The shadow of Rana Kapoor over the Dish TV-Yes Bank tussle

Subhash Chandra, Essel Group chairman, has alleged that Kapoor, the disgraced former boss of Yes Bank, had threatened to call back loans totalling ₹3,300 crore made to his group unless he agreed to merge Dish TV with Videocon D2H back in 2016.

Chandra’s startling allegation forms part of a complaint he filed in September 2020 at the Gautam Buddh Nagar police station in Uttar Pradesh. Although the complaint is more than a year old, its details have not been disclosed in public. Acting on this complaint, a copy of which was reviewed by Mint, the UP police started an investigation, and has now frozen Dish TV shares owned by Yes Bank.

“[T]he company (Dish TV) has been informed that crime branch (Gautam Buddh Nagar) has issued a notice to Yes Bank Limited (YBL), restricting YBL from dealing in and/or exercising any rights over 44,53,48,990 equity shares of the company held by YBL till completion of the investigation or till further orders," Dish TV informed the exchanges on 6 November.

Chandra’s complaint in September last year was made six months after Yes Bank’s boss Kapoor was arrested by the Enforcement Directorate, the federal financial agency, in a separate case of money laundering. Kapoor, at the time of his arrest, denied any wrongdoing.

“Pursuant to a criminal conspiracy between Sh. Rana Kapoor and V.N. Dhoot (former chairman and MD, Videocon), it was proposed to us that Sh. Rana Kapoor and V.N. Dhoot had devised a plan… which was intended to cheat us for merger of Videocon D2H and Dish TV and (the) acquisition of promoter shares of Videocon D2H by the promoter entities of Dish TV/affiliates," reads the police complaint filed by Chandra. “When the said plan was initially proposed to us, we rejected the same outrightly as we had no interest in the expansion of (the) DTH business by merger, etc."

“When we showed our reluctance to this transaction, we were pressurised to accept the proposal… else YBL, who had extended several loans to us, would create problems in day-to-day banking operations, impacting Essel Group as a whole and Sh. Rana Kapoor will ensure that the financial facilities already extended to us (aggregating to the tune of ₹3,300 crore) will also be recalled. As recalling of (the) financial facilities would have had an adverse effect, under the pressure of Sh. Rana Kapoor and Sh. V.N. Dhoot, we agreed to work on the lines dictated by Sh. Rana Kapoor and Sh. VN Dhoot." Essentially, the complaint alleges that the merger happened under duress.

On 11 November 2016, Dish TV announced its plans to merge with VideoconD2H.

“This is a great day for Dish TV and its shareholders," Dish TV Chairman and managing director Jawahar Goel had told analysts back then, as he proclaimed that the company was “excited to take the next big leap in this journey". Goel succeeded his elder brother Chandra, who stepped down as chairman in 2015.

Chandra’s allegation will be investigated, but for now, it is nothing short of surprising. This is because he did not disclose that he was arm-twisted into the deal even when he first wrote an open letter in January 2019, after the shares of three of his listed companies—Zee Entertainment Enterprises Ltd (ZEEL), Zee Media and Dish TV—plunged.

“My recommendation made to my brother Jawahar Goel to buy D2H from Videocon was one more key error, which costed me and Jawahar both a fortune," Chandra had written in the open letter.

This long-drawn-out saga has now come to a head as Dish TV’s board is set to hold its annual general meeting on 30 November. Whether YBL, which is seeking to recast the Dish TV board and wrest control, gets to exercise its voting rights, which it wields through the shares that have been seized by the police, might determine the future course of Dish TV.

Conditional credit

Chandra has also declared in his complaint that once he succumbed to Kapoor’s demand, Yes Bank over a period of eighteen months gave ₹4,210 crore to seven privately-held firms of the Essel Group. The promoter group in Dish TV pledged 25.69% of their shares with the bank as the underlying collateral.

Less than a month after Dish TV announced its merger with VideoconD2H in November 2016, the trickle of money to Essel group-linked firms began. Yes Bank first loaned ₹450 crore to Pan India NetworkInfravest Ltd in December 2016, according to disclosures made by the privately held company to the ministry of corporate affairs. In January 2017, Yes Bank released ₹750 crore to Mumbai WTR Private Ltd, ₹500 crore to RPW Projects Ltd and followed it up with another ₹125 crore to the same company.

Thirteen months later, in February 2018, Essel Business Excellence Services Ltd and Last Mile Online Ltd got ₹400 crore each and Essel Corporate Resources Private Ltd received ₹500 crore. In May 2018, Yes Bank gave ₹400 crore to Pan India NetworkInfravest Ltd and ₹275 crore to RPW Projects Private Ltd. Finally, in June 2018, Living Entertainment Enterprises Private Ltd got the last tranche of ₹410 crore.

“YBL officials (who are named) offered 10% additional loan (at 10% of ₹4,210 crores, it worked out to ₹421 crores) at cheap rate of interest and for a long tenure of ten years," Chandra states in his complaint. “Our people took a loan of 50 million USD in an overseas entity. For this also, they misled and took the letter of comfort dated 30 May 2016 from (ZEEL managing director) Punit Goenka, stating that he will undertake to keep the wholly-owned subsidiary of ZEEL liquid. They assured that this does not become any guarantee or undertaking and they will somehow find a way to write off this USD 50 million over the tenure of ten years in lieu of us agreeing to merge (the) D2H business of Dhoot’s with Dish TV."

