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The Securities and Exchange Board of India (Sebi) has barred Zee Entertainment Enterprises Ltd (ZEEL) from the securities market for two months and its Chairman Emeritus Subhash Chandra and Managing Director & CEO Punit Goenka for one year over the unauthorised pledge of the company's Hyderabad land to secure loans taken by promoter-linked Essel Group entities. In addition to the market restrictions, Sebi imposed cumulative penalties of INR 1.48 crore on the company and the two executives. The regulator found that ZEEL failed to obtain mandatory approvals and did not disclose the related-party transaction in its financial statements, despite senior management being aware that the property had been pledged as collateral.
The Securities and Exchange Board of India (Sebi) has barred Zee Entertainment Enterprises Ltd (ZEEL) from accessing the securities market for two months, while Chairman Emeritus Subhash Chandra and Managing Director and Chief Executive Officer Punit Goenka have been prohibited from the market for one year. The action follows the regulator's findings that the company's Hyderabad land was pledged without proper authorisation to secure loans availed by promoter-linked entities of the Essel Group.
In a 150-page final order issued recently, Sebi also imposed a cumulative monetary penalty of INR 1.48 crore on ZEEL, Chandra and Goenka. The regulator levied penalties of INR 30 lakh on ZEEL, INR 60 lakh on Chandra and INR 58 lakh on Goenka. The order came into force with immediate effect, with the parties directed to pay the penalties within 45 days.
According to Sebi, the matter relates to a Deposit and Declaration Agreement executed on 27 December 2018, under which the original title deeds of ZEEL's Hyderabad property were handed over to Indiabulls Housing Finance Ltd (IHFL) as security for loans obtained by Essel Home and other borrowing entities associated with the Essel Group.
The regulator observed that the deployment of ZEEL's property as collateral constituted a related-party transaction under the applicable regulations. However, the company failed to obtain prior approval from its audit committee before entering into the arrangement, thereby violating the Listing Obligations and Disclosure Requirements (LODR) Regulations.
Sebi further found that ZEEL did not make the required disclosures in its financial statements, despite Chandra and Goenka being aware that the Hyderabad land had been pledged and that the original title deeds remained with the lender until June 2020. The regulator stated that the true nature of the transaction was not disclosed to shareholders and was instead presented as a case of misplaced documents, even after the matter became the subject of litigation and arbitration proceedings.
In its findings against Chandra, Sebi held that he had misused his position as chairman by handing over the original title deeds of ZEEL's Hyderabad property to IHFL after falsely representing that the action had received approval from the company's management. According to the regulator, this exposed a significant corporate asset to risk for his personal benefit.
Sebi also concluded that Chandra failed to act in good faith, exercise due diligence and safeguard the interests of ZEEL and its shareholders, amounting to an abuse of his position and authority. The regulator said the company's governance failures extended to inadequate disclosure and non-compliance with regulatory approval requirements, resulting in enforcement action against both the company and its senior leadership.
Source - PTI
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