Zee Entertainment Enterprises Ltd has formed an “interim committee” to oversee its day-to-day operations after ex-chairman Subhash Chandra and managing director and CEO Punit Goenka failed to overturn the market regulator’s ban on them holding board positions.
The interim committee will be under the supervision of Zee’s board, a company spokesperson said.
The Securities and Exchange Board of India in June banned Chandra and Goenka from holding board positions in publicly listed companies for a year, alleging they were actively involved in diverting funds to the group’s other listed entities and firms related to founding shareholders.
Last week, the Security Appellate Tribunal refused to vacate the regulator’s decision, saying it did not find any illegality or irrationality in Sebi’s order and saw no merit in interfering. It directed Sebi to pass a final order by the middle of next month and asked Chandra and Goenka to defend themselves before the regulator.
The ruling comes as Zee and an India unit of Japan’s Sony Group are closing in on a merger announced in 2021 to form a $10-billion TV enterprise, with Goenka set to become the merged entity’s managing director and CEO.
A Zee spokesperson who confirmed the development said: “The Board of Zee in a meeting conducted on July 14, 2023, evaluated and discussed all the necessary steps, in light of the interim order passed by Sebi and the subsequent judgement by the SAT. Since the order restricts Goenka from holding the position as a director or key managerial position in a listed company, the board of the company has constituted an Interim Committee of senior executives to ensure smooth operations of the company.”
It added that the interim committee will be under the supervision of the board and will seek its guidance on all matters pertaining to the company.
“The board continues to have immense faith in the value-building leadership skills showcased by Punit Goenka and will monitor the progress of the matter. The board also remains confident that the company will deliver robust growth consistently and generate higher value for all shareholders,’’ the spokesperson said.
Shares of Zee surged on the announcement and it settled with gains of 6.27 per cent or Rs 13.55 at Rs 229.65 on the BSE.
While the market regulator’s order had led to concerns that the proposed merger with Sony could be delayed, observers said that the formation of the committee may help in Zee proceeding with the merger.
In 2021, Zee announced that it will merge with Culver Max Entertainment (earlier known as Sony Pictures Networks India). It has received approval from stakeholders and creditors and the fair trade regulator CCI.
However, it is yet to receive the final go-ahead from the National Company Law Tribunal (NCLT), which earlier last week reserved its order on the proposed merger.
The securities appellate tribunal (SAT) observed there was a sense of urgency in the Sebi order on account of the alleged diversion of funds from a listed company.
Goenka assurance
The merger of Zee and Sony has reached an advanced stage of completion, and the issues faced by promoters with Sebi should not become a problem for the company, debarred Zee MD Punit Goenka has said in a letter to employees, according to sources.
In his letter, Goenka reminded the employees that the merger has already been cleared by the Competition Commission of India), the BSE, and the NSE, besides the shareholders of the company, a person aware of the development said.
