NDTV Frauds, page 3
The details of complaints filed by the minority shareholders Sanjay Dutt and Sanjay Jain led Quantum Securities Private Limited is shocking. One of the frauds committed by Prannoy Roy was the creation of a shell company called RRPR Holdings Private Limited and grabbing Stock Exchange listed company NDTV’s major controlling shares. What is RRPR Holdings? It is Radhika Roy Prannoy Roy Holdings. Husband and wife each have 50 percent shares in this company which exists only on letter pads. From this point the minority shareholder started questioning, sending a series of complaints to SEBI, Income Tax, CBI, ED and Delhi Police Economic Offices Wing (EOW).
The minority shareholder unearthed the following deliberate violations in public limited company NDTV by the major promoter Prannoy Roy:
Covert acquisition by Promoters, Prannoy Roy and Radhika Roy of 8% equity from General Atlantic Partners in Dec 2007 and thereafter sale of over 15% equity to benami holders through a foreign fund – Goldman Sachs in Mauritius. This covert deal was a blatant violation of Stock Exchange rules and the two foreign investors were acting as partners in illegal trades and actions of Promoters. Finance Ministry under P Chidambaram kept silent on this covert deal, as did SEBI, which is supposed to protect the interests of other shareholders.
Conspired with ICICI Bank and received funding of over Rs. 375 crores ($76 million[12]) to husband and wife’s private company RRPR Holdings Private Limited in the name of the public company NDTV. How ICICI Bank then under K V Kamath gave such a huge loan to shell company which is having no business, cash flows or assets is a million dollar question. The loan given by the bank was for consideration other than normal commercial basis and completely in violation of RBI Regulations. Thus ICICI Bank facilitated Mr. & Mrs. Roy and helped them retain control in NDTV, the public company in clear violation of RBI norms. This happened in October 2008 and the RBI buried this gross violation quietly. Not only was there a violation of RBI Regulations, but further a contravention of Banking Regulation Act and Prannoy Roy along with Radhika Roy, caused a loss of close to Rs. 50 crores to ICICI Bank when they forced the bank to settle the loan in August 2009. It is very strange as to why this has not been investigated by RBI and CBI as now private banks are also covered under the Prevention of Corruption Act.
Thereafter, in July 2009, ICICI Bank acted in concert/ facilitated Mukesh Ambani’s Reliance Group and executed a clandestine agreement to take control of the news media company from Prannoy Roy and Radhika Roy. This was in complete violation of Ministry of Information and Broadcasting (MIB) norms, SEBI norms, Companies Act etc. and of course resulted in tax evasion to the tune of Rs. 300 crores ($61 million12). However, what is a matter of intrigue and concern is the fact that even today it is not known who controls this news television network. Post Dec 2012, the ownership got transferred in a convoluted manner to a web of shell companies controlled by a Delhi based industrialist Mahendra Nahata, who was known as Ambani’s man in Delhi.
Nahata is seen everywhere in most operations of Mukesh Ambani. Mahendra Nahata’s telecom companies were always caught in scams from Sukh Ram scandals, 2G Scam and even Reliance Jio started business by a controversial move by acquiring a Nahata floated, little known company. It is quite possible that in 2012 the ownership (Nahata being a front) actually shifted from the elder Ambani brother to the younger – Anil Ambani as Mukesh by then had formalized and thereafter transferred ownership of another news network – TV18 group from Raghav Bahl. Some believe and it is rumored, that the two brothers agreed that one of the groups (NDTV) should change hands and thus the ownership was parked via a Special Purpose Vehicle - SPV (RRPR Holding P Ltd) with Mahendra Nahata.
During the period, June 2006 – October 2008 the media company floated many shell companies across global jurisdictions such as Sweden, Netherlands, UK, Mauritius and Dubai (over 30) etc. to bring into India via illegal hawala route a sum of over USD 150 million dollars. This is clear case of violation of Income Tax Dept and ED provisions. After the execution of sham transactions many of these companies were closed. In some foreign companies, NDTV’s prominent faces Barkha Dutt, Vikram Chandra and Sonia Singh were also shareholders or directors. All these companies were just paper companies at some hotel address or some attorney addresses. For more, see Figure 2 below:
Figure 2. Trail of NDTV Shell companies (Graphic: PGurus.com)
NDTV evaded over Rs.500 crores of income tax and laundered money through tax havens by floating many shell companies across the world[13]. SEBI shut their eyes on NDTV’s money laundering and siphoning by promoters Prannoy Roy and wife Radhika Roy. MIB also kept silent when the shareholding pattern of the company was frequently changed.
