With the annual general meeting of Dish TV only five days away, the promoters of the direct-to-home satellite service have filed yet another case in Bombay High Court, hoping to stop YES Bank from exercising voting rights on its stake of over 24%.
This is the fourth major legal challenge put in front of YES Bank over the last few days, seeking to prevent it from voting at Dish TV’s annual general meeting.
The latest move comes within hours of challenge No.2 and 3 failing. Challenge No.1, in the form of a directive by a police station in Uttar Pradesh, had already been quashed by Supreme Court earlier this month.
The fourth and the latest challenge is in the form of a petition in the Bombay High Court alleging that YES Bank broke India’s takeover code when it invoked the pledges of Dish TV promoters.
Dish TV promoters had pledged a large chunk of their shares with YES Bank as collateral security for a loan. When the promoters failed to pay back the loan, YES Bank invoked the pledges several weeks ago, resulting in the transfer of the asset (shares) to YES Bank.
Now, the promoters are arguing that YES Bank’s invocation of the pledges broke SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.
Under SEBI Substantial Acquisition of Shares and Takeovers Regulations, 2011, any company or entity that buys 25% or more of the shares of another company has to make an ‘open offer’ to buy shares from the public as well.
It is not immediately clear if this rule would have applied to YES Bank, given that the first shareholding pattern released by Dish TV after the invocation of the pledges show YES Bank owning only 24.78% of Dish TV’s shares, below the trigger point of 25% (see chart above).
The exact argument made by Dish TV promoters, the Subhash Chandra family, in the petition is not known.
However, the plea is to stop YES Bank from exercising its voting rights on the shares its owns in Dish TV.
The move can be seen as a last-ditch effort by the promoters to keep control of the direct-to-home satellite broadcaster.
It comes within hours of the Bombay High Court dismissing another petition by the promoters alleging that YES Bank’s shares actually belong to it, and not to YES Bank.
The Bombay High Court refused to issue a stay on YES Bank exercising its voting rights based on these arguments.
OBSTACLES GALORE
In the last six weeks, YES Bank has also faced other challenges thrown in its way of exercising control over Dish TV.
One was in the form of a directive issued by a police official in NOIDA, Uttar Pradesh, which said that the police was seizing control of YES Bank’s shares in Dish TV, and YES Bank cannot exercise control over these. This directive was quashed by the Supreme Court.
Soon after Supreme Court quashed that notice, a suit was filed in front of the National Company Law Tribunal which sought, among other things, a stay on Thursday’s annual general meeting. The petitioners alleged that YES Bank voting in the AGM would abridge their rights.
This too was dismissed by the NCLT yesterday, more or less at the same time as Bombay High Court dismissed the promoters’ plea to stop YES Bank from voting in the AGM based on the claim that they were still the owners of the shares.
CRUCIAL AGM
The annual general meeting of Dish TV was originally scheduled to be held in September.
However, when the AGM notice was issued, YES Bank, as the biggest shareholder, said it would table a resolution at the meeting seeking shareholders’ approval to have practically the entire Dish TV board of directors removed and replaced.
When Dish TV received this intimation, it postponed the annual general meeting to November, claiming that it needed “sufficient time to evaluate, analyse and ensure compliance of regulatory and other approvals” for any change in directors.
It postponed the AGM once again in November, but is unlikely to be able to do so this time, given that the ministry of corporate affairs has not allowed it to push the AGM for the third time.
The promoters, therefore, need to win over at least 44% of the total shareholders if they are to defeat YES Bank’s proposal to bring the company under a new board of directors. The only other way is to either postpone the AGM again, or to prevent YES Bank from exercising its voting rights on its shares.