Zee's Subhash Chandra Only Holds A Titular Chairmanship, Says His Counsel At SAT

The chairmanship held by Subhash Chandra in Zee Entertainment Enterprises Ltd. is only titular or honorary in nature, and he holds no directorial position in the company, advocate Somasekhar Sundaresan told the Securities Appellate Tribunal on Monday.

While arguing for Chandra, Sundaresan said this to underscore that there was no urgency to pass an interim order against his client.

Referring to SEBI's June 12 order, Sundaresan said that since Chandra retired from Zee's board in August 2020, barring him from any directorial position is "unwarranted and unnecessary".

The Securities and Exchange Board of India, through an interim order, has barred Essel Group Chairman Emeritus Subhash Chandra and Zee's Chief Executive Officer Punit Goenka from management and directorial positions in listed companies.

During the hearing, Sundaresan questioned the regulator's stance of tying Shirpur Gold Refinery Ltd.'s case with that of Zee. SEBI had said that the order in Zee's case should be read with the findings in the Shirpur case.

In Shirpur's case as well, the regulator has alleged fund diversion against certain Essel Group entities. But the order makes no allegation against Chandra.

Highlighting this, Sundaresan said if Shirpur is the basis of the present order, there should have been some directions against Chandra. "Unless a nexus can be shown between the direction and the proceeding, an order isn’t sustainable," he argued.

Sundaresan also questioned the urgency of passing an interim order without giving Chandra an opportunity to be heard. "Information on the case was only sought on April 27, 2023, years after the alleged incident in question."

An order based on the information sought was passed on June 12 without giving them an opportunity to be heard. This is in violation of the natural justice principle cherished by the court, he said.

Responding to these arguments, Senior Advocate Darius Khambata, arguing for SEBI, said that the regulator's arguments are based on objective facts. He took the court through the transactions between Zee and seven associate entities and highlighted the alleged questionable movement of funds.

Zee's matter is not limited to a violation of disclosure norms in 2019; the issue is far more serious than that, he said. "The question is: How did the associates get the money to pay back Zee?"

Khambata also countered the argument that there is no basis for saying that Shirpur holds importance in the present case. The Whole-Time Member who decided the case was also part of the settlement committee that rejected Zee’s settlement application. He had found some similarities in both cases; hence, bank statements were called for. "Our investigation was ignited by Shirpur, but that case is not the sole basis for the present order," he said.

SEBI has only made prima facie findings based on objective facts; no final decision has been taken. "If Goenka and Chandra want to clear their names, they are free to do so. However, they haven’t even filed a reply, although two weeks have passed since the order," Khambata said.

During the previous hearing, Senior Advocate Janak Dwarkadas, appearing for Goenka, had also questioned the urgency with which the SEBI order was passed.

In light of these hearings, the National Company Law Tribunal adjourned the hearing pertaining to Zee's proposed merger with Sony Pictures.

The arguments before the appellate tribunal will continue on Tuesday.