Dish TV’s independent directors (IDs) BD Narang, Rashmi Aggarwal, and Shankar Aggarwal have hit back at market regulator SEBI for not giving them a hearing before passing an order on March 7 to freeze their demat accounts. SEBI member SK Mohanty had passed an ex-parte interim order on March 7 to freeze the demat accounts of the three IDs since the company failed to disclose the voting results of an annual general meeting (AGM) held on December 30, 2021. Replying to SEBI’s interim order, the three IDs told the regulator that it was against the principles of natural justice since they were not giving a hearing. Legal experts say that ex-parte orders by SEBI have often come under heavy criticism by the courts, which on several occasions has asked the regulator to use the powers sparingly or in grave instances involving market manipulation. An ex-parte injunction is mainly a direction/command to restrain, granted after hearing only one party in matters of ‘urgency’, without a notice to the other parties involved. A full hearing is held at a later date.
The 41 page reply by the IDs to SEBI includes annexures and earlier court judgments to show that the regulator had missed following the principles of natural justice. It states that SEBI’s ex-parte order had gone against the spirit of the regulator’s own circular issued on January 22, 2020, which said that a 10 days’ notice should be given by the regulator before freezing the demat accounts of any company promoters. In this case, SEBI froze the demat accounts of Dish TV Independent directors without even giving them any hearing or a notice of even a single day.
SEBI had issued two advisories to the company to disclose the results of the AGM. But DishTV had been citing its application and case in the Bombay High Court to avoid disclosing the results. The IDs have now told SEBI that the communications between SEBI and DishTV were out of their knowledge since the same were presented to the board either by the regulator or the company. Hence, to hold the IDs responsible for the non-disclosure of the AGM results without giving them a hearing shows a poor judgment on part of SEBI, legal advisors close to the IDs told Business Line. IDs have told SEBI that as stipulated by several pronouncements of SEBI, SAT and higher courts, the non-executive IDs cannot be held liable for alleged violations committed by the company without their knowledge, consent, connivance or negligence. The March 7 SEBI order had asked Dish TV to disclose the AGM results in 24 hours and gave a post order hearing opportunity to the IDs.
Dish TV has now disclosed the results of the AGM as directed by SEBI, the reply by the IDs said. “IDs were first informed of the SEBI advisory to DishTV before the conduct of the company’s board meeting on February 14. They were also informed that the management has already replied to SEBI vide letter dated January 18 and February 10, 2022 in line with the legal advice received. The IDs, after the application of mind, in discharge of their fiduciary duty and in view of the explanation given by the management, felt that since replies to SEBI had already been issued, it would be prudent to await the final response of the regulator,” the reply by IDs to SEBI states. To pass the strictures against the IDs, the SEBI had ordered said, “ The company has shown a blatant disrespect for the law by not disclosing the outcome of the AGM held on December 30, 2021. Such disregard to the law of the land has further continued with nondisclosure of the first advisory and delayed disclosure of the final advisory issued to it by Sebi. In fact, I find that not even the subsequent clarification from the honourable Bombay High Court in this regard could make the company disclose the voting results of the AGM. The Hindu BusinessLine