SEBI slaps ₹1.5 crore fine on Zee Entertainment top bosses for fund diversion

Securities and Exchange Board of India (SEBI) penalised Zee Entertainment Ltd (ZEEL) along with its promoters Subhadh Chandra and Punit Goenka ₹1.5 crore and barred them from the stock market for one year for diverting company assets to benefit promoter-linked entities.

In SEBI’s final order, the quasi-judicial authority N. Murugan found that promoter-owned entity Essel Group pledged ZEEL’s Hyderabad property to borrow ₹726 crore from IHFL and used the funds without board and audit committee approval. ”Further SEBI also concluded that Goenka had failed to prevent the use of the asset or disclose it to the Board, the Audit Committee and the statutory auditors, despite allegedly having knowledge of the transaction. The alleged related-party nature of the transaction was also not disclosed in the financial statements for these years. The borrowing entities were not identified as related parties, and the use of ZEEL’s property for securing their obligations was not reported as a related-party transaction under Ind AS-24,” SEBI said.

ZEEL also failed to disclose material developments to investors, stock exchanges or in the financial statements for years, violating disclosure regulations. Further, SEBI found that Mr. Goenka had signed the CEO-CFO certificate furnishing incorrect, false and misleading information to the shareholders of ZEEL.

After concluding that the notices had violated unfair trade practices and disclosure regulations, SEBI barred ZEEL from the stock markets for two months and issued notices to Mr. Goenka and Mr. Chandra for 12 months each. Further, SEBI also fined ZEEL ₹30 lakhs, Mr. Goenka ₹58 lakhs and Mr. Chandra ₹60 Lakhs. The notices were also directed to close any open derivative positions within three months since the order is received or on expiry, whichever is earlier. The noticees were further directed to pay the penalty within 45 days from the date of receipt of the final order.