In a severe rebuke to Dish TV promoters, a majority of its shareholders has voted against the reappointment of managing director (MD) Jawahar Lal Goel and two other directors at its extraordinary general meeting (EGM). The development is a major victory for Yes Bank, the largest shareholder in Dish TV with a 25.63% stake, which had been trying to oust Goel from management and reconstitute its board since September 2021. Special resolutions. such as the ones presented by Dish TV, require 75% of minority shareholders to vote in their favour. Almost 79% of shareholders voted against the resolution to reappoint Mr Goel as MD of the company, while 21% voted in favour.
For the first time since Dish TV’s founding, the promoter group led by Jawahar Goel will not be in control of its management. However, he will remain a non-executive director on the board, according to the EGM voting results filed by the firm.
The development comes after the Bombay High Court (HC) comprising justice GS Patel and justice MJ Jamdar thwarted an attempt to prevent Yes Bank from voting and dismissed a petition filed by World Crest Advisors (a promoter entity of Dish TV). The HC upheld last week’s order of a single bench judge of the HC allowing Yes Bank to vote at the EGM saying, in an oral order, “In our view on equitable consideration, World Crest has made out no case.”
The promoter group entity of Dish TV had filed a plea and sought to restrain Yes Bank, a shareholder of the company, from exercising its voting rights over shares held by the Bank. World Crest, in its petition, had sought to be declared the owners of more than 440 million shares (nearly 24.19% stake) of Dish TV, which were pledged in favour of Catalyst Trusteeship (a security trustee for the shares that were pledged to Yes Bank).
According to World Crest, these shares were pledged in lieu of term loans provided by the Bank to various Essel group companies and lenders and pledgees were not the owners of shares and could not exercise voting rights. However, Yes Bank believed it was the owner of the shares.
The lender argued that World Crest's petition was an attempt to stall its participation in the EGM and that as per the deed of pledge, as a nominee of Catalyst, Yes Bank is entitled to exercise voting rights.
Dish TV is a part of Essel group and run by Mr Goel, Zee group patriarch Subhash Chandra’s brother, with the promoters holding a 5.93% stake in the firm.
Dish TV has been locked in a dispute with Yes Bank since last year over ownership issues in the company. Yes Bank had acquired Dish TV's shares after invocation of pledge subsequent to default/breach of terms of loan by the company.
Yes Bank had been seeking a management change at Dish TV for some time while accusing five directors, including Mr Goel, of corporate governance issues.
Yes Bank has claimed all along that it had extended loans of Rs5,270 crore to 10 different Essel group entities between 2015 and 2018, against shares pledged by promoters of the group. Due to repayments issues, it had, subsequently, taken ownership of these shares. This included Dish TV, where it is the largest shareholder of the company.
On 20th June, Yes Bank had voted on the resolutions, including reappointment of Jawahar Goel as MD; Anil Dua as a whole-time director; and Rajagopal Venkateish as a non-executive independent director.
Darius Khambata, Yes Bank’s counsel, highlighted that while there have been eight attempts to deny the lender its right to vote, there has been no attempt or no effort so far to redeem the shares of which Yes Bank is now a beneficial owner.
The HC held that World Crest's argument that Yes Bank cannot exercise voting rights will lead to an unviable and thoroughly inequitable situation. "What we are asked to infer is that the recording of Catalyst's name as the beneficial owner resulted it in having certain severely curtailed rights as a shareholder or member. We find it difficult to accept this proposition." the HC said.
"Those rights which Catalyst or its nominee Yes Bank is now exercising can be be brought to an end if World Crest's exercises its right to redeem," the court said. "It seems to us that World Crest's case however long on legal arguments, is remarkably short on any equitable principle," the HC order noted.
”World Crest refuses to redeem a pledge. The law is clear that without Catalyst's express approval, it cannot force the sale of the security. Yet at the same time, it now wants to contend that the security should count for nothing but so much waste paper and be entirely notional. Catalyst cannot be compelled to sell. World Crest will not redeem. In the meantime, Catalyst can do nothing. Once an entity is shown as a beneficial owner [of shares], it is so for all purposes,” the HC order stressed.
The Court also dismissed World Crest's interpretation of the Supreme Court's recent ruling in the PTC Financial case. The Supreme Court's ruling in PTC Financial does not, as World Crest would have it, create a new or subsidiary class of company members or shareholders. The argument by World Crest is one that leads to the creation of a distinct class of beneficial owners, i.e., shareholders with significantly diminished rights because they are pledgees, the HC noted.
The HC’s division bench of justices Gautam Patel and Madhav Jamdar heard the case on Thursday after World Crest was earlier denied interim relief by the single judge bench of justice AK Menon.