On Monday, the Central Bureau of Investigation raided the home and some other premises associated with New Delhi Television founders, Radhika Roy and Prannoy Roy. The searches stemmed from a First Information Report it filed on Friday. This FIR was based on a complaint by Sanjay Dutt, a director of a firm named Quantum Securities Limited, which holds minority stakes in NDTV Ltd and ICICI Bank.

The FIR entirely reproduces Dutt’s complaint dated April 28. It is not clear whether the FIR was filed only on the basis of the complaint or if the CBI independently conducted a preliminary investigation to establish a prima facie case to warrant a raid on the media house, which is perceived to be a critic of the ruling Bharatiya Janata Party government.

In a statement on Tuesday, the CBI claimed that it had “registered the case based on the complaint of a share holder of ICICI bank and NDTV after carrying out due diligence”. It added that it “fully respects the freedom of press”.

The complaint contains a slew of accusations against NDTV and ICICI Bank. In its statement on Tuesday, the CBI said that the investigations pertained to an allegedly wrongful gain of Rs 48 crore that the Roys made by purportedly colluding with officials of ICICI. Banking regulations were allegedly violated when the bank took a 61% stake in NDTV held by the Roys as security for a Rs 375-crore loan and reduced the interest payable from 19% to 9.5%.

QSL’s Dutt claimed that this contravened Reserve Bank of India regulations, which state that banks cannot take more than a 30% stake in a company as collateral.

NDTV, in a statement on Monday, denied these charges and said it had repaid the loan more than seven years ago. It also pointed out that courts have previously rejected the same allegations.

On the question of how the CBI could intervene and file cases under the Prevention of Corruption Act given that ICICI is a private bank and the alleged loss in the transaction had not hurt the state, the investigating agency said:

“It is clarified that the Honourable Supreme Court in the case of Ramesh Gelli vs CBI of 2016, held that the provisions of Prevention of Corruption Act, 1988 are applicable to the officials of private banks. Therefore, CBI has jurisdiction to take up investigation of the cases of private banks.”

However, banking officials that Scroll.in spoke to said that the allegation of a discount on amount repayable to a bank may be difficult to prove as a criminal act, particularly in a situation where illegal gratification is not established.

The loan

The genesis of the allegations against NDTV goes back to 2007-’08, when the promoters decided to make an open offer to buy back some of the company’s equity from minority stakeholders. To finance this operation, NDTV took a loan of about Rs 500 crore from India Bulls Private Limited. This loan was made to a new entity, Radhika Roy Prannoy Roy Holdings Private Limited, or RRPR Holdings Pvt Ltd, created by the Roys.

But in 2008, media houses across the world were severely affected as advertising revenues began to dry up after the American subprime crisis. As this Caravan piece pointed out, just after NDTV’s open offer, the subprime crisis sunk its share price to Rs 100 in October 2008 from Rs 400 just five months earlier. This may have led to increased pressure from India Bulls to have its debt repaid.

In order to repay the loan, NDTV decided to approach ICICI Bank, which agreed to lend Rs 375 crore in October 2008. The security for this loan was the total promoter holdings of the Roys in NDTV and the shares held by RRPR Holdings Pvt Ltd, which amounted to 61% of the media company’s total voting capital. The loan carried an interest rate of 19%. By the end of 2008-’09, RRPR Ltd owed ICICI Rs 366.48 crore including interest.

In the meantime, RRPR Ltd got an interest-free zero coupon convertible loan of Rs 403.85 crore from Vishvapradhan Commercial Private Limited – or VCPL – to repay ICICI. A zero coupon convertible loan is one on which no interest is charged but the holder has the right to convert the coupon value into shares at a future date.

It was at this stage that the name of Mukesh Ambani’s Reliance Ventures cropped up.

