The Securities and Exchange Board of India (SEBI) has on Monday barred Zee Entertainment Enterprises Ltd's Subhash Chandra and Punit Goenka from becoming director or key management personnel (KMP) in any listed company for allegedly abusing their positions in the company and siphoning off funds for their own benefit.
The interim order by the capital markets regulator comes on the back of an investigation into allegations related to appropriation of certain fixed deposits of Zee Entertainment Enterprises Ltd (ZEEL) by Yes Bank for squaring off loans of related entities of Essel Group.
According to the SEBI probe, Chandra, the then chairman of ZEEL/Essel Group, had provided a ‘Letter of Comfort’ (LoC) towards credit facilities availed by certain group companies from Yes Bank.
More importantly, the LoC was known only to a few persons in the management and even the board of ZEEL was not aware of the letter, stated the SEBI order.
“… 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,” stated the SEBI order.
“...the funds had originated from ZEEL/other listed companies of Essel Group, which moved through multiple layers of Promoter Family owned/controlled entities and was ultimately transferred to ZEEL, in order to show the fulfilment of payment obligations of the Associate Entities towards ZEEL. The above flow of funds clearly indicates that there was no actual net receipt of funds by ZEEL and these were merely book entries to show receipt of funds,” added the SEBI order.
As per the SEBI probe, on the basis of the LoC, Yes Bank adjusted fixed deposit of Rs 200 crore of ZEEL for meeting the obligations of seven entities – associate entities, as per SEBI order -- which, in turn, were found to be owned/controlled by family members of Chandra and Goenka.
Incidentally, both Chandra and Goenka had filed a settlement application with SEBI to settle the proceedings but it was rejected by the capital market watchdog.
“The Noticees (Subhash Chandra, Punit 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,” stated the SEBI order while adding that the Zee Entertainment Enterprises will place the SEBI order before its board of directors, within seven days from the date of receipt of the order.
More importantly, SEBI is in the process of doing a further detailed probe in the matter to “unravel the true and complete picture.
SEBI has initiated a detailed investigation in the matter, which is currently in progress, stated the SEBI order.
Chandra and Goenka can file their reply/objections within 21 days.