The ‘R’ word in the case against NDTV

At 9 am on Monday this week, reporters in the capital city of Delhi woke up to the chatter of ‘something going down at NDTV’.

WhatsApp groups pinged with queries: Has the CBI raided Prannoy Roy’s residence?

Meanwhile, the press officer at the Central Bureau of Investigation offered no clarification till about 10:30 am, when a WhatsApp statement was issued for the benefit of probing reporters on the beat: “CBI has registered a case against Shri Prannoy Roy, Ms Radhika Roy, a private company and others for causing an alleged loss to Bank. Searches are being carried at 4 places including Delhi and Dehradun. Details will follow.”

The “details” followed. NDTV and Prannoy Roy became breaking news and top Twitter trends for the day.

Some saw this as a conspiracy to muzzle a media house that wasn’t kowtowing to the current Bharatiya Janata Party regime. Others thought this to be the much-deserved dismantling of a kind of journalism that was too soft on the previous Indian National Congress dispensation. Yet others mouthed clichés of allowing the law to take its due course and there being a “prima facie” case against NDTV’s promoters.

Irrespective of the sides one took, there was immense curiosity in the opaque world of NDTV’s financials. By the evening NDTV issued a statement on the raids.

Rupees 48 crore became the buzzword. This sum of money, however, is a minor quibble in the larger complaint of murky transactions worth Rs 403.85 crore that forms part of CBI’s first information report.

They who must not be named

On April 28, 2017, Sanjay Dutt — a former financial consultant with NDTV and Director of stockbroking firm Quantum Securities — wrote to CBI Director Alok K Verma ‘humbly requesting’ him to take action on the 15-point allegations he makes against promoters of NDTV, management of ICICI bank and benami persons. The first paragraph of the complaint begins thus:

“…the Complainant (QSL-Quantum Securities P Ltd) craves your leave to submit specific facts relating to the dubious role played by ICICI Bank in acting as a conduit for a “Benami Person” in laundering of funds amounting to Rs 403.85 cr in collusion with Mr Prannoy Roy and Mrs Radhika Roy through a labyrinth of shell companies and a complex web of funds routing with the ulterior motive to create covert controlling interest in favour of the “Benami Person” in a Ministry of Information and Broadcasting licensed news media company, ie NDTV.”

What Dutt is talking about was documented in a 2015 story that Newslaundry broke on Reliance bailing out NDTV’s holding company, Radhika Roy Prannoy Roy Private Limited (RRPR), which now has 29 per cent stake in NDTV.

To cut a long story short, in 2009-10, RRPR received a loan of Rs 403.85 crore from Vishvapradhan Commercial Private Limited (a shell company) which received a loan of Rs 403.85 crore from Shinano Retail (fully owned by Reliance Industrial Investments and Holdings) which, in turn, received a loan of Rs 403.85 crore from Reliance Ventures limited (a subsidiary Reliance Industries). The complainant explains this well in point number 10 in the FIR.

If you thought this was complicated, it gets more so in 2012 as this Caravan piece details. Reliance’s ties with RRPR were snipped with the entry of a third company, Eminent, owned by Mahendra Nahata – a board member of Reliance Jio. In what appears to be a curious deal, Eminent secured the ownership of Vishawapradhan Commercial’s Rs 403.85 crore loan to RRPR for Rs 50 crore.

Remember that the lender in this case has the right to convert the Rs 403.85 crore loan, which RRPR has not paid till date, into 99.9 per cent of RRPR’s equity — effectively, diluting the Roys’ control over NDTV. This means that Eminent can acquire controlling stakes in NDTV any time it wants.

It is because of these circuitous dealings that Dutt urges the CBI to “investigate who is the true owner of” NDTV in his complaint. He compares the murky loan transactions to a “hawala/money laundering route as money has moved across 5-7 entities to eventually reach RRPR…”

But CBI has not (yet) made this aspect the focus of its scrutiny; instead it has said it will investigate the “wrongful gain of Rs 48 crore to the promoters…and a corresponding wrongful loss to the ICICI bank.”

This may simply be because investigating a possible clandestine change of ownership will not fall under the jurisdiction of CBI but the Securities and Exchange Board of India, which has initiated a probe in the case.

But importantly, even if CBI got down to investigating the case of Rs 403.85 crore and the irregularities it throws up, it would have to look into similar transactions in media companies like India TV, News 24 and News Nation – which would lead to Mukesh Ambani or Mahendra Nahata. These are some case in the public domain but as R Jagannathan points out, “funny money is vital to media viability”. How many such cases is the CBI willing to unearth?

Be that as it may, CBI, to close the gaps on this FIR against NDTV will have to look into the loan transactions.

The loss at hand

In 2007, the Roys sought to buy back NDTV’s shares from General Atlantic. To fund this purchase, they set up RRPR that borrowed Rs 501 crore from India Bulls. To cover a part of this loan, they again borrowed Rs 375 crore from ICICI. This loan was contracted at an annual interest rate of 19 per cent but NDTV settled it at Rs 350 crore in 2009. This is known as a “haircut” in banking parlance and is so common for banks to do that even homeowners can negotiate for one-time settlements, more so in a post-slowdown economy. The idea is to get back whatever the bank can before a loan goes bad.

But Dutt’s contention doesn’t rest at the haircut. He asserts that the Roys pledged their entire shareholding as collateral to ICICI without disclosing this to the stock exchanges or SEBI– this is a clear violation of SEBI Act but it is not a criminal offence. SEBI had initiated action against NDTV for failing to issue such disclosures multiple times. It is Dutt’s contention that ICICI could have liquated this marketable collateral instead of settling for a lesser amount. (NDTV’s shares, though, had plummeted from Rs 400 in 2008 to Rs 100 by the end of the year.)

But the larger allegation goes back to the Rs 403.85 loan extended by Vishvapradhan Commercial. This loan, according to Dutt, had landed in RRPR’s account in two tranches – Rs 350 crore in August 2009 and Rs 53.85 crore in March 2010. The first tranche was used by RRPR to pay back ICICI in August 2009 itself – a fact testified by NDTV’s RoC.

Dutt alleges that ICICI knew of this entire transaction between RRPR and Vishawapradhan Commercial and could have recovered the entire loan amount but instead settled for Rs 350 crore.

To put it simply, he is alleging that Roys had the money to pay back ICICI in toto courtesy the Rs 403.85 loan and the collateral in the form of shares, but only paid Rs 350 crore. He also puts ICICI under the scanner – “the bank could have insisted on a complete closure of its loan portfolio…”

It is clear, then, that the investigation into this “willful loss” cannot start and end at NDTV. CBI would have to probe some other powerful people. The complaint doesn’t name names and only refers to ICICI management/officials. But the allegations pertain to the tenure of then Chairman of ICICI KV Kamath – who is currently the chief of the New Development Bank of BRICS countries. (It is worth noting that Kamath was the intermediary between the warring Ambani brothers during the high-profile Reliance split.)

CBI will also have to question the “benami party” that gained “covert control” of NDTV. That fuzzy trail points to Eminent and Reliance Industries Limited, whose chairman, Mukesh Ambani, is one of India’s 25 greatest global living legends, according to NDTV. Indeed the caged parrot will really have to break free and soar high to crack this one.

The author can be contacted at manisha.pande1110@gmail.com and on Twitter @MnshaP