SEBI Bars Subhash Chandra, Punit Goenka From Company Boards
Letter of comfort offered by Subhash Chandra for the loans of Zee's associate companies violates disclosure norms, says SEBI.
The market regulator, in an interim order, barred Essel Group Chairman Subhash Chandra and Zee Entertainment Enterprises Ltd.’s Chief Executive Officer Punit Goenka from holding the position of a director or a key managerial person in a company board.
Both of them abused their position as the directors or key managerial persons of a listed company to siphon funds for their own benefit, according to the order of the Securities and Exchange Board of India on Monday.
The regulator alleged that they alienated the assets of Zee and other listed companies of the Essel Group for the benefit of the associated entities. As they are still at the helm of affairs of the company and the investigation is still underway, their continuation as a director or key managerial personnel in any listed company or its subsidiaries is "likely to be prejudicial to the interest of those companies, particularly its investors", the order read.
The investigation was prompted by the resignation of two independent directors in 2019. In her resignation letter, one of the directors, Niharika Vohra, had accused Chandra of giving comfort letters towards credit availed by group companies of Zee without board approval, in violation of the listing regulations.
It was observed that on the strength of the said Letter of Comfort, Yes Bank had adjusted Fixed Deposit of Rs 200 Crore of Zee for meeting the obligations of the following seven entities towards Yes Bank.SEBI Order
Later, while being probed about this, Zee submitted that all such amounts have been received from these associate companies. However, an examination of the trail proved that the amount originated from Zee’s account. This, the regulator said, is part of an elaborate scheme orchestrated by the promoter family and needs to be investigated. They were attempting to piggyback on the success of Zee, the regulator said.
They 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 Zee’s own funds which was rotated through multiple layers to finally end in Zee’s account.SEBI Order
This order should be read together with the order against Shirpur Gold Refinery Ltd., where the promoters Punit Goenka and Amit Goenka were found to be the prima facie beneficiaries of fund diversions, according to SEBI.
The parties can submit their replies or objections within the next 21 days.
