 "Zee")
The Securities and Appellate Tribunal (SAT) on Monday dismissed appeals filed by Essel group chairman Subhash Chandra and Zee Entertainment Enterprises’ MD & CEO Punit Goenka against an interim order issued by the Securities and Exchange Board of India (Sebi), alleging fund diversion at the television major.
In an interim ex-parte order on June 12, the market regulator debarred Goenka and Chandra from taking key managerial positions and directorships at listed companies due to alleged fund diversion at Zee.
The SAT bench headed by Justice Tarun Agarwala said that it did not find any reason to interfere with Sebi’s order at this stage. The tribunal has directed Zee promoters to submit their responses within two weeks.
“In the absence of any evidence being filed by the appellants before us, we do not find any perversity, irregularity, illegality or irrationality in passing of the impugned order,” said SAT.
The tribunal also asked Sebi to fix a date for hearing within a week from the filing of replies by Goenka and Chandra. The market regulator will have to pass the appropriate orders within two weeks after giving an opportunity to be heard.
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However, SAT has directed the market regulator to appoint another whole time member (WTM) for investigations to remove any kind of bias.
Ashwani Bhatia, the Sebi WTM who passed the interim order against the Zee promoters, had also passed an order against Essel group firm Shirpur Gold Refinery in April. He was also a part of the committee considering the settlement application in the matter.
SAT is of the opinion that there is a possibility of the WTM being influenced by the discussions that took place in the settlement proceedings.
“In our opinion, (the) WTM is required to focus on the material evidence which is on the record and should not import information which is in his personal knowledge,” said SAT.
Further, the tribunal called Zee promoters’ contention that that the transactions were related to FY20 and there was no hurry to pass an interim order at this stage, as not acceptable.
“There is nothing on record to indicate that the details of the repayment made by the related entities was made known to the Sebi or to the stock exchange in 2019-20. These details only surfaced when Zee provided the information on May 8, 2023. Thus, prima facie at this stage there is no delay in the passing of the impugned order,” noted SAT.
The court also observed that no evidence of any sort has been placed to show that the prima facie findings through the bank statement records is ‘perverse’.
The bench also opined that the Goenka and Chandra should avail the opportunity to file objections, provide documents and prove that funds given by ZEEL to related entities were valid consideration and that there was no round tripping of funds.
On the point raised by Goenka’s counsel for not providing an opportunity to be heard before the issuance of the order, the tribunal observed that pre-decisional hearing is not always necessary.
“At times, an opportunity of hearing may not be pre-decisional and may necessarily have to be post-decisional especially where the act to be prevented is imminent or where action to be taken brooks no delay,” noted SAT.
