Markets regulator Sebi on Monday barred Essel Group chairman Subhash Chandra and Zee Entertainment Enterprises Ltd (ZEEL) MD and CEO Punit Goenka from holding the place of a director or key managerial personnel in any listed firm for siphoning off funds of the media agency.
The case pertains to Chandra, who was additionally the chairman of ZEEL throughout the alleged violation, and Goenka having abused their place as administrators or KMPs of a listed firm for siphoning off funds for their very own profit.
In its interim order, Sebi famous that Chandra and Goenka alienated the property of ZEEL and different listed firms of Essel Group for the advantage of affiliate entities, that are owned and managed by them.
The siphoning of funds seems to be a well-planned scheme since, in some cases, the layering of transactions concerned utilizing as many as 13 entities as pass-through entities inside a brief interval of two days solely, it added.
Sebi famous that the share worth of ZEEL has come down from a excessive of near Rs 600 per share to the present worth of lower than Rs 200 per share throughout the interval FY 2018-19 to FY 2022-23.
This erosion of wealth regardless of the corporate being so worthwhile and producing revenue after tax persistently would result in a conclusion that “all was not effectively with the corporate”.
During this era, the promoter shareholding dropped from 41.62 per cent to the present stage of three.99 per cent.
Although the promoter household is simply holding 3.99 per cent shares in ZEEL, Chandra and Goenka proceed to be on the helm of affairs of ZEEL, the order famous.
“Noticees (Chandra and Goneka) created a façade via sham entries to misrepresent to the buyers in addition to the regulator that cash had been returned by affiliate entities, whereas in actuality, it was ZEEL’s personal funds which have been rotated via a number of layers to lastly finish in ZEEL’s account.
“The noticees have tried to trip piggyback on the success of ZEEL, the flagship firm of Essel Group, to bankroll the affiliate entities, that are owned and managed by them,” Sebi mentioned in its 17-page order.
The order got here after Sebi carried out an examination within the wake of the resignation of two unbiased administrators — Sunil Kumar and Neharika Vohra — of ZEEL in November 2019.
They had raised issues over a number of points, together with the appropriation of sure Fixed Deposit (FD) of ZEEL by Yes Bank for squaring off loans of associated entities of Essel Group.
Vohra alleged that financial institution ensures got to a subsidiary with out approval from ZEEL’s board.
Sebi’s investigation discovered that Chandra had offered a Letter of Comfort or LoC in September 2018, that was in direction of a Rs 200 crore mortgage excellent from Essel Group Mobility.
Going by the letter, the Rs 200 crore FD accessible with Yes Bank from any of the Essel Group firms, together with ZEEL, might be taken to settle it.
Accordingly, Yes Bank had adjusted the loans of seven affiliate entities with this Rs 200 crore of ZEEL.
Later, it was discovered that these seven entities have been owned or managed by relations of Chandra and Goenka, Sebi famous.
When Sebi investigated additional, ZEEL submitted that Rs 200 crore had been returned by the affiliate entities to ZEEL.
Since Chandra and Goenka had signed the LoCs with out consulting or informing the Board, each have been discovered to have violated provisions of LODR (Listing Obligations and Disclosure Requirements) guidelines.
Accordingly, Sebi mentioned, “Noticees shall stop to carry the place of a director or a Key Managerial Personnel in any listed firm or its subsidiaries till additional orders.”
