The Securities and Exchange Board of India (Sebi) examined Deloitte Haskins & Sells LLP (Deloitte) in 2024 over its role as the statutory auditor of Zee Entertainment Enterprises Ltd (ZEEL) regarding transactions made without board approval, said two people familiar with the matter. However, the regulator effectively gave Deloitte a clean chit in its final order on 31 July, ruling that the complete facts surrounding the unauthorized transaction were not known to the firm and that disclosure responsibility cannot be shifted to the auditor.
The case dates back to December 2018, when promoter Subhash Chandra signed a declaration and acknowledgement on behalf of ZEEL to deposit the title deeds of its Hyderabad property (spanning 17,639.64 square metres) with Indiabulls Housing Finance Ltd (IHFL).
The property served as a first-ranking mortgage for ₹726 crore in loans taken by four Essel Group entities—Gnex Projects Pvt. Ltd., Vivek Infracon Pvt. Ltd., Gnex Infrabuild Pvt. Ltd., and Renu Realtech Pvt. Ltd.—with Essel Home Pvt. Ltd. acting as co-borrower. The transaction drew Sebi's criticism as it found no evidence of prior approval from ZEEL’s audit committee, board, or shareholders.
Deloitte, which stepped down as ZEEL's auditor in 2022, had flagged on 17 May 2019 in its CARO Report for FY 2018-19 that the original title deed for the Hyderabad property was missing. During its 2024 investigation, Sebi enquired why Deloitte had not investigated the missing trust deed in fiscal 2019 and why it failed to address it in its fiscal 2020 audit report.
Auditor exonerated
“The role of a statutory auditor and forensic auditor are different. As a statutory auditor, Deloitte’s role was to bring to shareholder notice the missing deed. It was not obliged to investigate why the deed went missing. The audit firm was told at the time that the deed is with potential buyers of the property,” said one of the sources. The person added that Deloitte was shown the deed before its FY2020 report was written, leading to no further property disclosures, which it explained to Sebi in 2024.
Exonerating the audit firm, Sebi stated in its 31 July order: “The complete facts relating to the execution of the 2018 D&A, the absence of authorisation by the Board and the interest of Noticee Nos. 2 and 3 (Goenka and Chandra) in the transaction were not known to Deloitte. The responsibility for determining whether the event was required to be disclosed cannot be shifted upon the statutory auditor. The reliance placed upon the report of Deloitte is also misplaced.”
In the same order, Sebi barred ZEEL from the securities market for two months, while banning promoter Subhash Chandra and MD & CEO Punit Goenka for 12 months each. On Wednesday, ZEEL appealed to the Securities Appellate Tribunal (SAT) to lift the ban, saying it needs to sell about ₹1,200 crore in liquid mutual fund investments to fund daily operations.
On Friday, SAT granted interim relief to Zee, allowing the company to move ahead with its proposed ₹3,143 crore fundraise, while maintaining Sebi’s market-access restrictions. However, the relief is contingent on the company depositing the full penalty imposed by the Securities and Exchange Board of India (Sebi) within one week.
While the inquiry raised broader questions about an auditor's obligations, Sebi lacks independent powers to directly sanction audit firms. In 2018, Sebi imposed a two-year ban on Price Waterhouse (PwC) over the ₹7,800 crore Satyam fraud. Although SAT set aside the order, ruling Sebi cannot bar auditors, the Supreme Court stayed SAT's decision in 2019.
Emailed queries to ZEEL, Deloitte and Sebi did not elicit a response.
According to a senior auditor at a Big Four firm (KPMG, PwC, EY, Deloitte), such regulatory enquiries are uncommon but reflect Sebi's tightening oversight. "Sebi checks if the auditor has made disclosures in the CARO report and the fixed asset schedule, among others. Multiple checks are done to see if the board was made privy to any transactions and ensure that the auditor has all the checks and balances in place," the auditor noted.