SEBI notice on violations: HC refuses relief to NDTV promoters

The Bombay high court (HC) on Monday refused to interfere with the adjudication proceedings initiated by the Securities and Exchange Board of India (SEBI) against

The Bombay high court (HC) on Monday refused to interfere with the adjudication proceedings initiated by the Securities and Exchange Board of India (SEBI) against New Delhi Television (NDTV) promoters Prannoy Roy and his wife Radhika for alleged violations of the SEBI (Prohibition of Insider Trading) Regulations, 1992.

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A division bench of justices SC Dharmadhikari and RI Chagla refused to entertain a petition filed by the broadcast journalists who sought quashing of the August 31, 2019 notice issued by SEBI, asking them to show why proceedings should not be initiated against them for violation of section 12A (d) and (e) of the SEBI Act and relevant clauses of the SEBI (Prohibition of Insider Trading) Regulations, 1992, both of which prohibit insider trading.

The notice pertained to a 2008 proposal involving restructuring of NDTV into “news related businesses” and “beyond news” businesses. According to SEBI, the Roys traded in NDTV shares while in possession of “unpublished price sensitive information”, despite non-implementation of the proposal. However, the Roys claimed that the proposal was dropped and sought quashing of the show-cause notice on the grounds that it contained nothing that would point towards violation of extant regulatory framework.

The couple moved the HC after SEBI on September 11, 2019 rejected their plea for “full and fair” inspection of documents on the basis of which the proceedings have been initiated.

The Roys’ counsel submitted that as the purported insider trading took place in 2008 while the show-case notice was issued 10 years later in August 2018, the petitioners were seriously prejudiced by the notice. She also pointed out that the show-cause notice mentioned some investigation report, which had not been given to the petitioners, in “complete violation of the principles of natural justice”.

The argument, however, failed to impress upon the bench. “It is a show-cause notice, face it. Participate in the proceedings, may be it will collapse on that ground [of delay] alone,” the judges said, expressing their unwillingness to grant any relief to the NDTV promoters.

They also refused to order SEBI to provide inspection of documents sought by Roy. The bench said it will dismiss the petition, if the counsel does not withdraw it. The counsel then sought time to take instructions and the bench posted the petition for further hearing on Monday.