When Sanjay Dutt and Jain came to know of the misdeeds, illegal acts and alleged frauds committed by the two promoters Radhika and Prannoy Roy, they decided to file a complaint with the Additional Commissioner of Police, Economic Offenses Wing, New Delhi. This was based on the findings of the Income Tax Dispute Resolution Panel (DRP), which in December 2013 had determined that NDTV, through its shell subsidiary companies colluded with National Broadcasting Corporation-Universal (NBCU), which was a subsidiary of the American giant General Electric (GE). What was striking about this investment was that NBCU transferred Rs. 584.46 crores to NDTV between 2008 and 2009 by purchasing shares in NNIH (an NDTV Shell company) Netherlands. But in the next financial year, the same shares were sold back to NDTV Networks BV, another NDTV shell company for a paltry sum of Rs. 58 crores, a loss of 90%! Why would a world reputed Multinational (MNC) company do this?
DRP saw through the ruse and arrived at the following conclusion: “The only purpose apparent from the transaction is to create a loss of Rs. 584.46 crores for NBCU and to bring the taxable income of the assessee (NDTV) amounting to Rs. 642.54 crores, earned from undisclosed sources, into the books of accounts of the assessee through its subsidiaries. Was this a creative way to bring its own (or benami for someone else) money back into India, with NBCU’s help? That is what DRP concluded, which casts a harsh light on NBCU and its parent company GE for being a party in this sham transaction. Why would a reputed MNC invest $150 million in a shell company with zero employees and zero revenue?
It is pertinent to note that, in July 2009 while executing the illegal and clandestine change of control agreement to transfer ownership of the Media Company via sale of the holding (Khoka) company, the two promoters committed a breach of SEBI Regulations, Foreign Exchange Maintenance Act (FEMA) and Income Tax Act. In fact, the agreement shows that they knew they were committing PMLA violations and other SEBI Takeover code regulations. Most importantly, this has major security implications as MIB was neither informed nor permission taken to transfer control of a nationally sensitive news media company.
Round tripping of high value assets (Intellectual Property Rights (IPRs), Brand, inventories and media libraries) and also revenue streams of NDTV Ltd by the promoters of the Company to make an illegal gain of approximately Rs.1200 crores ($243 million). This gain is distributed amongst the key Directors, Employees and others (Law Firms, CAs etc.) who facilitated/ validated these transactions. The money has been routed back into India through the Mauritius route of merger with an Indian entity without paying any short term or long term capital gains tax. Major NDTV promoters Prannoy Roy was ditching his 45,000 minor shareholders and siphoning and laundering the money into his private shell companies.
During the financial year FY 2008-2009, Prannoy Roy and Radhika Roy along with RRPR Holding Private Limited (RRPR) as Person Acting in Concert (“PAC”), in terms of Regulation 11(1) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 and subsequent amendments thereto (“SEBI (SAST) Regulations”), made a cash offer of Rs 438.98 per share of Rs. 4 each (the “Offer Price”), to acquire up to 1,26,90,257 fully paid Shares representing 20% of the Resulting Voting Share Capital (“Offer”) of New Delhi Television Limited. It is important to note that RRPR did not own a single NDTV share before July 2008. After July 2008, but in FY 2008-2009, the promoters increased their stake in NDTV and thereafter on August 5, 2009 partly divested their shareholding so as to enable RRPRHL to hold 26% in NDTV Ltd. The relevance of 26% is well known and established as a key control threshold level by various statutes.
