Zee & Goenka Challenge SEBI Market Ban at SAT

Zee Entertainment Enterprises (Zee) and its Chief Executive Officer Punit Goenka have formally appealed to the Securities Appellate Tribunal (SAT). This action challenges a Securities and Exchange Board of India (Sebi) order that restricts their participation in the securities market.

The Regulatory Intervention

Counsel for Zee and its promoter sought urgent intervention from SAT on Monday, pushing for an immediate hearing against the market regulator’s order issued on July 31. The tribunal has now scheduled the matter for a hearing on Wednesday, August 12.

Sebi’s order imposed several restrictions and penalties:

• Punit Goenka: Barred from the securities market for 12 months and fined ₹58 lakh.
• Zee Entertainment: Restrained from market access for 2 months and penalized ₹30 lakh.
• Subhash Chandra (promoter): Barred for 12 months and fined ₹60 lakh.

Unpacking the Allegations

The core of the matter involves the alleged fraudulent use of land owned by Zee in Hyderabad, which was used as security for loans. These loans were availed by four distinct entities within the Essel Group.

These Essel Group entities secured four separate loans, collectively amounting to ₹726 crore, from Indiabulls Housing Finance (IHFL). Sebi’s order details that Subhash Chandra executed a Declaration and Acknowledgement (D&A) on behalf of Zee in December 2018.

Sebi’s Investigation Findings

The market regulator alleges that the financial benefit derived from using Zee’s property ultimately flowed to entities controlled by Goenka, Chandra, and their family members. The D&A had stated Zee possessed all necessary permissions to create a first-ranking mortgage and the power to secure the borrowing entities’ dues.

However, Sebi’s investigation revealed that Zee had not obtained the required prior approvals. Crucially, neither its Audit Committee, board of directors, nor shareholders had sanctioned this arrangement.

Furthermore, the borrowing entities were not disclosed as related parties in Zee’s financial statements. The use of the Hyderabad land to secure these loans was also not disclosed as a related-party transaction, according to the regulator’s order.