The boardroom battle between satellite TV service provider Dish TV and Yes Bank, its largest shareholder with a 25.63 percent stake, took another turn on November 30, when the Supreme Court stayed criminal proceedings initiated by the police against the lender’s officials.
Last week, the Uttar Pradesh police’s Gautam Buddha Nagar Crime Branch issued a notice freezing Yes Bank’s voting rights in Dish TV, operated by Subhash Chandra’s Essel Group. This came ahead of Dish TV’s annual general meeting scheduled on November 30, which the company has postponed to an as yet unannounced new date.
Why did the UP police freeze Yes Bank’s voting rights in Dish TV?
Subhash Chandra filed a complaint at the Gautam Buddha Nagar police station in September last year, alleging that Rana Kapoor, the former MD and CEO of Yes Bank, had threatened to call back a loan given to the Essel Group unless he agreed to a merger between Dish TV and Videocon D2H.
The Gautam Buddha Nagar Crime Branch issued a notice dated November 5 restricting Yes Bank from dealing in and/or exercising any rights over 445.3 million shares of Dish TV that it held until the completion of the investigation or further orders.
What are Chandra’s allegations against Rana Kapoor?
In his complaint, Chandra said he succumbed to Kapoor’s demand to merge Dish TV and Videocon D2H after the former Yes Bank boss threatened to recall a Rs 3,300 crore loan advanced to the Essel Group, according to a Mint report.
Chandra said the Essel Group also took a $50 million (Rs 375 crore) loan for which Yes Bank took a letter of comfort from Zee Entertainment MD and CEO Punit Goenka in 2016. According to Chandra, Yes Bank promised that the letter would not be taken as a guarantee or undertaking and that the bank would try and write off the loan over 10 years if Chandra agreed to the Dish TV-Videocon D2H merger.
In an open letter dated January 25, 2019, Chandra apologised to Jawahar Goel, managing director of Dish TV, who is also his younger brother. In the letter, Chandra said, “My recommendation made to my brother Jawahar Goel to buy D2H from Videocon was one more key error, which cost me and Jawahar both, a fortune.”
What did the SC say in its ruling and what does it mean?
A bench of Justices DY Chandrachud, AS Bopanna and Vikram Nath heard the Dish TV-Yes Bank case on November 30 and pulled up the UP police for freezing Yes Bank’s voting rights, saying the use of a criminal process to achieve results of civil proceedings would be dangerous.
The apex court’s ruling was crucial for Yes Bank because the lender would not have been able to vote at the AGM that was scheduled on November 30.
Yes Bank had moved the Supreme Court after the Allahabad High Court dismissed its petition to quash Chandra’s complaint.
The Allahabad court’s order became a cause of concern for private lenders who said the freezing of voting rights by the police would have set a precedent that could have stopped them from exercising their rights as lenders.
If Chandra’s complaint that the Essel group was forced to take a loan was admitted, then all business groups that have run into financial difficulties could blame banks, a retired State Bank of India executive said in an interview to Mint.
Experts noted that the Dish TV-Yes Bank case would have not only decided the fate of the two companies but would have also affected cases where banks are fighting with defaulters for control over collateral shares.
Why was the Dish TV AGM important?
Yes Bank had demanded the reconstitution of the Dish TV board, alleging that the directors were not acting in line with good corporate governance standards.
Yes Bank had issued notices for the removal and appointment of directors on the Dish TV board on September 6. Resolutions for the removal and appointment of directors were to have been placed by the company before its shareholders at the AGM, which had first been scheduled for September 27.
However, Dish TV sought more time to convene the AGM and postponed it for two months. The company said in an exchange filing on November 7 that the AGM would be held on November 30.
What changes is Yes Bank seeking on the Dish TV board?
Yes Bank has asked for the ouster of MD and director Goel, along with the removal of Rashmi Aggarwal, Bhagwan Das Narang, Shankar Aggarval and Ashok Mathai Kurien.
The lender sought the appointment of Akash Suri, Sanjay Nambiar, Vijay Bhatt, Haripriya Padmanabhan, Girish Paranjpe, Narayan Vasudeo Prabhutendulkar and Arvind Nachaya Mapangada as new independent directors.
What is the significance of the Yes Bank-Dish TV battle?
The tussle between Dish TV and Yes Bank is similar to one faced by Zee Entertainment, another Essel Group company. In both cases, key shareholders have sought board changes. Invesco and OFI Global, the largest shareholders of Zee Entertainment, have suggested changes in the company board.
“I do believe a good level of responsible shareholder activism is good to keep in check both the management and the controlling shareholders, protect the interests of the minority shareholders, and I see this as good for the Indian corporate governance ecosystem,” Krishnakumar Natarajan, a cofounders of IT company Mindtree said in an earlier interview to CNBC-TV 18 on the two corporate battles.