Market Regulator SEBI Bars Essel Group Chairman Subhash Chandra and ZEE CEO Punit Goenka from Directorial Roles
The Securities and Exchange Board of India (SEBI) has imposed a ban on Subhash Chandra, Chairman of Essel Group, and Punit Goenka, CEO of Zee Entertainment Enterprises (ZEEL), preventing them from holding positions as directors or key managerial personnel in any listed company or its subsidiaries until further notice. SEBI’s decision comes after an investigation revealed that Chandra and Goenka misappropriated funds from their listed entity, ZEEL, for personal gains.
This interim order, although likely to be contested by the promoters, comes at a crucial time for the company as it seeks regulatory approvals for a merger with Sony Pictures Networks India. Legal experts believe that this ruling deals a significant blow to the company’s prospects.
SEBI has instructed ZEEL to present this directive before its board within seven days. Additionally, Chandra and Goenka have been given a 21-day period to file their responses or objections to the case.
Interim orders are issued by SEBI when there is initial evidence of wrongdoing. The SEBI order stated, “The Noticees (Chandra and Goenka) shall cease to hold the position of a director or a Key Managerial Personnel in any listed company or its subsidiaries until further orders.”
Chandra and Goenka came under SEBI’s scrutiny following the resignation of two independent directors from ZEEL’s board in 2019. The directors, Sunil Kumar and Neharika Vohra, cited various concerns, including the misappropriation of ZEEL’s fixed deposits by Yes Bank. This prompted SEBI to launch an investigation into the matter.
A senior corporate lawyer commented, “The only positive aspect for ZEE is that the order is interim, and they have the opportunity to present their responses and arguments. It is likely that they will seek an injunction pending a final order.”
In her resignation letter, Neharika Vohra stated, “During the October 17, 2019 meeting, it was revealed through a letter received by the board from the concerned bank that guarantees were given to a subsidiary without the board’s approval. The management team treated the issue with indifference.”
According to SEBI’s order, Subhash Chandra provided a letter of comfort (LOC) for a ₹200 crore loan to Essel Group Mobility. The investigation uncovered that Chandra issued this LOC without obtaining the necessary board approval.
Ashwani Bhatia, a whole-time member of SEBI, stated in the 16-page order, “The above facts establish a prima facie case of Subhash Chandra and Punit Goenka abusing their positions as directors/KMPs of a listed company to misappropriate funds for personal gain.”
The LOC stated, “This pertains to the ₹200 crore loan outstanding in Essel Green Mobility from Yes Bank. We will ensure that a fixed deposit of at least ₹200 crore is maintained with Yes Bank by any Essel Group company (including Zee Entertainment) at all times while the said facility remains due and outstanding. In the event of default under the facility, you may appropriate the fixed deposit for repayment.”
SEBI revealed that the LOC was known only to a few individuals in the management, and even the ZEEL board was unaware of it, as indicated by Vohra’s resignation letter to the chairman.
Due to the LOC, Yes Bank utilized ZEEL’s fixed deposit of ₹200 crore to meet the obligations of seven associate entities linked to the bank. These entities are Pan India Infraprojects, Essel Green Mobility, Essel Corporate Resources, Essel Utilities Distribution Company, Essel Business Excellence Services,
Zee Entertainment Enterprises, a Mumbai-based multinational media conglomerate, operates across various sectors including television, print, internet, film, and mobile content. With a global presence, it currently runs 45 channels worldwide.
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