The Securities Appellate Tribunal (SAT) will hear the appeal of Zee promoters Subhash Chandra and son Punit Goenka against an interim Sebi order on June 26.
The Securities and Exchange Board of India has barred Essel group chairman Chandra and Goenka, managing director & CEO of Zee Entertainment Enterprises Ltd, from holding the post of director or a key managerial position at any listed entity.
The regulator said there was prima facie evidence that they had been siphoning money out of Zee Entertainment Enterprises Ltd (Zee).
At the previous hearing, the tribunal did not give any interim relief to Goenka and Chandra.
In its June 12 order, Sebi said it had unearthed evidence that Chandra and Goenka had given a letter of comfort in September 2018 to Yes Bank pledging fixed deposits worth Rs 200 crore of Zee against loans given to seven subsidiaries and associates of Zee without seeking the approval of Zee’s board of directors.When these entities defaulted on the loans, the bank impounded Zee’s fixed deposits. At this time, Zee claimed that it recovered the entire sum from the seven entities. But a closer investigation by Sebi revealed that Zee’s own funds had been “rotated through multiple layers to finally end in Zee’s account.”
Sebi’s investigations into Zee and its promoters began after two independent directors of the Zee group’s holding company — Sunil Kumar and Neharika Vohra — resigned in November 2019 after raising concerns over the manner in which Yes Bank “appropriated” ZEEL’s fixed deposits to square off loans given to Essel Group entities.
Sebi also concluded that the father-son duo had been involved in a “well-planned scheme” to siphon funds out of Zee by “using as many as 13 entities as pass through entities within a short period of two days only” – and that it occurred during a period when the promoter shareholding in Zee dropped from 41.62 per cent to 3.99 per cent and Zee’s stock price fell from Rs 600 per share to less than Rs 200 indicating that “all was not well with the company”.
The Zee promoters have questioned why the regulator is re-examining issues relating to events that occurred four years ago — and have claimed the inquiries are designed to sabotage the merger of Zee with Sony. Both Goenka and Chandra had moved the SAT seeking a stay on the Sebi order.
During the hearing last week, the senior counsel appearing on behalf of Goenka had maintained that the market regulator did not do any investigation into the case and that it is a “sham’’.
However, Sebi in its reply to the SAT said, “not only have there been violations but also the issuance of multiple false disclosures and submission of statements to cover up such wrongdoings.”
Sebi further said the appellants had not produced any material to indicate they had suffered any prejudice by not getting a personal hearing before the interim order was passed.
Sebi also submitted that the appellants had not produced any material to indicate they had suffered any prejudice by not getting a personal hearing before the interim order was passed.
On the 13 entities allegedly used to siphon off funds, the regulator said: “These entities are part of the Essel group, either through commonality in shareholding, control, directorship, or group name. Further, these entities appear to be beneficially owned by the Appellants and their family members,” it added.
IIFL ban
Capital markets regulator Sebi on Monday barred brokerage house IIFL Securities, earlier known as India Infoline Ltd, from onboarding new clients for two years for misutilisation of client funds. The order came after Sebi conducted multiple inspections of the books of account of IIFL for the period April 2011 to January 2017.