Dutt alleged that VCPL received this 403.85 crore loan from a company named Shinano Retail Private Limited, which in turn received the money from Reliance Ventures Limited in 2009-’10. Since VCPL offered the loan to RRPR Ltd on a zero coupon basis and as RRPR Ltd owns 29.2% of NDTV, VCPL would effectively become the holder of these stakes if it decided to convert the loan into shares. The complaint alleged the Rs 403.85 crore was transferred by VCPL in two tranches –August 2009 and March 2010 – to RRPR Ltd.

The FIR alleges that the entire transaction was a dubious one to effect the ownership change of NDTV as the transfer of Rs 403.85 crore was just an excuse to cover up what was basically a buy out of shares using the zero coupon loan.

Pending interest

The CBI’s FIR does not dispute the fact that RRPR Ltd and the Roys paid back the loan to ICICI. This is established through an email communication ICICI sent in 2009, where it clearly states there was no pending amount.

However, Sanjay Dutt of QSL has claimed in his complaint that ICICI failed to recover the full principal amount and a large sum of interest on the loan it gave the Roys, which accumulated between March and August 2009.

Despite ICICI’s communication that the loan has been paid back in full, the balance sheets of RRPR Ltd still show an outstanding loan of Rs 4 crore, for which, the complaint points out, interest has to be charged at the original rate of 19%. As per the complaint, the loss from failure to recover the interest amounts to Rs 48 crore.

Essentially, the complaint alleged that ICICI officers and Roys hatched a conspiracy to defraud the bank of Rs 48 crore.

Interest discount

Banking officials that Scroll.in spoke to said in the absence of clear evidence to prove that a bank discounted the interest payable in return for some illegal gratification, it would be hard to make a solid case against ICICI.

CH Venkatachalam, general secretary of the All India Bank Employees Association, who has in the past compiled exhaustive lists of major loan defaults in nationalised banks, said that offering a discount on interest has become a common practice in some banks to tide over the so-called Non-Performing Assets crisis that has been caused by some corporations failing to repay enormous loans. (As of June 2016, the top 20 defaulters owed public sector banks Rs 1.54 lakh crore.)

Venkatachalam said if banks were sometimes willing to make concessions if they believe they would be able to recover a loan immediately at a discounted interest rate rather than facing the risk of a loan going unpaid at the original terms. “I am not too sure if this is illegal but this is clearly immoral,” he added.

CBI’s role

Since the FIR reproduced Dutt’s complaint, which contains several allegations, including money laundering, apart from the interest loss to ICICI, it was not immediately clear which part of the complaint the CBI was pursuing. Even its statement on Tuesday leaves the matter suitably vague.



Secondly, the CBI and other investigating agencies such as the Enforcement Directorate have made a habit of concealing the identity of officials involved in crimes, arguing that FIRs are only preliminary reports to launch the investigation and need not contain all information for prosecution. If government officers are involved in the conspiracy, the specific names would be revealed in the charge sheet that would be eventually filed. This may explain why the CBI has not identifed the persons in charge of ICICI and its credit committee who sanctioned the lower rate of interest.

Strange silence

Curiously, the CBI has not named either Reliance Ventures or the other companies accused of being shell companies to effect a camouflaged ownership change of NDTV. In the statement it released on Tuesday, the CBI said it was investigating the conspiracy that led to the loss of Rs 48 crore to ICICI. It does not, however, expressly state that the charge of illegally effecting an ownership transfer at NDTV is being investigated.

If this aspect is not being investigated, questions are bound to be raised on the motives of the raids, which seems to target NDTV alone and not the shell companies alleged to have been controlled by a big business house.

It is important to note that RRPR Ltd still owes VPCL the Rs 403 crore loan amount. In 2011-’12, the rights over this loan were moved to Eminent Networks, a media company that has invested in multiple television channels and has links to Mahendra Nahata, a board member of Reliance Jio. Therefore, the rights to convert the original zero coupon loan given to RRPR could actually be held by Eminent Networks at the moment.

The CBI has also not explained the timing of the raids, which has happened almost a decade after the original transaction.