The Securities and Exchange Board of India (SEBI) ruled that the investigation into the alleged misappropriation of funds by Essel Group chairman Subhash Chandra and Zed Entertainment Enterprises Limited (ZEEL) CEO Punit Goenka must be concluded within eight months.
The order was issued by SEBI Chairman and Whole-Time Member (WTM) Madhabi Puri Buch.
She determined that a prima facie case existed against Chandra and Goenka and that they were involved in the execution of a scheme that ultimately benefited the ZEEL family at the expense of funds belonging to publicly traded companies.
Buch noted in the order that “entities (Chandra and Goenka) have actively attempted to conceal the very acts that have resulted in the loss of at least INR 143.9 crore to the public listed companies, including ZEEL.”
Earlier, on June 12, 2023, another WTM, Ashwani Bhatia, issued an interim order prohibiting Chandra and Goenka from holding key managerial positions (KMP) in any listed company or its subsidiaries.
This judgement was contested by Goenka and Chandra before the Securities Appellate Tribunal (SAT), which was dismissed on July 10.
The SAT also ordered SEBI to appoint a second WTM to hear the appeal filed by Goenka and Chandra disputing the allegations that they were involved in the embezzlement of funds.
Accordingly, the matter was heard by Buch, who has now validated the interim order issued on June 12 and modified it such that Chandra and Goenka are not permitted to hold directorships until the investigation is concluded.
In the same 14 August order, Buch added that the SEBI’s investigation into the allegations against Chandra and Goenka must be concluded within eight months.
To ensure that Goenka and Chandra have no control over the assets of publicly traded companies, the order prohibits Goenka and Chandra from holding directorship positions during the investigation.
“The justification for the same is that while the proceedings in the matter are ongoing, it is SEBI’s top priority to protect the assets of the publicly traded companies from any influence or control by Goenka and Chandra. The same logic applies to wholly owned subsidiaries of such publicly traded corporations, as their assets effectively belong to their shareholders. According to the 91-page order, allowing the Entities to be in a position of influence will prevent the ongoing investigation from being impartial and thorough.
The order clarified that the duo cannot hold any key managerial position in any company formed as a consequence of a merger or amalgamation involving the companies listed above.
This also prevents Goenka from becoming the CEO of the new company founded by the recent merger of Zed and Sony Pictures.
The order is attached for you to understand better.
