In the news after the resignation of its promoter Subhash Chandra, Zee Entertainment Enterprises Limited may find itself mired in another tangle as regulator SEBI and the Ministry of Corporate Affairs are set to look into the reasons behind the recent resignations of independent directors.
Two former directors – Subodh Kumar and Neharika Vohra – along with Non-Independent Director Subodh Kumar, resigned from the Zee board on November 25.
According to a regulatory filing by Zee, Kumar and Vohra had raised concerns over several issues, which included discrepancies in spending CSR funds.
Moneycontrol reached out to Zee for comments, but the company is yet to respond.
The Ministry of Corporate Affairs may now initiate an enquiry as it involves CSR funds.
"Government is serious about CSR fund utilisation and if any discrepancy is found in this case, ministry can take action. Prima facie it seems the fund was used for their own association, which may call for an enquiry,” a source told Moneycontrol.
Zee, however, said that CSR funds have been allocated in compliance with the law (and this has been certified by chairman of the CSR committee) and necessary certification was obtained.
SEBI may also look into another point raised by Kumar and Vohra.
Both stated that no action was taken on the large outstanding from Dish TV and Siti Cable for the content supplied by Zee.
"It is the case of Compliance Monitoring Department. It looks like a pretty straightforward case against company,” a source told Moneycontrol.
On this issue, Zee said: "The same have been secured by definitive plan and situation is being strictly monitored as instructed by the board and also discussed in various analyst calls.”
Kumar and Vohra also raised the matter of "a scheduled bank" appropriating "Rs 200 crore of the company's fixed deposits towards promoter loans and the management did not take legal action"
Zee's response was that the “issues pertaining to the wrongful revocation of the bank guarantee stand resolved with the company being secured by the promoter companies and appropriate legal notices were sent to the bank at the relevant time” were the company’s comments”.
Both had also flagged the issue of "film advances given in 2018-19 to the tune of Rs 2,200 crore", to which the company responded by saying the information has already been disclosed in its annual report and clarified in various investor interactions.
"We understand that the letter sent by independent directors are more damaging than company reply to exchanges. Market expects company should make public the original letters of the independent directors," a source told Moneycontrol.
Following Chandra's exit, things at Zee seem to be on a slippery slope. The Company Secretary also put in his papers on the day the independent directors resigned, leading to murmurs on the Street.
After the Moneycontrol report, BSE sought more clarification on the issue.
"This is with respect to clarification sought by the exchange on November 26, 2019 and company’s response dated November 27, 2019 providing details of reasons for resignation of directors.
In order to ensure that adequate, accurate, explicit disclosure of information and enabling access to relevant and sufficient information for all stakeholders, you are requested to submit, as announcement to the exchange, the copies of resignation letters of all the three resigning directors mentioned in above letter," BSE wrote to Zee.
Zee's reply is awaited.