SC allows Yes Bank to vote in Dish TV’s AGM

The police here did what even the National Company Law Tribunal did not do (freeze shares and voting rights)”.

In a big relief to Yes Bank, the Supreme Court on Tuesday stayed the Uttar Pradesh Police order that directed freezing of the bank’s voting rights in the Essel Group-owned Dish TV India’s stake.

As part of its investigation into the criminal complaint filed against Yes Bank by Essel group founder Subhash Chandra, the UP police had on November 5 frozen the voting rights on Yes Bank’s stake held in Dish TV India and also restrained the lender from transferring the 44.53 crore shares or to exercise rights in respect of the shares “till completion of investigation or further orders”.

Essel Group-owned Dish TV India had on Monday night announced that it has postponed its annual general meeting, scheduled for Tuesday, by a month.

Deprecating the practice of short circuiting judicial orders using police force, a bench led by Justice DY Chandrachud said that using criminal procedure to achieve results of civil proceedings will have dangerous consequences and “we have to look at the overall consequence”. It stayed the criminal proceedings against Yes Bank and sought response from the UP government, Chandra and others.

Stressing upon the need to protect rights of lenders, it took serious exception to police action in a corporate matter, saying “we cannot permit police officers sitting in Gautam Buddha Nagar to freeze voting rights of a shareholder.

The police here did what even the National Company Law Tribunal did not do (freeze shares and voting rights)”.
“Prima facie, at this stage, we are of the view that it would be necessary to protect the interest of the petitioner (Yes Bank) in respect of the pledged shares, the pledge having been admittedly invoked. Hence, we issue notice and direct that, pending further orders, there shall be a stay of the operation of the impugned notices dated November 5, 2021. There shall also be a stay of further proceedings in connection with FIR dated September 12, 2020, lodged at Police Station Noida Sector 20,” the order stated.

The apex court also posted the matter for further hearing on January 12. Yes Bank had moved the SC after the Allahabad High Court’s November 25 order that dismissed its petition seeking to quash the FIR filed by Chandra.

Senior counsel AM Singhvi and counsel Raunak Dhillon, appearing for Yes Bank, termed police notice as an “extraordinary ingenious misuse of the criminal process” to restrain the lender from exercising its rights under the pledged shares. He said that police officer freezing rights of a bank was bizarre, misuse of criminal law and beyond jurisdiction. He argued that such notice came just ahead of the AGM only to prevent the bank, which is the largest shareholder, from voting in the AGM. He said that the other side feared that if the lender may vote to change or refuse to reappoint directors during the AGM. 

Stating that the entire proceedings have been initiated at the behest of Chandra, who is in no way concerned with the loan facilities and has no executive role with the borrowers, Singhvi submitted that the civil proceedings were withdrawn earlier this year, but the FIR continued to remain pending since August last year. “State machinery has and is being misused to prevent the bank from making legitimate recovery efforts in respect of thousands of crores of public monies,” the petition stated. 

Opposing any stay, senior counsel Kapil Sibal, representing Chandra, argued that there was neither a genuine loan transaction nor a valid pledge of shares in favour of the bank. He said it was “tainted” loan transaction between the bank and Dish TV and the company was pressurised into taking a loan in order to “clean the books of Yes Bank.” 

Sibal also claimed that Yes Bank doesn’t want to sell the pledged shares as it has been sitting on them for the last 18 months and just wants to take over the company for someone else. 

Yes Bank had disbursed loans of Rs 5,270 crore to Essel group and its sister concerns between 2016 and 2018. The bank acquired a 24.5% stake in Dish TV after its promoters failed to repay their debt and a pledge of Rs 42 crore was invoked.

BSE, NSE and RBI were informed about such invocation in early 2020. In September last year, Chandra filed a police complaint against the bank and its former management led by Rana Kapoor, accusing them of fraud while brokering a merger deal between Videocon D2H and Dish TV India. The matter being investigated by the UP police.