The Securities Exchange Board of India (SEBI) has banned Zee Entertainment Enterprises’ former chairman Subhash Chandra and MD & CEO Punit Goenka from holding any managerial or directorial roles in any company after it confirmed that the father-son duo were siphoning off funds for their own benefit. 

The June 12 order stated, “The Noticees (Chandra and Goenka) shall cease to hold the position of a director or a Key Managerial Personnel in any listed company or its subsidiaries until further orders.”

The order is to be read with the interim order dated April 25 passed in the matter of Shirpur Gold Refinery Ltd.

Investigation into both parties had begun following the resignation of two independent directors — Sunil Kumar and Neharika Vohra — of ZEEL in November 2019.  Kumar and Vohra had raised concerns over several issues, including the fact that ZEEL’s fixed deposit was appropriated by Yes Bank to settle a loan taken by ZEEL’s related entities.

But the guarantees for the loans had been given without ZEEL’s Board’s approval.

A probe by SEBI revealed that Chandra had provided a “Letter of Comfort” or LoC dated September 4, 2018, that was towards a ₹200-crore loan outstanding from Essel Group Mobility. The letter said that the ₹200-crore FD available with Yes Bank from any of the Essel Group companies, including ZEEL, could be taken to settle it. Thus, Yes Bank had adjusted the loans of seven associate entities with this money.

Later it came to light that these seven entities were owned/controlled by family members of Subash Chandra and Punit Goenka, according to the SEBI order.

False claims

“The above facts make out a prima facie case of Mr. Subhash Chandra and Mr. Punit Goenka having abused their position as directors / KMPs of a listed company for siphoning off funds for their own benefit. Further, although the Promoter Family is only holding 3.99% shares in ZEEL, Mr. Subhash Chandra and Mr. Punit Goenka continue to be at the helm of affairs of ZEEL. Considering the above, I am of the opinion that, while the investigation is still underway, their continuation as a director / 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 stated.

On further investigation, the regulator found that the returned money belonged to ZEEL and that it was merely routed through various other entities — or layered — to seem like it was being returned by the associate entities.

“The funds had followed a circuitous route where funds originated from ZEEL/listed companies of Essel Group, passed through various entities owned or controlled by Promoter Family and ultimately ended up with ZEEL,” said the order.

ZEEL was also found to have claimed falsely in its annual report of FY20 that it had received all the funds from the associate entities.

“Since the payments from associate entities have been found to be bogus book entries, the said disclosure in the annual report appears to be a misstatement/misrepresentation,” said the regulator.

Related Topics