CORPORATE

GOVERNANCE & ETHICS

GROUP ASSIGNMENT
Yes Bank and Dish TV India Ltd. Case
Solution

Submitted by Group 5:

Rahul Choudhary - 200301017

Simranjeet Singh - 200301020

Shubhi Vohra - 200301030

Vivek Kumar - 200301025

1. Create a chronology of events.
• Pledger’s create a pledge in favor of the security trustee for the benefit of the bank on April
28, 2018 via a deed of pledge.
• The Pledger’s created a pledge in favor of the security trustee for the benefit of the bank on
July 5, 2018 via a deed of pledge.
• The Pledger’s created a pledge in favor of the security trustee for the benefit of the bank on
October 5, 2018 via a deed of pledge.
• 06/05/2019: Amended and supplemented deed of commitment, as amended and restated.
• July 24, 2019: YES Bank Ltd sent a letter to the various Essel group companies (“the
Borrowers”), as well as World Crest Advisors LLP and Direct Media Distribution Ventures
Private Limited (“the Pledger’s”), requesting payment of the outstanding amount owed to the
bank, failure to which would result in the bank exercising its right to the pledged shares.
• Acquisition of 44,53,48,990 pledged shares of Dish TV equal to 24.19 percent of paid-up Share
Capital of Dish TV due to default of payment obligations on May 29, 2020 – Yes Bank informs
SEBI under LODR
• Dish TV writes to Yes Bank on May 31, 2020, declaring that Yes Bank's statement "Shares
obtained on invocation of pledge subsequent to default/breach of terms of loan" is false. As
of the date, Dish TV had not defaulted on any payment obligations to Yes Bank, and the
promoters had not pledged any shares. Any change in the equity structure of a DTH License
Holder corporation needs regulatory approval (MIB).
• 1 June 2020 – Dish TV informs SEBI and Yes Bank of mistakes in their disclosure and their
correspondence informing them of the same.
• On June 5, 2020, YES Bank Ltd sends a clarification letter to the NSE and BSE in response to
Dish TV India Ltd.'s letter dated May 31, 2020, seeking that the stock exchanges take the letter
under consideration on the books. In the letter, YES Bank admits to making an unintended
error in particulars at point 4. However, it notes that the same can be interpreted as details
contained in its disclosure's point number two. In addition, the bank clarified point 2 of the
Dish TV letter, stating that the shares were invoked pursuant to the Pledger’s' pledge, i.e., the
Pledge agreement.
• On 24 July 2019 - Borrowers (Essel Group Companies) and Pledgers (World Crest Advisors
and Direct Media Distribution Ventures Private Ltd.) were notified by Yes Bank that they
owed the bank money.
• Pledge of deed in favour of security trustee for the benefit of the Bank: 28 April 2018, 5 July
2018, 5 October 2018, repeated on 6 May 2019.
• On June 19, 2021, Yes Bank writes to Dish TV Board
• Cease and desist from proceeding with rights issue, which would result in a dilution of 25.63
percent of the bank's equity
 • The board does not represent the minority promoters fairly, and the board members act at
the request of the minority promoters. The bank proposes to appoint three directors to the
board.
• On June 21st, the board of directors of direct-to-home Company Dish TV India approved
raising up to 1,000 crores through a rights issue in one or more tranches.
• Yes Bank writes to Dish TV on June 25, 2021.Addition of two directors to the Board of
Directors in accordance with Section 161; and not to proceed with the rights issue without
prior approval.
• DTIL Board meeting on June 30, 2021.
• Yes Bank writes to SEBI on July 7, 2021: District Court Delhi prohibits the bank from selling
shares. DTI's board unfairly represents banks and other financial institutions. Proposed rights
issue a step to dilute bank equity and defeat attempts to recover amount. Request SEBI to
reconstitute the DTIL board, maintain status quo on rights issue.

2.Enumerate the relationship between the

company, bank, and promoters.
• •After acquiring 44.54 crores in pledged shares from Dish TV promoters, yes bank holds a
24.19 percent stake in Dish TV India Limited (DTIL), making it the company's single largest
stakeholder.
• Mr. Jawahar Goel, promoter and managing director of Dish TV, had pledged a "significant
percentage" of his ownership in the company as security for the Essel group's credit facilities.
• Mr Jawahar Lal Goel, stake was reduced to 7.3 percent of the company from 55 percent in just
over a year.

3.Why is the bank objecting to the rights issue

proposed by the company?
• The bank thinks that the Board is issuing rights to erode the bank's rights/equity and
undermine the rights of the bank and other significant shareholders.
• Dilution of the bank's ownership percentage will make it harder for the bank to collect its
debts.
• The Bank is no position to sell its holdings on account of ex-parte ad interim orders passed
by the district court, Saket, New Delhi.
 • Bank is a majority shareholder and company is taking the decision without the consent of the
bank.
• As the company's single largest shareholder, the Bank should have a role in the issue of rights
and other critical decisions, and the Board of Directors should not approve any plan that
might dilute the Bank's ownership without having representation from the Bank on the Board.

4.Is the company liable or accountable to the

bank? Explain.
As the company has not received any loan from Yes Bank, nor has the Board consented to any of Yes
Bank's terms and conditions for the loan obtained by the founders. The firm DTIL is neither liable nor
accountable to the bank; nevertheless, the company is answerable to its shareholders, the largest
single shareholder of which being Yes Bank. The Company is solely liable to the degree that it is
accountable to its shareholders as a whole.

