In a major setback, the appellate tribunal SAT (Securities Appellate Tribunal) on Monday dismissed an appeal filed by Zee Entertainment's group chairman Subhash Chandra and its chief executive officer Punit Goenka. The matter pertains to a ban on them by capital market regulator SEBI (Securities and Exchange Board of India) from holding board positions in listed companies for a year, in a fund diversion case.
Reacting to the development, the Zee stock dipped over 3% to ₹200.15 on the National Stock Exchange (NSE). The stock had opened a gap-up at ₹207.2 and surged to an intraday high of ₹209.45, though it soon plunged to an intra-day low of 6% at ₹194.45.
At the time of filing, 17.27 lakh shares were trading on the counter against the two-week average of 8.87 lakh shares. With this, the m-cap of the entertainment behemoth remains at ₹19,464.93 crore.
The ZEEL stock saw an 11.5% rise in the past five days; 3.62% in the past month; but fell 12.89% in the past six months and dropped 17.07% in the year-to-date period.
On June 12, 2023, Chandra and Goenka were barred by SEBI from taking leadership roles at listed companies, which also sought "urgent action" against the Zee Entertainment promoters in ₹200-cr fund diversion case.
The market regulator, in its reply to SAT, said the promoters indulged in violations as well as multiple "false disclosures" to cover up "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 read.
The regular said the promoters 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.
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.
On the strength of the LoC, Yes Bank adjusted a fixed deposit of ₹200 crore of ZEEL for meeting the obligations of seven entities, including Pan India Infraprojects, Essel Green Mobility, Essel Corporate Resources, Essel Utilities Distribution Company, Essel Business Excellence Services, Pan India Network Infravest, and Living Entertainment Enterprises. These associate entities were owned or controlled by family members of Chandra and Goenka, the promoter family that is also the beneficial owner of promoters of ZEEL, found SEBI.