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NDTV vs Adani Group: Media major appears to be on a weak ground, say lawyers

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NDTV and its founders have stated that the share transfer to Adani entity cannot happen without Sebi approval while the business conglomerate has claimed that the media major’s views are “baseless, legally untenable and devoid of merit”

The ongoing tussle between media major NDTV and diversified conglomerate Adani Group is likely to snowball into a legal battle as both sides contest claims put forth by the other party. And the lawyers specialising in securities market matters believe that the media major appears to be standing on weak ground. 

Soon after Adani Group announced that it had indirectly acquired a stake of 29.2 per cent stake in the media company by exercising the option of converting warrants into shares of RRPR Holding – a promoter group entity, the media major said that the conversion cannot go through as an earlier order by the Securities and Exchange Board of India (Sebi) had barred any such activity. 

Adani, on its part, has said that the “contentions raised by RRPR 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.” 

Interestingly, experts believe that the media major may be walking on thin ice as the crux of the matter is not about transferring any shares – that is barred by Sebi – but about warrants being converted into shares as per the agreement clauses. 

“This issue has nothing to do with transfer of shares from the Roys. It is an issue about new capital from the warrants that are being converted into shares. Therefore, it cannot be linked with the Sebi order. But this matter will obviously go into litigation,” said a lawyer specialising in Sebi matters on conditions of anonymity. 

In a similar context, Sumit Agrawal, Founder, Regstreet Law Advisors and a former Sebi law officer says that there have been instances in the past when Sebi has protected the rights of third parties affected by regulatory restrictions. 

“The bone of contention is whether it is a breach of a contract or potential breach of a Sebi order. In cases of contractual dispute, civil courts and NCLT have the jurisdiction and Sebi cannot interfere. Separately, 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. For instance, in one case of pledged shares of Parsvnath Developers, Sebi had allowed the release of the pledged shares in favour of the borrower [Pradeep Kumar Jain & Sons (HUF)] by the lender (which had been restrained by Sebi from buying, selling or dealing in securities),” said Agrawal.