SEBI to Grill Zee's Top Management Over Fund Diversion Allegations, Investigation Expected to Conclude by Mid-April

22 Feb 2024 , 02:06 PM

The Securities and Exchange Board of India (SEBI) is set to question Zee Entertainment Enterprises’ top management, including founder Subhash Chandra, CEO Punit Goenka, CFO, and current/past board members, regarding fund diversion allegations.

SEBI aims to conclude its investigation by mid-April and initiate legal proceedings based on its findings. The regulator is currently scrutinizing thousands of pages of transactions, bank statements, agreements, partnership deeds, and board minutes.

Zee’s current chairman is R Gopalan, former secretary of the Department of Economic Affairs. A Zee spokesperson refuted the allegations, stating that reports on accounting issues are incorrect and that the company has been cooperating with SEBI as per the SAT order.

Zee shares declined 14.8% on BSE on February 21 following reports of SEBI finding a potential diversion of about ₹2,000 Crore by the company promoters. The cancellation of a $10-billion merger plan with Sony Group was also attributed to Sebi’s findings.

SEBI’s initial findings in June 2023 suggested a ₹200 Crore diversion through related party transactions from Zee, contested by Chandra and Goenka before the Securities Appellate Tribunal (SAT). SEBI disclosed that Chandra issued a letter of comfort for ₹4,210 Crore as chairman of Essel Group.

The investigation originated from the resignation of three independent Zee directors in November 2019, highlighting concerns about the appropriation of a fixed deposit of ₹200 Crore by Yes Bank for settling loans of related parties of Essel Group.

Chandra and Goenka are associated with Essel Group, and the examination revealed a letter of comfort issued by Chandra to Yes Bank in September 2018. The letter ensured a fixed deposit of at least ₹200 Crore to the bank while the loan remained outstanding.

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