- The Securities and Exchange Board of India (SEBI) delivered a swift directive on Monday, targeting Subhash Chandra and Punit Goenka.
- The order requires both individuals to immediately step down from their roles as directors or Key Managerial Personnel (KMPs) in any listed company or its subsidiaries, and this remains in effect until further notice.
MUMBAI (India CSR): The Securities and Exchange Board of India (SEBI) has taken a tough stance, issuing an immediate directive on Monday against Subhash Chandra and Punit Goenka. Both individuals are required to step down from their roles as directors or Key Managerial Personnel (KMPs) in any listed company or its subsidiaries, effective until further notice.
The exploitation of Power for Self-gain
The regulator has accused Chandra and Goenka of severe misuse of power. Both individuals are alleged to have misappropriated assets from Zee Entertainment Enterprises Ltd. (ZEEL) and other listed Essel Group companies, all in an effort to profit their own Associate Entities.
Threat to Investors and Company Interests
In light of the severity of these allegations and the ongoing investigation, SEBI has expressed its concern that continued involvement of Chandra and Goenka could be disastrous for the implicated companies and their investors.
Stripping of Key Managerial Positions
SEBI’s interim order prohibits Chandra and Goenka from holding any Key Managerial Positions until further clarification on the matter. Both have been given a 21-day window to respond with their statements or objections to the allegations.
Allegations of Systematic Fund Siphoning
The heart of the issue revolves around the alleged embezzlement of funds. Despite their Promoter Family only holding a 3.99 percent stake in ZEEL, both Chandra and Goenka have managed to maintain influential positions in the company.
Manipulating Investors and Regulators
According to SEBI, both individuals have utilized deceptive measures to manipulate investors and regulators. They stand accused of creating false financial entries to make it appear that funds were being returned by Associate Entities, when in reality it was ZEEL’s own money being circulated through multiple layers before being returned to its own accounts.
Misusing ZEEL’s Success
It’s alleged that the duo attempted to leverage the success of ZEEL to financially support their own Associate Entities. SEBI noted that these actions seem to be part of a meticulously planned scheme, using up to 13 entities as pass-through bodies within a mere span of two days.
Incriminating Evidence of Fund Diversion
SEBI has emphasized the need for thorough investigations, given that the entities used in these transactions are also implicated in the Shirpur Gold Refinery Ltd. case. This connection strengthens the suspicion of fund diversion from ZEEL.
Worrying Share Price Decline
A significant decline in ZEEL’s share price from approximately Rs. 600/- per share to less than Rs. 200/- per share between FY 2018-19 and FY 2022-23 has raised alarming concerns about the company’s financial health, despite its regular profitability and after-tax income generation.
ZEEL: A Misused Asset
SEBI did not hold back in its criticism of the alleged misconduct, stating, “ZEEL is the flagship Company of the Essel Group. It appears as if it was used like a piggy bank by the Noticees.”
Conclusive Evidence Prompts Immediate Action
SEBI’s order is tied to the interim order dated April 25, 2023, associated with the Shirpur Gold Refinery Ltd. case. The commonalities in the entities and timelines involved in both cases further cemented SEBI’s decision to act without delay.
