MUMBAI: The Securities and Exchange Board of India (Sebi) on Monday barred Essel Group Chairman Subhash Chandra and chief executive officer of Zee Entertainment Enterprises (ZEEL) Punit Goenka from holding any key managerial position in any of its listed companies or subsidiaries until further notice.
The market regulator said Chandra and Goenka abused their positions in the company and siphoned off funds for their own benefit.
The order has come at a crucial time for the promoters as ZEEL is set to be merged with Sony’s India arm, Sony Pictures Networks India. “The notices (Chandra and Goenka) shall cease to hold the position of a director or a Key Managerial Personnel in any listed firm or its subsidiaries until further orders. This Order shall take effect immediately and shall remain in force until further orders,” said Sebi order.
The interim order comes after Sebi’s probe in the matter related to the Letter of Comfort (LoC) granted by Chandra in September 2018 towards credit facilities taken by certain group firms from YES Bank. As per the investigations, these guarantees were given without approval from the board and were used to siphon off funds by the promoters.
“The above facts make out a prima facie case of Subhash Chandra and Punit Goenka having abused their position as directors/KMPs (key managerial positions) of a listed company for siphoning off funds for their own benefit,” noted the order.
“Analysis of the bank statements showed that although ZEEL had claimed to have received `200 crore from the seven associate entities of the promoters, major portion of the funds had originated from either ZEEL itself or listed companies of the Essel Group, which after passing through several layers, reached the accounts of the Associate Entities from where it ultimately landed in ZEEL’s account,” said the order.
The investigations showed that the funds had followed a circuitous route where funds originated from ZEEL and listed companies of Essel Group, passed through various entities owned or controlled by Promoter Family and ultimately ended up with ZEEL. Though the Promoter Family is only holding 3.99% shares in ZEEL, Subhash Chandra and Punit Goenka continue to be at the helm of affairs of ZEEL.