Adani and NDTV deal: Adani Group’s takeover of New Delhi Television (NDTV) is still making headlines. The contention is not over yet. They have started a new debate on whether Adani needs clearance from the Income Tax department to take control over NDTV.

On Thursday, NDTV claimed that Adani need prior clearance from India’s tax authority. Later it was denied the claim saying that it has no base and misconceived. This issue is still complicated and a question arises if Adani Group is making a legal move. 

So, let’s understand what legal experts say on Adani and NDTV deal:

The share warrants issued by a company are negotiable instruments and the holder of such warrants can exercise the option of conversion within the time frame, said a Supreme Court advocate and a company law expert said.

He said when queried about the Adani Group’s steps to takeover over NDTV based on the information that is available in the public domain.

Adani’s VCPL is at liberty in converting the warrants into shares: Expert

“Share warrants are negotiable instruments and the issuance of share warrants presupposes the underlying equity shares of the issuer company as per such warrants,” D. Varadarajan, a Supreme Court advocate specializing in company/competition/insurance laws, told IANS.

The holder of share warrants, in this case Vishvapradhan Commercial Private Ltd (VCPL), a subsidiary of Adani Enterprises Ltd, is at liberty to exercise the option of converting the warrants into shares within the window of time frame as stated and inbuilt in the warrants, he added.

“Hence, the issuer company (in this case RRPR Holding, the investment vehicle of NDTV founders Prannoy Roy and Radhika Roy and holding 29.18 per cent) would know prior hand and should have envisaged the contingency of conversion of share warrants into shares,” Varadarajan said.

According to Varadarajan on Adani and NDTV deal, the maximum extent of acquisition of equity shares by conversion of share warrants is premeditated by the issuing company.

Unconscionable to raise hue and cry on automatic process

“Hence, it is unconscionable to raise hue and cry on various pretext and stifle the automatic process of conversion of warrants into equity, after having enjoyed the money represented by share warrants by the issuer company by willingly issuing the warrants at the outset.”

On August 23, VCPL issued a notice to RRPR Holding of its decision to convert the share warrants issued to it in 2009 into equity shares and the Adani Group issued an open offer to acquire 26 per cent stake in NDTV.

The conversion of warrants into equity would lead to Vishvapradhan Commercial gaining control of 99.5 per cent of RRPR Holding that holds 29.18 per cent stake in NDTV.

The resistance of NDTV and VCPL reply

Ever since the warrant conversion notice, RRPR Holding and NDTV’s founders Prannoy Roy and Radhika Roy have been claiming that the transaction needs permission from Securities and Exchange Board of India (SEBI) and the Income Tax Department.

They also said the decision to convert the share warrants into equity shares in RRPR Holding by VCPL was not discussed with them.

The VCPL has asked RRPR Holding to cease and desist from repeating the misconceived and misleading statements, suggestions, inferences and assertions made by it.

The VCPL has again called upon RRPR Holding to take all necessary steps and perform its obligations as specified in the Notice, forthwith and without any further delay.

A shareholder having 26 per cent stake in a company can stop the passing of a special resolution that needs a minimum of 75 per cent of members voting in its favour.

If the share warrants of Vishvapradhan Commercial are converted to equity in RRPR Holding, then the former will control over 26 per cent stake in NDTV.

The soaring NDTV’s share price

Meanwhile the share prices of NDTV continued its upward spiral on Friday to touch Rs 515.10. It was closed at 490.60 on Thursday. Due to Adani and NDTV deal the share price of NDTV has rallied in 575 per cent in the last one year. 

“Who the share buyers are will be known only when the buyers approach NDTV for name transfer,” Varadarajan said.

On August 25, NDTV in a regulatory filing had said the SEBI has restrained its Founder-Promoters Prannoy Roy and Radhika Roy from accessing the securities market, and further prohibiting buying, selling, or otherwise dealing in securities, directly or indirectly, or being associated with the securities market in any manner whatsoever for a period of two years, which expires on November 26.

The NDTV has postponed its 34th Annual General Meeting to September 27 from the earlier fixed date of September 20.

Due to change in the date of the AGM, the Register of Members and the Share Transfer Book of the Company will now remain closed September 20-27 (both days inclusive), NDTV had said.