Capital market regulator Securities and Exchange Board of India (SEBI), in its reply to the Securities and Appellate Tribunal (SAT), has said urgent action should be taken against the promoters of Zee Entertainment Enterprises in the ₹200-crore fund diversion case in order to protect investors and shareholders and safeguard the company management.

The SAT on June 15, 2023, had refused any interim relief to Essel Group chairman Subhash Chandra and his son and Zee Entertainment Ltd managing director and chief executive Punit Goenka against an order by the SEBI, which banned them from holding a director or key managerial position in any listed company. It asked the capital markets regulator to file a reply in the next 48 hours in response to Chandra and Goenka's appeals.

In a freshly filed affidavit to SAT, the market regulator said the promoters indulged in violations as well as multiple "false disclosures" to cover up their "wrongdoings".

"In the instant case, we have a situation before us where the Chairman Emeritus and the Managing Director and CEO of this large listed company are involved in a myriad of different schemes and transactions through which vast amounts of public money belonging to listed companies are diverted to private entities owned and controlled by these persons," the affidavit reads.

The regular said the promoters have failed to submit any evidence to prove they suffered prejudice and that they were given a personal hearing before SEBI passed the order because it was willing to give a hearing to them.

SEBI's investigation was launched after Zee rejected the settlement application in the Essel Group-company Shirpur Gold Refinery (Shirpur) case. The market regulator issued an order in the case in April 2023.

"In Shirpur, we have also seen that the promoter group timed its offloading of shares in the open market to avoid bearing the brunt of the fall in the market value of Shirpur's shares. It is ultimately the small retail investors who endured the downfall in share price," the affidavit reads.

The Zee Entertainment Enterprises stock is trading 0.75% down today at ₹185.75, down from ₹187.15 on the National Stock Exchange (NSE).

After confirming siphoning off of funds worth ₹200 crore for their own benefit, the SEBI on June 12 banned Chandra and Goenka from holding the position of a director or key managerial personnel in any listed company or its subsidiaries.

The case pertains to SEBI's probe after the resignation of two independent directors (Sunil Kumar and Neharika Vohra) of Zee in November 2019 after raising concerns over several issues, including the appropriation of certain fixed deposit (FD) of ZEEL by Yes Bank Ltd (Yes Bank) for squaring off loans of related entities of Essel Group.

The probe revealed Chandra, the then chairman of ZEEL/Essel Group, provided a ‘letter of comfort’ on September 4, 2018, towards credit facilities availed by certain group companies from Yes Bank. Neharika Vohra's resignation letter to then ZEEL chairman showed this LoC was known only to a few persons in management and even the board of ZEEL was not aware of the same, SEBI said.

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