India Securities and Exchange Board (SEBI) has barred Punit Goenka and emeritus Subhash Chandra, MD-CEO and chairman emeritus respectively, of media giant Zee Entertainment Enterprises (ZEEL), from holding any managerial or directorial positions in listed companies.
The suspension is while SEBI carries out investigations into allegations of insider trading. On Thursday, SEBI, which is set up to “protect the interests of investors in securities and to promote the development of and to regulate the securities market” issued an interim order naming Goenka and Chandra as “noticees.” The detailed 16-page notice, of which Variety has obtained a copy, makes multiple reference to “siphoning” of funds.
“It was ZEEL’s own funds which was rotated through multiple layers to finally end in ZEEL’s account. The Noticees have attempted to ride piggyback on the success of ZEEL, the flagship company of Essel Group, to bankroll the Associate Entities, which are owned and controlled by them,” the notice states.
“The prima facie findings against the Noticees warrant a detailed investigation by SEBI to unravel the true and complete picture. Accordingly, SEBI has initiated a detailed investigation in the matter, which is currently in progress,” the notice adds.
“The intent behind the related party transactions was clearly not in the best interest of ZEEL. What is also amply clear is that structures and processes were not in place in the Company that could control such irresponsible behaviour and hold to account such individuals. ZEEL is the flagship Company of the Essel Group. It appears as if it was used like a piggy bank by the Noticees,” the notice says.
The order, signed by SEBI’s Ashwani Bhatia, says that there is 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 Noticees 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 adds.
ZEEL must place the order before their board of directors within seven days and Goenka and Chandra have 21 days to file their reply/objections.
On Tuesday, Zee chairman R. Gopalan issued a statement that represented its first public response.
“The board is currently in the process of reviewing the detailed order, and appropriate legal advice is being sought in order to take the next steps as required.
With a singular focus on enhancing the shareholder value year after year, the board of the company has continued to guide the management towards its strategic goals and priorities for the future. All the appropriate steps will be actioned as necessary, in order to ensure that the interest of the company and all its valuable shareholders is kept at the forefront.
The board recognizes the significant contribution made by Dr. Subhash Chandra as the founder of the company and the growth and value generation centric leadership showcased by Mr. Punit Goenka. The board is confident that the company, will continue to achieve the set goals for the future and most above, create value for all stakeholders.”
It was notable that the Zee statement made no reference to the merger with Sony’s Indian TV operations that has been on the table for more than 18 months now.
In 2021, ZEEL and Sony Pictures Networks India (subsequently renamed Culver Max Entertainment) signed definitive agreements to merge the two entities to create an Indian broadcast giant, with Goenka to lead the merged entity as MD and CEO. The merger was pending approval from India’s National Company Law Tribunal. It is not immediately clear how the SEBI order will affect the process.
Sony had recently talked up its India expansion plans.
However, in response to Variety‘s requests for comment Sony said only, “We are declining comment on this.”