A merger between the DTH arms of Videocon NSE 4.76 % and Essel groups, which took place in March 2018, is now the subject of a legal dispute in the Delhi High Court.
In a case filed on 31 August of 2018 a Videocon group company has claimed that Essel group unlawfully invoked pledges on certain Videocon D2H shares that were placed in their custody. The Dhoots and Chandras are related to each other by marriage. Further, Videocon has levelled serious allegations against a company called Nityank Infrapower and Multiventures, which is at the heart of the legal dispute, as per documents filed in the High Court.
The legal tussle between Essel and Videocon started after Nityank approached NCLT to prevent allotment of shares to Videocon group company Domebell in the merged Dish TVNSE -0.93 % entity on the grounds that it had a pledge on Videocon D2H shares owned by Domebell. Nityank claimed the shares should be allotted to itself.
Domebell and a group of other Videocon companies such as Electroparts later approached the Delhi high court on 31 August this year claiming that Nityank is an Essel group company and had unlawfully invoked a pledge on Videocon D2H shares that were placed as security with it in the event a merger with Dish TV were to fall through.
It sought an injunction from the court restraining the allotment of shares to Nityank in the merged Dish TV entity.
The Delhi high court granted the stay which was valid till 09 September. The case is pending further hearings.
The Videocon group company claimed that Nityank made an advance payment to Dhoot-owned firms on behalf of Essel as part of an agreement by which the Dhoot’s would sell their shares in Videocon D2H at a pre-agreed price of Rs. 106 per share to Essel. This payment was made by subscribing to debentures of a company nominated by the Dhoots.
This share purchase transaction that was agreed would ensure that the Dhoots would own less than 20% stake in the merged D2H-Dish TV combine.
Further, Domebell and other Videocon group companies claimed that to safeguard the advance payment, Essel took D2H shares as security which were placed in Nityank’s custody so that these could be usurped by Essel if the merger were to fail.
While Videocon claims that Nityank a company that is reportedly being probed by the authorities for depositing over Rs 3,000 crore of cash during or after demonetisation, is associated with Essel Group, this is denied by Essel.
SFIO probe
The SFIO is investigating companies that made huge cash deposits and withdrawals during and soon after demonetization. The ministry of corporate affairs (MCA) has asked the Serious Fraud Investigation Office (SFIO) to probe 57 shell companies on the basis of reports by regional directors of the office of the Registrar of Companies (RoCs).
A Times of India news report dated 31 July 2018 stated Nityank Infrapower and Multiventures (formerly known as Dreamline Manpower Solutions) had come under the scrutiny of the fraud watchdog after it deposited and withdrew large amounts of cash with Yes Bank in the aftermath of demonetization.
Sources close to Nityank Infrapower and Multiventures claimed the transactions were ‘legal’ and SFIO has been provided relevant explanations though the company did not respond to official queries from ET.
Official sources confirmed that SFIO’s investigation into Nityank under section 216 of the Companies Act was still active.
MCA, in a written reply to a parliamentary question, had mentioned Nityank Infrapower and Mutiventures as one of the companies that is being investigated for alleged fraud.
Essel group denied any association with Nityank Infrapower and Multiventures Limited in an official response to emailed queries from ET. “Nityank Infrapower and Multiventures Ltd. is not an Essel Group Company and all the allegations are completely baseless and infructuous,” a spokesperson for Essel group said in its response.
But the Videocon group has a different version, according to court filings that ET has reviewed.
In a letter written to the SFIO on July 2, 2018 and subsequently submitted to the court, Videocon group company, Hindustan Oil Ventures (HOV) has said that Nityank Infrapower and Multiventures subscribed to its debentures worth Rs. 1626 crore on behalf of the Essel group as advance payment for the shares that the Subhash Chandra group was buying in the Videocon D2H business.
Nityank role
In addition, Hindustan Oil Ventures claimed that it entered into back to back share purchase and “letter agreements” at the time the merger was being negotiated with Essel. As per the agreements, Essel and Videocon would nominate a company each to facilitate the transfer of the advance payment.
Further, Nityank’s filing with the Registrar of Companies (ROC) show that it had provided security for loans worth approximately Rs. 1600 crore taken by three Essel group companies – RPW Projects, Pan India Network Infravest and Mumbai WTR in 2017 It furnished HOV debentures as security for these loans.
Videocon and HOV did not respond to ET’s queries.
Source: Economic Times