- SEBI has prohibited Zee Entertainment Enterprises Ltd (ZEEL) from the securities market for two months and its Chairman Emeritus Subhash Chandra and MD & CEO Punit Goenka for one year over unauthorised pledge of the company’s Hyderabad land to secure loans availed by promoter-linked Essel Group entities.
- A total penalty of ₹1.48 crore was imposed on ZEEL, Chandra, and Goenka, with individual penalties of ₹30 lakh on ZEEL, ₹60 lakh on Chandra, and ₹58 lakh on Goenka.
- SEBI's investigation was triggered after ZEEL's statutory auditor, Deloitte Haskins & Sells LLP, reported in its FY19 audit that the title deeds of certain immovable properties were missing.
- Shareholders approved a ₹3,144-crore convertible warrant issuance to the promoter group with 76.64% support during Friday's extraordinary general meeting (EGM).
- On December 27, 2018, the original title deeds of ZEEL’s Hyderabad property were handed over to Indiabulls Housing Finance Ltd (IHFL) as security for loans taken by Essel Home and other borrowing entities linked to the Essel Group.
- SEBI noted that the deployment of ZEEL’s property constituted a related-party transaction and the company failed to obtain prior approval from its audit committee, thereby violating LODR regulations.
- The title deeds remained with the lender until June 2020, with ZEEL failing to make necessary disclosures despite Chandra and Goenka's knowledge of the situation.
- A year before the recent order, shareholders rejected a similar ₹2,237-crore warrant proposal with only 60% support.
The Securities and Exchange Board of India (Sebi) has imposed significant penalties on Zee Entertainment Enterprises Ltd (ZEEL) and its top executives due to an unauthorized pledge of company land.
Subhash Chandra and Punit Goenka have been barred from the securities market for one year, while ZEEL faces a two-month prohibition.
The total penalty amounts to ₹1.48 crore, with individual fines of ₹60 lakh for Chandra, ₹58 lakh for Goenka, and ₹30 lakh for ZEEL.
The case revolves around a Deposit and Declaration Agreement executed on December 27, 2018, where the original title deeds of ZEEL’s Hyderabad property were handed over to Indiabulls Housing Finance Ltd (IHFL) as security for loans taken by entities linked to the Essel Group.5
Sebi noted that this transaction was a related-party transaction and lacked prior approval from ZEEL's audit committee, violating Listing Obligations and Disclosure Requirements (LODR) regulations.6
The regulator's investigation was prompted by a report from ZEEL's auditor, Deloitte Haskins & Sells LLP, which indicated missing title deeds during the FY19 audit.
Chandra allegedly misused his position by falsely claiming that the necessary approvals were obtained before creating the mortgage, putting ZEEL's assets at risk for personal benefit.
The order is effective immediately, and penalties must be paid within 45 days.
In a related development, ZEEL's shareholders approved a convertible warrant issuance, raising the promoters' stake significantly despite previous investor rejections.4
Ashish K Singh, managing partner at Capstone Legal, noted that the Sebi restrictions could create regulatory ambiguity around ZEEL's plans for the convertible warrants.
“The regulator's 150-page final order said Chandra falsely claimed management approval before handing the title deeds to Indiabulls Housing Finance, and imposed penalties of ₹60 lakh on him and ₹58 lakh on Goenka. Separately, shareholders approved a ₹3,144-crore warrant issue that would raise promoters' stake from 4% to 24%.”
