Punit Goenka, the managing director and CEO of Zee Entertainment Enterprises, had his regulatory prohibition from holding a directorship or a key managerial position in a listed company overturned by the Securities Appellate Tribunal (SAT) on Monday.
The proposed merger between the Indian media company and Culver Max Entertainment, the local division of Sony Group Corp. in Japan, may have accelerated as a result of the SAT’s verdict (Sony Pictures).
Goenka will be able to maintain his leadership roles at Zee and his position as a key executive of the combined company going forward, thanks to the order issued on Monday, which overrides a restricted ruling issued by the Securities and Exchange Board of India (Sebi) in August.
The capital markets watchdog may file a Supreme Court appeal against the SAT decision.
As stated by persons familiar with the matter, steps have been taken to dissolve the temporary committee overseeing Zee’s operations and restore Goenka. Earlier, Goenka and his father, Subhash Chandra, were unable to get any temporary relief from SAT in defiance of Sebi’s directive.
Judge Tarun Agrawala, the SAT presiding officer, and technical member Meera Swarup remarked that the regulator has not been able to demonstrate the ‘foundational facts’ relating to Goenka, leading them to strike aside the Sebi order.
In its ruling, it also stated that Goenka was prohibited ‘on a preponderance of probabilities’ from holding managerial and directorial posts.
According to SAT, ‘genuine documents are rejected on the grounds that they do not prove the transactions beyond a reasonable doubt.’
In a move against Goenka and the chairman emeritus of Zee, Subhash Chandra, Sebi issued an interim order on June 12 and a confirmatory order on August 14 alleging they transferred funds from the company to other promoter entities without the board’s consent.
‘The withdrawal of the ban placed by Sebi on Punit Goenka – over his appointment as a key managerial person (KMP) of Zee, and merged or amalgamated entities arising from the Zee and Sony merger – will allow him to be appointed as chairman & managing editor and chief executive, as envisaged under the scheme of the merger,’ Manmeet Kaur, a partner in the litigation firm Kara Inc. ‘Further, he can take up the role of director or any other KMP.’
Sangeeta Jhunjhunwala, a partner at Khaitan Legal Associates, stated that Sebi might step up its existing investigations and contest the SAT judgment in the Supreme Court.
Following the announcement of the order during market hours, the Zee stock saw a slight increase, but it ultimately closed flat at Rs 249.3 per share on the National Stock Exchange. At now, Zee’s market capitalization is just above Rs 24,000 crore.
In the meantime, SAT made it apparent that any observation made in this order is merely prima facie, even though it granted Goenka’s appeal. It further stated that neither party will use nor allow the ruling to impact the probe.
According to SAT, Sebi has not given any justification for why the probe will take eight months to finish. This was made clear in Sebi’s confirming order. ‘We have seen that on numerous occasions, whenever this tribunal or the superior court has directed Sebi to complete the investigation within a stipulated period, (it has) not been done, and application after application (is) filed by Sebi, seeking time to extend the period of investigation,’ the SAT stated.
SAT refuted Sebi’s case for maintaining the order, stating that Goenka’s roles as the combined company’s MD and CEO will not affect the inquiry because Sony Corp. will select important personnel in accordance with its majority stake in the new company.
The subject matter of the Sebi investigation into Zee’s promoters dates back to November 2019, when three of the company’s independent directors resigned, citing a number of concerns, including the purported misappropriation by Yes Bank of a Rs 200 crore Zee fixed deposit for the purpose of squaring off the loans of affiliated parties of the promoter entity, Essel Group.
Based on preliminary evidence, the market watchdog concluded that the Goenkas had taken money out of Zee and other Essel Group listed firms, benefiting the promoter family in the end.
The alleged scheme by which Rs 143.90 crore of Rs 200 crore was transferred from Zeez and other listed Essel entities to fictitiously represent repayment of dues was also established by Sebi.
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