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Business News/ Companies / News/  SEBI to question Zee's top management over fund diversion allegations, Subhash Chandra and Punit Goenka under scanner
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SEBI to question Zee's top management over fund diversion allegations, Subhash Chandra and Punit Goenka under scanner

Markets regulator SEBI aims to conclude its investigation by mid-April and then initiate legal proceedings based on its findings.

File image of Essel Group Chairman and Zee founder Subhash Chandra (UNI Photo)Premium
File image of Essel Group Chairman and Zee founder Subhash Chandra (UNI Photo)

The Securities and Exchange Board of India (SEBI) is set to question Zee Entertainment Enterprises' top management regarding the fund diversion allegations, Economic Times reported citing sources. Those under scanner include founder Subhash Chandra, CEO Punit Goenka, the CFO, and Zee's current and past board members.

The markets regulator aims to conclude its investigation by mid-April and then initiate legal proceedings based on its findings.

SEBI is currently scrutinising thousands of pages of transactions, bank statements, agreements, partnership deeds, and board minutes, one source told the paper. Zee's current chairman is R Gopalan, former secretary of the Department of Economic Affairs (DEA).

Sebi has not responded to queries, as per the report. A spokesperson for Zee refuted the allegations, stating: "The reports and rumours pertaining to accounting issues in the company are incorrect and false. Pursuant to the SAT order, which granted relief to the current key managerial personnel (KMP), the company has been in the process of providing all comments, information or explanations requested by Sebi, and has extended complete cooperation on all aspects."

Zee shares slumped 14.8 percent on the BSE on February 21, closing at 164.50 apiece. This decline followed Bloomberg's report that SEBI had found a potential diversion of about 2,000 crore by the company promoters.

The share price decline was further exacerbated by the cancellation of a $10-billion merger plan with Sony Group, with Sebi's findings cited as a key factor in the deal collapse.

Previous Allegations and Tribunal Proceedings

SEBI's initial findings in June 2023 suggested that 200 crore was diverted through related party transactions from Zee. Still, this claim was contested by Subhash Chandra and Punit Goenka before the Securities Appellate Tribunal (SAT). The regulator informed the tribunal that a broader investigation was underway due to the complexity of the transactions.

SEBI also disclosed that Chandra issued a letter of comfort for 4,210 crore in his role as the chairman of Essel Group.

"It was urged that eight months were required to complete a wider investigation, since now, the respondent (Sebi) finds that there are a large number of transactions - running into 2,000 crore - involving companies owned, controlled, or otherwise related to the promoters," stated the October 30, 2023, SAT order.

SEBI's investigation originated from the resignation of three independent Zee directors in November 2019. Their concerns included the appropriation of a fixed deposit of 200 crore by Yes Bank for settling loans of related parties of Essel Group. This group is promoted by Chandra and his family, with Goenka being Chandra's son.

The examination revealed that Chandra issued a letter of comfort on September 4, 2018, to Yes Bank regarding credit facilities availed by Essel Green Mobility. The letter ensured the availability of a fixed deposit of at least 200 crore to the bank while the loan remained outstanding, allowing the bank to appropriate the deposit in the event of a default.

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Published: 22 Feb 2024, 08:58 AM IST
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