Why SEBI barred Subhash Chandra, ZEEL CEO Punit Goenka for a year and slapped penalty
The Securities and Exchange Board of India (SEBI) has barred Zee Entertainment Enterprises Ltd (ZEEL) founder & chairman emeritus Subhash Chandra and CEO Punit Goenka from accessing the securities market for one year after finding that the company’s immovable property was pledged without authorisation to secure loans raised by promoter-linked entities. Sebi has also imposed penalties of Rs 60 lakh on Subhash Chandra, Rs 58 lakh on Punit Goenka and Rs 30 lakh on ZEEL. In addition, ZEEL has been restrained from accessing the securities market for two months.In its final order issued on Friday, SEBI held that land parcels owned by ZEEL in Hyderabad were used as collateral for loans availed by Essel Group entities without the knowledge or approval of the company’s board of directors or audit committee. The transactions were also not disclosed to shareholders or investors, constituting a serious breach of corporate governance and fiduciary responsibilities. The violations relate to transactions carried out in 2018. Privately held firms of the promoter group had taken loan from the lenders. When the lender asked for additional security cover, title deeds were handed over to the lender. The pledge was allegedly created without board authorisation and remained undisclosed, depriving shareholders of material information regarding the company’s assets. Assets can’t be used for promoter firms SEBI observed that the assets of a listed company are held in trust for all shareholders and cannot be deployed for the benefit of promoter-controlled entities without due corporate approvals and governance safeguards. It held that the unauthorised encumbrance of the company’s assets constituted a fraudulent device that prejudiced investor interests and violated the provisions of the SEBI Act and the Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) Regulations.
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