The Securities and Exchange Board of India (SEBI) on Monday directed the Essel Group Chairman Subhash Chandra and Chief Executive Officer (CEO) of Zee Entertainment Enterprises (ZEEL) Punit Goenka to immediately cease holding positions as directors or Key Managerial Personnel (KMPs) in any listed company or its subsidiaries until further notice.

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The regulator, in an interim order, on June 12, stated that Subhash Chandra and Punit Goenka have allegedly abused their positions for personal financial gain.

SEBI alleged that Subhash Chandra and Punit Goenka have engaged in the alienation of assets belonging to ZEEL (Zee Entertainment Enterprises Ltd.), and other listed companies of the Essel Group, with the aim of benefiting their Associate Entities.

Considering the seriousness of the allegations and the ongoing investigation, SEBI is of the opinion that the continued involvement of Subhash Chandra and Punit Goenka as directors or KMPs in any listed company or its subsidiaries could be detrimental to the interests of these companies, particularly their investors. To safeguard the management of such companies and protect the interests of investors and stakeholders, SEBI has decided to issue interim directions until the investigation is completed.

Under the issued directions, Subhash Chandra and Punit Goenka are prohibited from holding any Key Managerial Positions until further notice. They are given a window of 21 days to file their replies or objections regarding the matter.

This accusation revolves around the alleged siphoning off of funds. Despite the Promoter Family holding only a 3.99 percent stake in ZEEL, Subhash Chandra and Punit Goenka continue to hold influential positions within the company.

The regulator alleged that the noticees employed deceptive measures to mislead investors and regulators. They created false entries to falsely portray that funds were being returned by Associate Entities when, in reality, it was ZEEL's own funds being circulated through multiple layers before returning to ZEEL's accounts.

The two attempted to leverage the success of ZEEL, the flagship company of Essel Group, to financially support their Associate Entities, which they own and control, SEBI said.

"The siphoning of funds appears to be a well-planned scheme since, in some instances, the layering of transactions involved using as many as 13 entities as pass through entities within a short period of two days only," SEBI said.

"...some of the entities used in these layers are common to the ones used for fund diversion in Shirpur Gold Refinery Limited case only strengthens the prima facie finding in this case that funds have been diverted from ZEEL, which needs to be investigated thoroughly," it added.

According to SEBI, the share price of ZEEL witnessed a significant decline from approximately Rs. 600/- per share to less than Rs. 200/- per share between FY 2018-19 and FY 2022-23.

Also read: Subhash Chandra claims 91% of Essel debt repaid; announces digital video venture

This erosion of wealth, despite the company's profitability and consistent generation of after-tax profits, raises concerns about the company's financial state, SEBI said, adding, during this period, the promoter shareholding also decreased from 41.62 percent to the current level of 3.99 percent.

"ZEEL is the flagship Company of the Essel Group. It appears as if it was used like a piggy bank by the Noticees," SEBI said.

SEBI's interim order, which is to be read in conjunction with the interim order dated April 25, 2023, pertaining to the Shirpur Gold Refinery Ltd. case, highlighted the common entities used in both cases and the similar time periods involved. This reinforced SEBI's decision to take immediate action.

(Edited by : Pradeep John)

First Published:Jun 12, 2023 10:08 PM IST