SAT directs Sebi to pass fresh order in RIL-Network 18 deal matter

The Securities Appellate Tribunal has directed Sebi to re-examine whether there have been violations of listing agreement with respect to Reliance Industries' acquisition of Network18 Media & Investments (NW18) and TV18 Broadcast (TV18).

Besides, the regulator has been asked to check whether Reliance Industries Ltd (RIL) acquired indirect control of the two companies through Independent Media Trust (IMT).

Victor Fernandes and Sangeeta Fernandes, in their complaints, alleged that RIL had failed to disclose that it had acquired indirect control over NW18 and TV 18 through IMT, a trust established in November 2011 for the exclusive benefit of RIL.

They had approached the tribunal after Sebi had disposed their complaint in January 2017 on the grounds that the trust was not a subsidiary of RIL and therefore disclosures were not required to be made under the listing agreement.

In a 19-page order, dated June 22, the tribunal said Sebi could not have rejected the complaint without considering the merits of the allegations.

"While setting aside the impugned decision of Sebi dated January 9, 2017, 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 noted.

ZOCDs are Zero Coupon, Optionally and Fully Convertible Debentures (ZOCDs).

Under Clause 36, when a listed company acquires indirect control over another listed firm, either through a trust or through any other entity, then such acquisitions have to be disclosed to the stock exchanges, SAT noted.

The tribunal also observed that Sebi's decision to reject the complaint was "patently erroneous and contrary to the spirit" of the listing agreement.

Further, the tribunal referred to an order of the Competition Commission of India (CCI) which had concluded that subscribing to ZOCDs by IMT amounted to acquiring indirect control over NW18 & TV18.

The CCI had passed the order in May 2012.

If Securities and Exchange Board of India (Sebi) is not agreeable to the view taken by the CCI, then the regulator "shall record its reasons for taking a contrary view", the tribunal said.