Supreme Court Exempts NDTV Promoters Prannoy Roy & Radhika Roy From Making Deposit Before SAT For Hearing Appeals Against SEBI Penalty

In a relief to NDTV promoters Prannoy Roy & Radhika Roy, the Supreme Court on Monday exempted them from making deposit before the Securities Appellate Tribunal(SAT) for hearing their appeals against the penalty of over Rs 16.97 crores imposed by the Securities and Exchange Board of India(SEBI) in a case related to insider trading.A bench headed by the Chief Justice of India ordered that "no amount shall be coercively recovered from the appellants(Prannoy Roy and Radhika Roy) for hearing the case".When the Solicitor General of India, Tushar Mehta, raised an apprehension on behalf of the SEBI that such an order is likely to be used in other similar pending cases, the bench clarified that the order "will not be treated as a precedent".The bench, also comprising Justices AS Bopanna and V Ramasubramanian, was hearing the appeals filed by NDTV promoters Prannoy Roy and Radhika Roy against an order of the Securities Appellate Tribunal which directed them to pay 50% of the "wrongful gains" found to have been made by them via insider trading.On the last hearing date, January 28, Senior Advocate Mukul Rohatgi had told the court that the Roys were willing to offer their shares in NDTV as security for the penalty of Rs 16.97 crores imposed by the Securities and Exchange Board of India(SEBI) for insider trading.The bench was told that they hold nearly 50 lakh shares, which are trading at Rs 37 per share, and therefore the share value was more than the penalty amount.Today, the Solicitor General, appearing for the SEBI, opposed the proposal to offer shares as securities. The SG informed the bench that the shares of the appellants are frozen by another order of the SEBI and that they are restrained from creating encumbrances on the shares.However, the bench opined that deposit of shares in a court proceeding will not amount to creating encumbrance."This is a deposit in Court. Not an encumbrance or a pledge. There is a difference", CJI SA Bobde observed.The SG submitted that if the appellants can give any other security, it will solve the problem. Rohatgi then replied that they don't have any other security.The SG further submitted that the appeals are listed before the SAT on March 6 for hearing, and the deposit was not a pre-condition for hearing the appeals. The deposit is only a condition for stay and the only consequence of non-deposit will be that the appellants will not be able to enter the share-market, the SG added. Since the appellants are not regular sharedealers, the SG continued, the non-deposit will not cause much hardship to them.Disagreeing with the SG, Rohatgi said that if there is no stay, the appellants' properties will be attached and sold.The bench ultimately proceeded to direct the SAT to hear the appeals without deposit and put a halt on the recovery proceedings against them.On November 27 last year, the Securities and Exchange Board of India(SEBI) had directed Roys to disgorge the amount of wrongful gain of ₹16.97 crores along with interest at the rate of 6% per annum from April 17, 2008, till the date of actual payment, within 45 days. The market regulator held that the NDTV promoters made wrongful gains by dealing in company shares in April 2008, while being in possession of Unpublished Price Sensitive Information (UPSI) pertaining to the proposed reorganization of the company.The SEBI also banned Roys from buying, selling or otherwise dealing in securities, directly or indirectly, or being associated with the securities market in any manner, whatsoever, for a period of 2 years.Aggrieved with this order, they approached the Securities Appellate Tribunal(SAT). On January 4, 2021, the SAT declined to grant a complete stay and directed them to deposit 50% of the penalty within 4 weeks.It was challenging this order that they filed civil appeal in the Supreme Court.BackgroundThe SEBI noted that the discussions pertaining to reorganization of the Company started on September 07, 2007 and the disclosure was made to the public post trading hours on April 16, 2008. Hence, the UPSI period was from September 07, 2007 to April 16, 2008 and, the trading window was required to be closed upto April 17, 2008 (till 24 hours after the UPSI was made public). It further noted that Prannoy Roy was the Chairman and whole time Director and Radhika Roy was the Managing Director at the said time and were a part of the decision-making chain that had led to crystallization of the UPSI. Nevertheless, the two promoters being in possession of the UPSI sold company shares on April 17, 2008, when the trading window for them was closed and made a profit of Rs 16,97,38,335. "That the Noticees have purchased 4835850 shares of NDTV while in possession of an UPSI-6 during the UPSI period and have sold shares of NDTV within 24 hours of public disclosure of the said price sensitive information (PSI) to the stock...

Supreme Court Exempts NDTV Promoters Prannoy Roy & Radhika Roy From Making Deposit Before SAT For Hearing Appeals Against SEBI Penalty

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