By Ashley Coutinho & Rajesh Kurup

The Adani Group’s takeover bid for New Delhi Television (NDTV) seems to be headed for a legal tussle. Rebutting the media firm’s stand that the transfer of shares by it can happen only after Sebi’s approval, the Adani Group on Friday said that such regulatory nods were not required and NDTV’s stand was “legally untenable and devoid of merit”.

Several legal experts who FE spoke with endorsed the Adani Group’s statement. They pointed out that the takeover is by exercising the right to convert the warrants into equity, which is a contractual obligation on part of NDTV. Any injunctions put by Sebi on NDTV promoters – Radhika Roy and Prannoy Roy – from dealing in securities markets till November this year do not in any way touch upon such contractual agreements which predate the injunction, they said.

“Adani Group’s position is that they are merely exercising their contractual rights and both entities were, in no way, parties to Sebi’s injunction order. There is considerable force in the said argument,” Sameer Jain, managing partner, PSL Advocates & Solicitors, said.

Adani Enterprises, an Adani Group firm, said on Friday: “The contentions raised by RRPR Holding Private Ltd (a promoter group company of NDTV) in the letter are baseless, legally untenable and devoid of merit. RRPR is, therefore, bound to immediately perform its obligation and allot the equity shares as specified in the warrant exercise notice.” 

Also Read: Adani Group says regulatory curbs do not restrict bid to take over NDTV

AEL was responding to a letter by RRPRH a day earlier, in which the latter had said a “prior written approval” from Sebi is required for exercise of conversion option of the warrants. This was based on a 2020 Sebi order that barred the NDTV founder-promoters from trading in the securities markets for two years, which would end on November 26.

RRPR is not a party to the Sebi order and the “restraints” do not apply to RRPRH, AEL said. Further, on August 23, `1.99 crore (amount payable to exercise the warrants) has been paid by Vishvapradhan Commercial (VCPL), an indirect subsidiary of Adani Enterprises, it added.

“The question is whether the exercise of the warrant amounts to the NDTV promoters dealing directly or indirectly in securities. It does not, going strictly by the letter of the law,” Siddharth Mody, partner at Desai & Diwanji, said. This is because this is an involuntary dilution, there is no parent action and so there is no violation of the Sebi order. “The warrant conversion is by a company which is a separate entity in the eyes of law distinct from its promoters. Second, this transaction of warrants which is now converted into shares is pursuant to a right being exercised under old documents,” Mody added.

The regulator will be in a tight spot on whether it’s a breach of a contract requiring performance of obligations or indirect breach of Sebi’s order while performing obligations, according to Sumit Agrawal, founder, Regstreet Law Advisors. He said civil courts and the NCLT have the jurisdiction in cases of contractual dispute, and Sebi’s jurisdiction is limited in such instances.

“Usually, Sebi does not interfere in such matters but in the past there have been cases where Sebi has protected administratively as well as through public orders third-party rights which get affected because of restrictions imposed on a party before it,” he said.

For instance, in a case of pledged shares of Parsvnath Developers, Sebi had allowed the release of the pledge of shares in favour of the borrower (Pradeep Kumar Jain & Sons) by the lender, which had been restrained by Sebi from buying, selling or dealing in securities, Agrawal said.

PSL’s Jain is of the view that since the said order is set to expire in 60 days, it would not make substantial difference to the matter as it stands today as there is a clear intention by NDTV to not comply with Adani Group’s demands. The dispute, if taken to courts, will take much longer to get resolved, Jain said.

The Adani Group had on Tuesday initiated an attempt to acquire a total of 55% stake in NDTV through multi-layered transactions. This was perceived as a hostile takeover bid as the news media firm responded immediately through a stock exchange notice, stating that the move was without its consent. Adani Group, in its notice to NDTV, had also asked the firm to transfer all its stake “within two days”.

This followed a move by VCPL, a wholly-owned subsidiary of AMG Media Networks (AMNL), exercising its rights to acquire a 99.5% stake in RRPRH. This would have led to AMNL, which is a wholly-owned subsidiary of AEL, indirectly acquiring a 29.18% stake in NDTV.