Subhash Chandra, Essel Group Chairman and Punit Goenka, CEO of Zee Entertainment have approached the Securities Appellate Tribunal against the interim order of the Securities and Exchange Board of India which barred the duo from holding directorial or key managerial position in any listed company.
In their appeal, they have claimed that the no show cause notice was issued to them and therefore the order has been in violation of natural justice principles.
On Monday (12 June) the Securities and Exchange Board of India barred Chandra and Goenka from holding directorial or key managerial position in any listed company, vide an interim order.
The SEBI in its order noted that Chandra and Goenka abused their position as directors/key managerial position for siphoning off funds for their personal benefit and alienated the assets of Zee Entertainment and other companies of the Essel Group for the benefit of other associate companies.
The SEBI noted that the siphoning off appeared to be well-planned scheme, as on certain instances the layering of transactions passed through 13 entities within a span of two days. From FY 2018-19 to FY 22-23, the share price of Zee Entertainment came down from Rs 600 per share to Rs. 200 per share.
The SEBI observed that the erosion of wealth despite the company being so profitable leads to the conclusion that the company was not well. It stated that during this period, the promoter shareholding dropped from 41.62 per cent to 3.99 per cent.
It said that directors created a façade through sham entries to misrepresent investors, the money was returned by associate companies, but in fact it was Zee Entertainment own funds that was rotated to finally end in Zee Entertainment’s account.
The SEBI started its investigation after two independent directors Sunil Kumar and Neharika Vohra resigned in November, 2019 after raising concerns over appropriation of certain fixed deposit of Zee Entertainment by Yes Bank for squaring off loans of related entities.
Subhash Chandra in September, 2018 provided Letter of Comfort towards credit facilities availed by group companies from Yes Bank, which was only known to a few persons and the Board of Zee Entertainment was not aware of the same.
On the basis of the said letter of comfort, Yes Bank adjusted an FD of Rs 200 crore for meeting the obligations of seven associate entities. The said entities were owned by family members of Chandra and Goenka.
While passing the interim directions, the SEBI noted that the disclosure in the Annual Report regarding payment from associate entities appear to be misrepresented.
Their appeal before the Appellate Tribunal is likely to heard on 15 June.
Comments ↓
An Appeal...
Dear Reader,
As you are no doubt aware, Swarajya is a media product that is directly dependent on support from its readers in the form of subscriptions. We do not have the muscle and backing of a large media conglomerate nor are we playing for the large advertisement sweep-stake.
Our business model is you and your subscription. And in challenging times like these, we need your support now more than ever.
We deliver over 10 - 15 high quality articles with expert insights and views. From 7AM in the morning to 10PM late night we operate to ensure you, the reader, get to see what is just right.
Becoming a Patron or a subscriber for as little as Rs 1200/year is the best way you can support our efforts.
