SEBI show cause notice: Bombay HC refuses relief to NDTV promoters Prannoy and Radhika Roy

The Bombay High Court on Monday refused to grant immediate relief to Prannoy Roy and Radhika Roy, promoters of New Delhi Television Limited (NDTV), against a show cause notice issued by the Securities and Exchange Board of India (SEBI).

In doing so, the Court dismissed the plea seeking to quash and set aside the show-cause notice by the market regulator for an alleged decade-old violation of insider trading regulations.

A Division Bench of Justices SC Dharmadhikari and RI Chagla passed the order. The Bench also refused to give a direction to SEBI to let Prannoy and Radhika Roy inspect all documents related to the notice.

The Court noted,

The notice pertains to a proposed restructuring of NDTV into news-related businesses and investments beyond the news businesses held through NDTV Network during the year 2008.

In this regard, the SEBI had issued a show cause notice on August 31, 2018 for alleged violation of section 12A(d) and 12A(e) of SEBI Act read with the Prohibition of Insider Trading Regulations, 1992. The said sections deal with prohibition of insider trading.

SEBI had alleged that the petitioners traded in the shares of NDTV while in possession of unpublished, price sensitive information related to the proposed restructuring.

Challenging the said notice, Prannoy and Radhika Roy had sought inspection of all documents, records, internal files and notings on the basis of which the notice was issued. It was claimed that the said proposal was eventually not implemented.

Moreover, it was contended by the petitioners that the notice was issued after a lapse of ten years, and that relevant records are no longer available. Therefore, the notice would prejudice and jeopardize their right to defend themselves, the Roys claimed.

DMD Advocates Partner Fereshte Sethna, appearing for the Roys, had submitted that the SEBI notice constitutes a "gross abuse of process" and that the allegations are "baseless and unfounded".

On the other hand, Senior Counsel JJ Bhatt, appearing for SEBI, had submitted that the market regulator has shown the required documents to the petitioners.

On Monday, a Bench led by Justice SC Dharmadhikari declined the plea and refused to make any observations on the merits of SEBI notice. He stated,

The Court has directed SEBI to decide the matter in an expedited and judicious manner.