Sebi bars Zee for 2 months; Subhash Chandra, Punit Goenka banned for 1 year over Hyderabad land pledge case

The Securities and Exchange Board of India (Sebi) has barred Zee Entertainment Enterprises Ltd (ZEEL) from the securities market for two months and its Chairman Emeritus Subhash Chandra and Managing Director & CEO Punit Goenka for one year over the unauthorised pledge of the company's Hyderabad land to secure loans availed by promoter-linked Essel Group entities. 

In a 150-page final order issued late on Friday, the market regulator also imposed a cumulative penalty of ₹1.48 crore on the company and its two top executives. 

Sebi levied a penalty of ₹30 lakh on ZEEL, ₹60 lakh on Chandra, and ₹58 lakh on Goenka. The penalties must be paid within 45 days, and the order takes effect immediately. The case stems from a Deposit and Declaration (D&A) Agreement executed on December 27, 2018, under which the original title deeds of ZEEL's Hyderabad property were handed over to Indiabulls Housing Finance Ltd (IHFL) as collateral for loans availed by Essel Home and other Essel Group-linked borrowing entities. 

According to Sebi, the use of ZEEL's property as security amounted to a related-party transaction that required prior approval from the company's audit committee under the Listing Obligations and Disclosure Requirements (LODR) Regulations. The company, however, failed to obtain the mandatory approval. 

The regulator also found that ZEEL did not make the required disclosures in its financial statements despite Chandra and Goenka being aware that the Hyderabad property had been pledged and that the original title deeds remained with the lender until June 2020. 

Holding Chandra responsible for the transaction, Sebi said he misused his position as chairman by handing over the original title deeds to IHFL after falsely representing that the move had the approval of ZEEL's management. "Noticee No. 3, being the chairman of ZEEL, misused his position and authority... and handed over the original title deeds of the asset (Hyderabad Land) of ZEEL to IHFL by falsely declaring that the said action had the approval of the management of ZEEL. Through such actions, the noticee put the material asset of ZEEL at risk for his personal benefit," Sebi said in its order. 

The regulator further observed that the true nature of the transaction was concealed and was instead portrayed as a case of misplaced documents, even after the matter became the subject of litigation and arbitration. 

Sebi concluded that Chandra failed to act in good faith, exercise due diligence and protect the interests of ZEEL and its shareholders, amounting to an abuse of his position and authority.