5.Can the company raise rights issues against

the consent of the bank?
It is not clarified in the Companies Act, 2013, that members' approval is required or that only Board
approval is needed for the issuance of shares under rights issue. As a result, shares under rights issue
can be issued by passing a Board Resolution or by obtaining permission from members in a General
Meeting.

In this situation, the Bank is challenging the Board's composition and seeking the appointment of two
nominee directors, and the issue of the Bank's ownership is unresolved (in arbitration), therefore the
firm should first settle this problem before proceeding with the issuing of rights.
6. What is the basis of the grounds on which
management can justify raising rights issues?
The management is allowed by the law to raise rights issue for the company if it so desires. The
management feels the rights issue is currently the most viable way to raise money for the company.

• A rights issue is issued when a firm needs money for several reasons. The technique enables
the company to raise capital without having to pay underwriting costs.
• Current shareholders are given preferential treatment in a rights issue, which gives them the
choice to acquire shares at a reduced price on or before a particular date.
• Current shareholders can also trade with other market participants until the new shares are
available for purchase. The rights are traded in the same manner as normal equity shares.
• The number of additional shares that owners can buy is usually proportionate to their present
ownership.
• Current shareholders may choose to disregard the rights; but, if they do not acquire new
shares, their existing shareholding will be reduced when the fresh shares are issued.

Q7. What are the duties (refer to Sec 166 and Sch.
4 of Companies Act, 2013), role, and
responsibilities of BoD towards the bank and the
shareholders?
Ans7-According to Section 166 and Schedule 4 of the Companies Act of 2013, the Board of Directors'
duties, role, and responsibilities to the bank and shareholders should be:

Section 166 of Companies Act,2013, says:

• A company's director must act in accordance with the articles of incorporation, subject to the
provisions of this Act.
• A business's director must work in good faith to advance the company's objects for the
benefit of all stakeholders, as well as in the best interests of the firm, its employees,
shareholders, the community, and environmental sustainability.
• A corporate director shall not obtain or attempt to obtain any undue gain or advantage for
himself, his relatives, partners, or acquaintances, and if such director is found guilty of
obtaining such gain, he shall be obliged to pay the business a sum equal to such gain.
• A company director must exercise independent judgement and exercise due and reasonable
care, skill, and diligence in carrying out his obligations.
 • A corporate director who violates the provisions of this section is subject to a fine between
1lakh to 5 lakhs INR.
• A corporate director shall not be involved in any circumstance in which he has a direct or
indirect interest which conflicts, with the business's interests.
• A company director may not assign his or her office, and any such assignment is void.

Followings are the roles and responsibilities of BOD:

• BOD must content themselves on the integrity of financial information and those financial
controls and the systems of risk management are robust and defensible
• BOD should safeguard the interests of all stakeholders; they need to give special attention to
minority shareholders.
• BOD can also act as a mediator, in situations of conflict between management and
shareholder’s interest.
• Board of Director key role is to work toward the upliftment of the companies and all the
stakeholders of the company without having any personal interest directly or indirectly.
• They are responsible for making all the major decision of the company by following
governance process.
• They are also liable to ensure the compliance with the law supports the corporate governance
and ethics.

In this case board of director can act as a mediator to solve the issue raised by the Yes Bank by
providing all the answers to their query in fair, ethical and legal manner.

On the other hand, to BOD need to be very transparent to the shareholders whatever major steps
and communication being made in this case, which may affect share values.

Q8. Draft a reply of the BOD to the bank on their

request to nominate two nominee directors on
the company's board.
Dish TV India Ltd

July 26, 2021

To,

Shivanand R Shettigar,

Company Secretary

Yes Bank Ltd

IFC-2, 15Th Floor, Senapati Bapat Marg

Elphinstone (W) Mumbai – 400013

Maharashtra

Ref: Response to letter dated June 25, requesting to induct Mr. Akash Suri and Mr. Sanjay Nambiar as
additional directors on the Board of Directors (“Board”) of Dish Tv India Ltd. (“DTIL”) in terms of
Section 161 of the Companies Act, 2013.

Dear Sir,

This is in response to your letter dated June 25, with regards to request for induction of additional
directors to the Board of Dish TV India Ltd.

As previously stated, Dish TV is controlled by the DTH License given by the Government of India, and
any change in the equity structure is forbidden unless approved in advance by the Ministry of
Information and Broadcasting. Yes bank acquisition of stake in the company is null and void till the
time consultation is being done with the Ministry and an approval is submitted.

In lieu of above point, Dish TV Ltd is not obligated to postpone the board meeting connected to
fundraising and rights issue for Yes Bank since their shareholding is still outside of the purview and
the board's decision in action is final because Bank has no interest rights in the firm.
Further, as per section 152(6) of the Companies Act 2013, the shareholders carry the right to approve
or reject a nomination of the nominee director if it is deemed right. The majority directors carry the
right to hold a meeting and make an informed decision.

In light of the foregoing, the company bears no obligation for delaying fundraising and rights issuance
until the appointment of nominee directors, and the board of directors is completely authorised to
reject the request presented by Yes Bank without jeopardising any compliance issues.

Thanking You,

Yours Truly

For Dish TV India Ltd

Ranjit Singh

Head Legal and Company Secretary