from accessing the securities market for two years.
Vikramaditya Chandra, Iswari Bajpai and Saurav Banerjee had also filed an appeal before the Tribunal. SAT observed that these three did not buy any shares during the investigation period. "They were allotted shares in tranches by NDTV under employee stock option scheme (ESOPs). The SCN alleged that Vikramaditya Chandra and Iswari Prasad Bajpai had traded in the shares of NDTV during PSI-3 and that Vikramaditya Chandra and Saurav Banerjee had traded in the shares of the Company during PSI-6." 
PSI-3 refers to the period from 22 November 2006 to 11 March 2007, when NDTV signed an agreement with Com Ventures VI LP, a venture capital fund for an investment of US$20mn (million) from Com ventures in NDTV Network Plc to fund non-news business.
"In view of the decision of this Tribunal holding that PSI-6 is not a price sensitive information, the trades made by Vikramaditya Chandra and Saurav Banerjee during PSI-6 are not violative of the PIT Regulations and, therefore, the order of the WTM to that extent cannot be sustained," the bench says.
In February 2023, SAT quashed an order passed by SEBI against Quantum Securities Pvt Ltd, Prenita Dutt and SAL Real Estate Pvt Ltd for their trades related to the PSI-6 period. "This Tribunal found that PSI-6 cannot be termed as a price sensitive information and, therefore, the entities who had traded during the PSI-6 period cannot be found guilty of violating the PIT Regulations as they were not insiders."
While quashing orders related to the PSI-6 period for Mr Chandra and Mr Bajpai, SAT remitted matters related to PSI-3 to the SEBI WTM. 
In November 2020, in three separate orders, SEBI had asked Dr Roy, Ms Roy, Vikram Chandra, Ishwari Prasad Bajpai, Saurav Banerjee as well as whistle-blower Sanjay Dutt and his wife Prenita Dutt of Quantum Securities Pvt Ltd, and SAL Real Estate Pvt Ltd and Taj Capital Partners Pvt Ltd, to disgorge the amount earned through insider trading of NDTV shares. While Vikram Chandra, Ishwari Prasad Bajpai and Saurav Banerjee are barred from markets for one year, the rest are restrained from markets for two years. 
In one order, SK Mohanty, WTM of SEBI has asked Dr Roy and his wife Radhika to "jointly or severally, disgorge the amount of wrongful gain of Rs16.97 crore as computed in the show cause notice, along with interest at the rate of 6% per annum from 17 April 2008, till the date of actual payment of disgorgement amount along with interest, within 45 days." 
Vikram Chandra was asked to disgorge Rs6.67 lakh with an interest of 6% from 17 April 2008. Mr Bajpai was directed to pay Rs8.83 lakh along with 6% interest from 12 March 2007 to the date. 
Prenita Dutt, wife of Mr Dutt and their three firms were asked to disgorge within 45 days, Rs2.2 crore with an interest of 6% from 17 April 2008. These amounts are the gains earned by these people while trading in shares of NDTV, the SEBI order says. 
In January 2021, when the Roys challenged SEBI order, the Tribunal directed them to deposit 50% of the the disgorged amount. The former promoters of NDTV, however, filed an appeal the Supreme Court challenging the order passed by SAT. They informed the apex court that the news channel was facing financial hardship with limited resources. 
Senior advocate Mukul Rohatgi, representing the Roys, emphasised before the bench they were willing to provide a statement of shares which will not be transferred by them to any other person.
Later in December last year, the Roys sold most of their shares in NDTV to Gautam Adani's AMG Media Networks. The Roys sold 27.26% out of their 32.26% stake in the news broadcaster. After the transfer, the Roys had a 5% stake in NDTV, with Adani group firmly in control of the company.
In November 2022, the new board at NDTV approved the resignations of Dr Roy and Ms Roy as directors of RRPR Holding Pvt Ltd (RRPR), the promoter of NDTV. (Read: NDTV: Prannoy and Radhika Roy To Sell Most of Their Shares to Adani)
At that time, RRPR Holding stated that it had transferred shares constituting 99.5% of its equity capital to Adani group-owned Vishvapradhan Commercial Pvt Ltd (VCPL), completing the official takeover of NDTV by the Adani group. The transfer of shares gave Adani group control of over a 29.18% stake in NDTV.
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