New Delhi, Aug 14 (IANS): The interests of entities, Subhash Chandra and Punit Goenka are factually in direct conflict with the interests of the public shareholders and the company, an order by SEBI Chairman Madhabi Puri Buch on Monday noted.
As prima facie found, the Entities have actively tried to conceal the very acts which have led to the loss of at least Rs 143.9 crore to the public listed companies including Zee Entertainment Enterprises, the 91 page order said.
While the Entities may argue that even the limited restraint noted above will be excessive and disproportionate in the matter, it is emphasized that the imminent effect of permitting the Entities to be in position of influence is that the ongoing investigation cannot be fair and complete.
As has been highlighted earlier, SEBI has issued a confirmatory order in respect of Subhash Chandra, Chairman Emeritus, Zee Entertainment and noted that the possibility of him impacting fair and transparent investigation cannot be ruled out.
The SEBI order said: "In respect of Entity No 1, it has been submitted that he does not hold any position of directorship or KMP in ZEEL or any other company and therefore, the direction seeks to serve no purpose except for impacting his reputation.
"In this regard, while it is not in dispute that as on date, Entity No. 1 does not hold any director / KMP position and is only Chairman Emeritus of ZEEL, one cannot lose sight of the fact that in the instant case, it is the LoC issued by Entity No. 1, which is the original / root cause of the entire scheme, which has, prima facie, been orchestrated," the SEBI order said.
"In the absence of the LoC, neither YBL would have appropriated the fixed deposit of ZEEL towards the loans of Associate Entities nor any loss would have been caused to ZEEL/other listed companies nor the Entities would have needed to design the whole scheme to conceal the said loss," it added.
"Further, even if he is not holding a position of Director / KMP, it is not disputed that he is a part of the Promoter Group and has a long standing influence on the companies belonging to the Essel Group, and therefore, nothing precludes him from seeking re-appointment on the Board of ZEEL in accordance with the Companies Law. Accordingly, the possibility of him impacting fair and transparent investigation, should he be so appointed, cannot be ruled out. Thus, in my view, continuance of restraint of the limited nature noted above is essential in respect of Entity No. 1," the order said.
The order noted that it is also learnt that on August 10, 2023, National Company Law Tribunal has granted its approval to the above mentioned merger.
It is noted from the reply submitted in this regard that post-merger, Entity No. 2, Punit Goenka would be appointed as Managing Director of the merged company."The same means that he would be entrusted with substantial powers of management of the affairs of the merged company. That very role in ZEEL is under question and therefore, till the final outcome of the proceedings in the instant matter, it would be appropriate that he is not part of the management of ZEEL or any corporate avatar of it," the order said.
"Entity No. 2 has submitted that he is integral to the functioning of the merged company (ZEEL's merger with Culver Max Entertainment Pvt. Ltd.) due to his experience in the industry and local expertise. It has also been stated that the scheme of merger also contemplates approval of the Board for appointment / removal of the KMP of the company. In this regard, I note that the conduct of Entity No. 2 as the Managing Director and Chief Executive Officer of ZEEL has been found to be prima facie in violation of provisions of PFUTP Regulations and LODR Regulations. His actions were in direct conflict with the interests of 96 per cent public shareholders of ZEEL, necessitating imposition of temporary restraint on him," the order said.
"SEBI in its order said balancing the said purpose of ensuring a fair and transparent investigation with the impact of the directions on the Entities, the directions are being modified.
The investigation in the matter by SEBI shall be completed in a time-bound manner and in any event, within a period of 8 months from the date of this Order.
"Till further orders, Entities shall not hold position of a Director or a KMP in ZEEL, other public listed companies and their wholly owned subsidiaries, under the control of the Entities and have been identified as part of the scheme, nor in any resultant company that is formed pursuant to a merger or amalgamation of any of these companies with any other company, wholly or in part, or in any company, which is formed pursuant to demerger of any of these companies," the order said.
"The rationale for the same being that while the proceedings in the matter are in progress, it is SEBI's priority to insulate the assets of the public listed companies from exercise of any influence or control by the Entities. The same rationale applies to wholly owned subsidiaries of such listed companies because their assets, in effect, belong to the shareholders of such listed companies," it added.
"It has been submitted on behalf of the Entities that the directions issued vide the Interim Order are indefinite in terms of scope as well as time as they restrain the Entities from holding the position of a director or KMP of any listed company or its subsidiaries till further directions. To this submission, without prejudice to other findings in this Order, I do find merit in the arguments advanced in this regard by the Entities," the order said.