Market regulator Sebi has barred Essel Group’s Subhash Chandra and Zee Entertainment Enterprises (ZEEL) CEO Punit Goenka from director or Key Managerial Personnel roles in listed companies or subsidiaries. The move follows Sebi’s discovery that Chandra and Goenka misappropriated funds from ZEEL for personal gain. The ban remains in effect until further notice.
“ZEEL shall place this Order before its Board of Directors, within 7 days from the date of receipt of the Order,” Sebi said.
“Noticees (Chandra and Goneka) created a façade through sham entries to misrepresent to the investors as well as the regulator that money had been returned by associate entities, whereas in reality, it was ZEEL’s own funds which were rotated through multiple layers to finally end in ZEEL’s account.
The noticees have attempted to ride piggyback on the success of ZEEL, the flagship company of Essel Group, to bankroll the associate entities, which are owned and controlled by them,” Sebi said in its 17-page order.
The order came after Sebi conducted an examination in the wake of the resignation of two independent directors — Sunil Kumar and Neharika Vohra — of ZEEL in November 2019.
They had raised concerns over several issues, including the appropriation of certain Fixed Deposit (FD) of ZEEL by Yes Bank for squaring off loans of related entities of Essel Group. Vohra alleged that bank guarantees were given to a subsidiary without approval from ZEEL’s board.
Sebi’s investigation found that Chandra had provided a “Letter of Comfort” or LoC in September 2018, that was towards a Rs 200 crore loan outstanding from Essel Group Mobility.
Going by the letter, the Rs 200 crore FD available with Yes Bank from any of the Essel Group companies, including ZEEL, could be taken to settle it. Accordingly, Yes Bank had adjusted the loans of seven associate entities with this Rs 200 crore of ZEEL.
Later, it was found that these seven entities were owned or controlled by family members of Chandra and Goenka, Sebi noted.
When Sebi investigated further, ZEEL submitted that Rs 200 crore had been returned by the associate entities to ZEEL. Since Chandra and Goenka had signed the LoCs without consulting or informing the Board, both were found to have violated provisions of LODR (Listing Obligations and Disclosure Requirements) rules.
Accordingly, Sebi said, “Noticees shall cease to hold the position of a director or a Key Managerial Personnel in any listed company or its subsidiaries until further orders”.
(With inputs from PTI)