The Securities Appellate Tribunal (SAT) on Thursday refused to stay the Securities and Exchange Board of India’s (Sebi’s) interim order barring Essel Group chairman Subhash Chandra and Zee Entertainment’s MD & CEO Punit Goenka from holding directorial positions in any listed company.
“Passing an interim order at this stage would virtually mean allowing the appeal,” the SAT said, giving Sebi 48 hours to file its reply with the tribunal. The matter will finally be heard and disposed on Monday.
Dwarkadas argued that there was no investigation into the matter by Sebi and that the interim, ex-parte order was a violation of Goenka’s fundamental rights. Sundaresan, on the other hand, said that Chandra was not a director in any listed company and the direction by the Sebi was not needed at all.
The markets regulator had said in its interim order that both Chandra and Goenka had abused their positions as directors and key managerial personnel of a listed company to divert funds from the company.
Countering the arguments on Sebi’s behalf, Senior Advocate Darius Khambata said the allegations were baseless. “They have not yet proved how the investigation is a sham,” he said.
Sebi was probing a case triggered in the wake of the resignations of two independent directors, Sunil Kumar and Neharika Vohra, who had raised concerns that a ‘letter of comfort’ or LoC had been signed by Chandra for a fixed deposit of `200 crore to Yes Bank. This was known only to a few individuals in the management, and even the board was not aware of it, the two had said.
On Tuesday, Zee Entertainment’s chairman R Gopalan said that the board was reviewing Sebi’s order and that appropriate legal advice would be sought in the matter.
Shares of Zee Entertainment closed trade down 4.31% over the previous day’s close at Rs 186.65 apiece on the BSE.
Experts remain divided on the outcome this case would have on the proposed Zee-Sony merger, which has been delayed for some time now. Senior Advocate HP Ranina believes the merger could be called into question with the Sebi pointing to alleged fund diversion within Zee and associate companies.
“Sony may ask for a forensic audit of Zee’s books of account and may even decide against going ahead with the proposed merger if it is not satisfied,” Ranina says.
However, Shriram Subramanian, founder and MD of proxy advisory firm InGovern, says that the Rs 200 crore that was said to have been diverted by Zee’s promoters was a thing of the past.
“Sony will be largely concerned about reputation risk and may seek to go ahead with the proposed merger without Punit Goenka as the MD & CEO of the merged entity,” he said.
Announced in December 2021, the merger, according to analysts, will create a $10-billion media giant, with the combined entity owning over 70 TV channels, two video streaming services (Zee5 and SonyLiv) and two film studios (Zee Studios and Sony Pictures Films India).
In its latest earnings call after the company’s Q4 results last month, Goenka said that all matters connected to the company had been addressed and that the media firm was taking all necessary steps within law to ensure there were no roadblocks to the merger process.