SEBI bars Essel Group Chairman Subhash Chandra and ZEEL CEO Punit Goenka from directorial roles in listed companies. Investigations revealed their misuse of positions to divert funds for personal benefit. The order states their immediate cessation from holding any directorial or key managerial positions until further notice.
Image-: Newsdrum
The Securities and Exchange Board of India (SEBI) has taken action against Subhash Chandra, the Chairman of Essel Group, and Punit Goenka, the CEO of Zee Entertainment Enterprises (ZEEL). SEBI has banned them from holding any directorial or key managerial positions in listed companies or their subsidiaries. This decision was made after SEBI’s investigations revealed that Chandra and Goenka misused their positions as directors and key managerial personnel to divert funds for their personal gain.
In an interim order issued on June 12, SEBI stated that Chandra and Goenka must immediately cease to hold any directorial or key managerial positions in any listed company or its subsidiaries. This order will remain in effect until further notice from SEBI.
SEBI’s order stated that Chandra and Goenka engaged in the improper transfer of assets belonging to ZEEL and other listed companies within the Essel Group. These assets were transferred to associate entities owned and controlled by Chandra and Goenka. The investigation revealed a well-planned scheme involving the use of multiple entities as intermediaries within a short period. SEBI found no internal processes or structures within ZEEL to prevent such governance misconduct. ZEEL, the flagship company of the group, was described as being used as a “piggybank” by Chandra and Goenka. The investigators also highlighted the significant decline in ZEEL’s share price from Rs 600 to Rs 200 between FY19 and FY23, despite the company’s profitability, suggesting underlying issues.
The investigation was initiated following the resignation of two independent directors of ZEEL, Sunil Kumar and Neharika Vohra, in November 2019. They raised concerns regarding various issues, including the appropriation of ZEEL’s fixed deposit by Yes Bank to settle a loan taken by related entities of ZEEL. The guarantees for these loans had been given without the approval of ZEEL’s board.
SEBI’s investigation uncovered that Chandra had provided a “Letter of Comfort” dated September 4, 2018, which allowed a Rs 200 crore loan owed by Essel Group Mobility to be settled using the Rs 200 crore fixed deposit of any Essel Group company, including ZEEL. Yes Bank then adjusted the loans of seven associate entities using ZEEL’s fixed deposit. It was later revealed that these seven entities were owned or controlled by family members of Subhash Chandra and Punit Goenka. By signing the LoCs without consulting or informing the board, Chandra and Goenka violated SEBI’s regulations.
During the investigation, ZEEL claimed that the Rs 200 crore had been returned by the associate entities. However, further scrutiny revealed that the returned funds actually belonged to ZEEL and were merely routed through various entities to create the appearance of being returned by the associate entities. ZEEL also made false claims in its FY20 annual report, stating that it had received all funds from the associate entities, which SEBI determined to be a misstatement. SEBI concluded that these actions were part of an elaborate scheme orchestrated by the promoter family of ZEEL to divert assets from ZEEL and other listed companies within the Essel Group to the promoters.
