The Securities Appellate Tribunal (SAT) on Friday allowed Zee Entertainment Enterprises (ZEEL) and its managing director and CEO Punit Goenka to proceed with the proposed issue of fully convertible warrants to a promoter group entity, providing a temporary relief from the securities market debarment imposed by the Securities and Exchange Board of India (SEBI).
A three-member SAT bench headed by Presiding Officer Justice P S Dinesh Kumar stayed the relevant portion of SEBI’s July 31 order to the limited extent necessary for ZEEL and Goenka to complete the preferential warrant issue, subject to both depositing the full penalty within a week. SEBI has been directed to keep the deposits in an interest-bearing account.
The tribunal also extended by one week the deadline for issuing the warrants, which was due to expire on August 14.
SEBI had barred ZEEL from accessing the securities market for two months and Goenka for 12 months, including from buying, selling or otherwise dealing in securities.
The relief comes after ZEEL argued that its shareholders had already approved the warrant issue with a 76.64% majority at an extraordinary general meeting held on July 31. The company told SAT that the issue could raise about Rs 3,100 crore and that failure to complete the allotment within the prescribed timeline could jeopardise the fund-raising exercise.
SAT noted that around 96% of ZEEL’s shareholders are public shareholders and held that the proposed preferential issue would be beneficial to public shareholders. It also observed that SEBI had no objection to the proposed investment being brought in after the two-month debarment period.
However, the tribunal did not lift the broader debarment. ZEEL and Goenka will continue to remain barred from accessing the securities market except for the limited warrant-related relief granted by SAT and any further orders of the tribunal.
SAT also permitted ZEEL to undertake mutual fund transactions for its day-to-day requirements in the ordinary course of business, but not for other purposes, including payment of the proposed dividend.
The appeals were filed against SEBI’s July 31 order.