The promoters, to meet the financing requirements for the said acquisition of shares of NDTV, took a loan of Rs.500 plus crores from India Bulls Financial Services. Thereafter, during FY 2009-2010, ICICI Bank granted a loan of Rs. 375 crores in FY 2008 – 2009 and the loan of ‘India Bulls Financial Services’ was paid off by the promoters of NDTV Ltd. It is important to note that ICICI Bank loan was illegal and totally against the provision of Banking Regulations Act and Master Circular of RBI on Loans and Advance against shares to promoters of listed Companies. For this loan, the Promoters pledged, collateralized and created a non-disposal undertaking in favor of ICICI Bank for the entire 61% holding i. e. over 3.6 crores (36 million) shares in NDTV. Not only did they create a non-disposal undertaking, the Lawyers of the Promoters under their instructions have made a filing under affidavit (in the Delhi High Court) that all shares of the three Promoters were pledged/ collateralized in favor of ICICI Bank to secure the Rs. 375 crores loan. This act is not only illegal as per SEBI and RBI provisions, it also violates the basic licensing condition (as a broadcaster) as stipulated by Ministry of Information and Broadcasting. Those days UPA’s MIBs Ambika Soni and Manish Tewari were frequenters to NDTV Studios. They could only watch when NDTV, blessed by Sonia Gandhi was creating all kinds of narratives as to why Rahul Gandhi should be the next Prime Minister of India.
During the same financial year FY 2009-2010, promoters paid back a substantial amount of Rs. 350 out of Rs.375 crores through unsecured and interest free loan of Rs.403.85 crores from a shell company linked to Reliance Industries Limited. The shell company’s name is Vishwapradhan Commercial Private Ltd. (VCPL) and most of its Directors were staffers in Reliance Group.
After four years of a series of complaints to various agencies, in mid-2014, the minority shareholders knocked on the doors of judiciary[14]. Now Delhi High Court has ordered SEBI, ED, and IT to file responses on the complaints. The long arm of law has started catching up with NDTV and its promoters. Figure 3 shows all the filings QSL had to do to be heard by the various government agencies and courts:
Figure 3. Timeline of filings by Quantum Services Limited
Table 3. Abbreviations explained
SEBI
Securities and Exchange Board of India
ROC
Registrar of Companies
ITD
Income Tax Department
RT
Round tripping
ML
Money Laundering
EOW
Economic Offences Wing
DRP
Dispute Resolution Panel of Income Tax Department
Some observations about the timeline graphic above:
QSL approached the Supreme Court on NDTV’s defamation case and argued that the jurisdiction of Bombay High Court because NDTV chose Mumbai with the sole intention of harassing them. The case is pending disposal and is currently frozen.
SEBI, since 2012-2013, has got several complaints relating to insider trading of the promoters, disclosure violations, fraudulent trades and take-over code violations from QSL but never bothered to even acknowledge them - forget taking action even after presentation of cogent evidence. Is it not the role of SEBI to ensure that the market is fair and gives equal opportunity for everyone to trade? How many times has SEBI punished the promoter of a publicly traded company? By law of averages, there will be crooks and SEBI’s role is to catch them and punish them. It is easy to say that India has a vibrant stock market but if the watchdog organization does not act swiftly, it would turn investors away.
NDTV has about 45,000 small investors who perhaps, looking at the glitzy, honest sounding stars invested their hard-earned money into its shares and now are looking at utter ruin. Even if NDTV is brought to book and an outside entity is appointed to auction off its assets, will the common man get his money back? Not only that, now that it has so many statutory liabilities from Income Tax and ED fines etc. piling up, what happens to the banks that may have given loans?
Did things improve after a change in government in May 2014? QSL wrote to the new Finance and Corporate Affairs Minister Arun Jaitley listing the frauds committed by the Promoters Radhika and Prannoy Roy. In a 15- page detailed letter dated Jun 6th, 2014 (copy also filed with the High Court), Sanjay Dutt, Director QSL explained with detail how his repeated queries to Promoters and inquires to Ministry of Corporate Affairs (MCA) and SEBI were ignored. After getting no response from the FM, Dutt again wrote to the Finance and Corporate Affairs Minister on October 20th, 2014, citing additional evidence found by two departments Enforcement Directorate and Income Tax (both of which come under Jaitley) and urged the Minister to act. However, as expected, no response from him on either of these letters or directions to his Departments to act.
Once QSL filed a writ petition in the Delhi High Court against NDTV in April 2014, agencies such as the ED and Income Tax began responding to specific queries. The reply by a Senior officer in the Office of Director General (DG) Investigation Income Tax dated Sept 11, 2015 confirmed that the Investigation Wing had investigated NDTV and its Promoters way back in 2011 with Netherlands and Cayman Islands into the tax affairs of NDTV group. In fact, in a document filed in the Delhi HC in September 2015 by DG Investigation (Income Tax), it is categorically stated that substantial tax was evaded by Prannoy Roy and Radhika Roy. Further, the affidavit also states that they received over Rs. 400 crores from a “bogus/ khoka” company called Vishwapradhan Commercial Pvt. Ltd. However, what is intriguing is why has the department sat on this information for 5 years? It has not acted and neither has it shared this information relating to money laundering and unknown source of funds in a licensed news broadcaster with CBI for an investigation.
