The Securities Appellate Tribunal (SAT) on August 30 asked the Securities and Exchange Board of India (SEBI) to file a response to Punit Goenka's appeal by September 4 and listed the matter for final hearing on September 8.
Goenka, former chief executive officer of Zee Entertainment Enterprises Ltd (ZEEL), had appealed against the SEBI order that barred him from holding any directorship or other key managerial positions in the company and other organisations.
During the course of the hearing, the tribunal orally observed that it is not satisfied with the amount of time taken by the market regulator for investigation, saying, "SEBI can’t keep going on with its investigation." It further noted that the matter involves public interest owing to the recent merger of ZEEL with Sony.
Senior advocate Abhishek Manu Singhvi, who appeared for Goenka, argued that it was unfair on SEBI's part to ask his client not to occupy any key managerial positions till it completes the investigation. He argued that the order was under SEBI's jurisdiction as a market regulator and that no public interest would be harmed if Goenka was made a director in ZEEL.
Singhvi highlighted that ZEEL has always been a board-run company and not a sole proprietorship as SEBI was portraying it to be. According to Singhvi, the resultant entity after the ZEE-Sony merger will not be under Goenka's control as it will have many representatives of Sony and independent directors on its board.
The tribunal noted that the case deserves to be judged as a final hearing considering its nature and directed SEBI to file its response by September 4.
The tribunal also directed Goenka to file his rejoinder to SEBI's response by September 7 and posted the case for final hearing on September 8.
In August, SEBI passed an order revising the directions it had given to ZEEL's former directors Subash Chandra and Goenka, asking its investigating officials to complete the enquiry in eight months.
First round of litigation at SAT
Goenka's approached SAT the second time over the same issue. In June, the regulator passed an interim order that had said that the Chandra and Goenka were not to hold any board or key managerial position in ZEEL, its subsidiary companies or any company resulting from a merger with these companies.
Goenka and Chandra appealed against this order at the SAT, but the tribunal refused to stay the same. The father-son duo were directed by SAT to file a reply/objection along with an application to vacate the stay given in the interim order.
Subsequently, SEBI issued the notices for an opportunity for personal hearing on July 31 and asked for additional documents to better appreciate their submissions. The market regulator's August order was passed pursuant to this hearing.
Why did SEBI ban Goenka and Chandra?
The market regulator alleged that the duo helped move funds out of ZEEL and routed them back to the company through layered and circuitous transactions. They did so by “falsely portraying that ZEEL had received the dues from associate entities”, it said.
SEBI had alleged that Chandra and Goenka had”abused their positions" for personal financial gains. It noted that the Mumbai-based media house had faked the recovery of loans to cover for private financing deals by its founder Chandra.
The regulator further alleged that the duo engaged in the alienation of assets belonging to ZEEL and other listed companies of the Essel Group, with the aim of benefiting their associate entities.
Zee-Sony merger
These developments coincide with the National Company Law Tribunal (NCLT) approving the merger of ZEEL with Culver Max Entertainment, earlier Sony Pictures Networks India.
In December 2021, Zee Entertainment and Sony Pictures reached an agreement to combine their businesses.
Subsequently, they sought the tribunal’s approval for the merger, having obtained necessary permissions from the National Stock Exchange (NSE), BSE and other regulatory bodies like the Competition Commission of India (CCI) and SEBI.
The merger is said to create a $10-billion media giant, with the combined entity owning over 70 TV channels, two video streaming services—Zee5 and SonyLiv—and two film studios— Zee Studios and Sony Pictures Films India.
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