Chandra claims that he paid ₹900 crore in interest on the ₹4,210 crore loan but once Essel Group stopped paying interest to Yes Bank, the bank invoked the share pledge.

“We are victim of the conspiracy of Sh. Rana Kapoor and Sh. V.N. Dhoot and other accused persons (who were) acting in concert with each other," Chandra alleges. “All the above was done in execution of a pre-designed plan to cheat the complainant, which shows that the accused persons are liable to be prosecuted under Section 420 of (the) IPC for cheating and dishonestly inducing the complainant (Dish TV)."

“Since a criminal investigation into the FIR lodged on (a) complaint by Dr. Chandra is underway, we refrain from making any comments on the claims being made by Yes Bank," said a spokesperson for the Essel Group. “We strongly deny the allegations regarding (the) contrasting views of Dr. Chandra (with) regards to (the) merger. In an open letter dated 25 January 2019, (the) merger was referred (to) as a ‘mistake’ since Dr. Chandra had to succumb to pressures from Yes Bank and its executives and had no option but to make recommendations to his brother for the same. Further, the disputes with Yes Bank were also disclosed in (the) open letter issued in August 2021."

Kapoor could not be contacted as he is incarcerated and is being questioned by the ED and the Central Bureau of Investigation in multiple cases. Calls and text messages to Dhoot went unanswered.

Dhoot is facing criminal investigations for allegedly investing in the companies of the husband of former ICICI Bank MD Chanda Kochhar as a kickback for loans received from the bank. Yes Bank’s Kapoor and family are facing charges of receiving kickbacks in lieu of loans extended by the bank. In March 2020, the central bank took control of Yes Bank to prevent its collapse under the weight of NPAs, and asked the State Bank of India (SBI) to pick 49% equity in Yes Bank. SBI has since brought down its ownership to 30%.

On 15 November, Yes Bank filed a petition before the Allahabad High Court against the UP police seizing its shares, according to an executive privy to the development. The executive also said that the bank has written to the ministry of corporate affairs, asking the regulator to dismiss the current board of Dish TV and supersede it with an independent board. Finally, the bank has also complained to the market regulator, the Securities and Exchange Board of India.

High stakes

There is a lot at stake for Yes Bank. An executive at Yes Bank said that almost a fourth of the Bank’s total non-performing loans is on account of the money borrowed by Chandra and entities controlled by him. Yes Bank reported ₹28,609.5 crore in NPAs in the year ended 31 March 2021, of which ₹6,500 crore is in loans to Chandra and the Essel Group.

An email sent to Yes Bank seeking comment went unanswered but a senior executive dismissed the charges levied by Chandra.

For now, it remains to be seen how the court will adjudicate the outcome of Chandra’s complaint. But analysts and banking executives contend that this case is important because it will have ramifications on the bank’s loans made to other business houses, some of whom are now facing financial difficulties.

“For almost twenty months, Essel Group did not raise any complaint and only after Kapoor got arrested, Essel Group has complained that it was forced to take a loan," said a retired executive of SBI. “Do we realize what this implies? This means that if this contention is admitted, almost all business groups that have run into financial difficulties could potentially come around and blame the banks."

Finally, there is one more question that remains unanswered. Chandra in his second open letter (in August this year) had said that he had paid 91.2% of his borrowings to his creditors.

But Yes Bank claims that an outstanding amount of ₹6,500 crore borrowed by Chandra and entities owned by him remains unpaid. So, what do we make of Chandra’s statement?

A spokesperson for Essel did not offer a comment to this question but an executive said that Chandra did write about issues with an unnamed bank in the same letter.

“Unfortunately, there could be one case (one lender), where there are disputes and both sides seem fixated on their belief on the number of debt(s) claimed and payable. The difference in numbers, in this case, is huge. The issues are pending in the court(s) for determination," Chandra wrote in the letter dated 3 August.

The unnamed lender

That unnamed bank turns out to be Yes Bank. Yes Bank emerged as the largest shareholder in Dish TV in May last year after it invoked the shares of the promoters. The bank’s revolt against Dish TV started when the board of Dish TV in February this year approved a ₹1,000 crore rights issue despite objections from Yes Bank.

YBL believes that Dish TV has enough money and the rights issue is to shore up the promoter’s ownership in the company even as it dilutes the ownership of other minority shareholders. For this reason, the bank first sought reconstitution of Dish TV’s board, seeking the removal of five of the six directors. A company court in Mumbai will adjudicate the legality of Dish TV’s demands later this month.

Yes Bank is peeved with the way Dish TV’s board has gone about with its plans for holding the annual general meeting (AGM). First, Dish TV’s scheduled AGM on 27 September was deferred by the board as it sought time to examine Yes Bank’s demands for the board reconstitution. The company had two months, or until 30 November, to hold its annual shareholder meeting. Later, on 27 October, Dish TV again requested the Registrar of Companies to allow it time until 31 December to hold the AGM. However, a day after the UP police seized the shares, Dish TV, on 7 November, informed the exchanges that it will hold its AGM on 30 November.

In a response to a question about the extension of the AGM, dated 8 November, a Dish TV spokesperson said the company always abides by the highest standards of corporate governance.

Disclosure: The Hindustan Times Ltd, the promoter entity of Mint’s publisher HT Media Ltd, recently acquired equity shares in Dish TV Ltd as part of its treasury management operations, according to stock exchange disclosure