So all the information that was required to proceed against NDTV by CBI, ED and SEBI etc. was always with the government. Then why did UPA-2 do nothing? Further, why did the NDA-2 do nothing about it? It wasn’t as if it was not reminded (it was, twice, in June and Oct 2014 i.e. letters to the FM). Until QSL filed a writ petition in Delhi High Court in 2014 and followed up every complaint diligently, the Government chose to sit on its rather wide rear side and indulged in masterly inactivity. Pulling teeth might have been less painful for QSL as it did all the leg work that was the government’s job. All this begs the question: Was the Lutyens cabal at work, trying to save one of their own? Remember who were employed at NDTV! Its not just political bosses with quid pro quo but also bureaucrats at SEBI and ED.
Enforcement Directorate catches NDTV
After Congress led UPA’s exit, agencies started acting on a series of complaints filed against NDTV in several quarters, though Finance Minister Arun Jaitley did his best to stall. The first action came from Enforcement Directorate in early 2015. The ED officers found that NDTV had committed Rs.2030 crores foreign exchange violations. But the attempts to send notice to NDTV under FEMA were blocked by many corrupt politicians and bureaucrats. Those days Rajan Katoch was the ED Chief and he was a UPA regime appointee and continuing in the organization getting one extension after another. Moreover this pliable officer was a cousin of the Congress leader Digvijaya Singh. Why BJP government gave him an extension is another question. Certain questions can’t get simple answers in corrupt Lutyens Delhi which has opaque walls of mystery that some can walk through and others get their nose bloodied. That this cabal continues to cast a larger-than-life shadow on the Modi government shows the kind of power they wield among the babulog.
Social Media was abuzz with blockage of actions of ED by Finance Ministry top officials like the Revenue Secretary Shaktikanta Das, an acolyte of P Chidambaram. At last, after much nudging, the Prime Minister’s office gave stern directions and Hasmukh Adhia became new Revenue Secretary and Karnal Singh became ED Chief. Subramanian Swamy and Gurumurthy were using their might for breaking the hidden designs of the Delhi’s corrupt gang. Within weeks, in November 2015 the Enforcement Directorate under Karnal Singh slapped a notice on NDTV for laundering of Rs.2030 crores.
The ED Investigation under FEMA has revealed that the financial transactions by NDTV Ltd were in total violation of RBI norms. In those days the RBI Governor Raghuram Rajan was a frequenter to NDTV Studios for giving exclusive interviews to Barkha Dutt. Rajan also played a part in scuttling the ED’s probe[15] as part of the money from the Aircel-Maxis deal was routed through NDTV. ED’s queries to RBI were mostly delayed and investigators had to force the bankers.
Following were the main violations by NDTV unearthed by ED. These violations were specified in the notice served to NDTV.
NDTV Ltd. through its step down subsidiary in UK, NDTV Networks Plc. (NNPLC) was permitted by FIPB to raise overseas funds through public offerings of equity shares and allowed listing at London Stock Exchange and remit those funds in its group companies. But NNPLC raised funds by way of overseas loans, bonds and optionally convertible preference shares. NDTV Ltd. has violated Regulation 5 (1) of FEM (Transfer or Issue of Security to Persons resident outside India) Regulations, 2000 issued under Section 6 (3) (b) of FEMA by not complying with the terms and conditions of FIPB approval.
NDTV Ltd. raised funds outside India to the tune of USD 170 Million through NNPLC and brought USD 163.78 Million (Rs. 725.56 crores approximately) in its group companies in India during the period March, 2007 to October, 2010. RBI has pointed out that bringing funds in its group companies by NDTV Ltd. from NNPLC is not a genuine and bonafide business activity and is a contravention of Regulation 6 (2)(ii) of the FEM (Transfer or Issue of any Foreign Security) Regulations, 2004 issued under Section 6 (3) (a) of FEMA.
