Markets regulator Securities and Exchange Board of India (Sebi) has summoned several former directors of Zee Entertainment Enterprises Ltd (ZEEL) as part of its probe into the entertainment company over the diversion of company funds, allegedly through related-party transactions, two people directly aware of the development said.
“So far, two former independent directors have been asked to appear before Sebi and testify,” said one of the people cited above. “Both these directors had left the company’s board around 2021,” the person added, requesting anonymity.
They further added that the regulator has also widened the scope of the investigation and is now looking into a wider pool of entities that have done business with ZEEL in recent years. Notably, Sebi is looking into the role of two prominent Mumbai-based production houses as possible “conduits which were used to siphon off funds,” a second person said.
The regulator is also probing a wider array of transactions between Zee and private companies owned by promoters. “Some of the former directors, including the independent directors, have received communication to appear before Sebi. They have also been asked to provide certain documents pertaining to the period when they were on the board of the company,” the first person said.
Emails sent to a spokesperson for Sebi remained unanswered.
A Zee spokesperson denied allegations about accounting irregularities at the company.
Also Read: Zee stock tanks 10% on report of Sebi 'uncovering $241-mn accounting issue'
“Pursuant to the SAT order, which granted relief to the current key managerial personnel, the company has been in the process of providing all the comments, information or explanation requested by Sebi and has extended complete cooperation on all aspects,” a Zee spokesperson said.
Shares of Zee Entertainment fell more than 10% on Wednesday after Bloomberg reported that Sebi has found that about $241 million might have been diverted by the promoters of the company.
In August, Sebi passed an interim order against promoters Subhash Chandra and his son Punit Goenka, barring them from holding any directorships in listed companies. In the order, Sebi alleged the promoters illegally withdrew Rs 200 crore from the company for their own benefit. The money was used to provide collateral for the debt owed by private companies of promoters, including Essel Green Mobility and Pan India Infra Projects, among others. The collateral was through a letter of comfort (LoC) to the lenders.
Sebi also held that these transactions were not done after obtaining approval from the Zee board. In October, the Securities Appellate Tribunal (SAT) overturned Sebi’s interim order barring Chandra and Goenka. Any final order is appealable to SAT.
Sebi is trying to ascertain if the directors knew about the LoCs being issued by promoters, said a third person familiar with the development. “If any of the directors knew about the LoCs, the same ought to have been shared with the board of the company. There are also questions around whether any of the board members are also complicit,” he said.
Sebi issues interim orders in high-priority cases since the complete investigation can take 2-3 years. In the meantime, to protect investor interests and to refrain the accused from selling off proceeds of crime, Sebi issues interim orders barring the accused from capital markets.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
