SAT reserves order on interim relief pleas filed by Zee and Punit Goenka

Zee has sought permission to proceed with its ₹3,143 crore preferential warrant issue and access mutual fund units, while Goenka has challenged Sebi's restraining order

The Securities Appellate Tribunal (SAT) on Wednesday reserved its order in the appeals filed by Zee Entertainment Enterprises (Zee) and its chief executive officer (CEO) Punit Goenka for interim relief against a restraining order by market regulator Securities and Exchange Board of India (Sebi).

 

Zee has sought permission to proceed with its proposed ₹3,143 crore preferential warrant issue and a relaxation in the 14-day window for completing it, considering the time already passed since the resolution was approved.

 

It has also sought relief in accessing its mutual fund units for dividend distribution in September, in its annual general meeting (AGM).

 

 

The market regulator, in its order dated July 31, barred Goenka for 12 months, while Zee was restrained from accessing the securities market for two months. Sebi had also imposed a penalty of ₹58 lakh on Goenka and ₹30 lakh on Zee. Meanwhile, promoter Subhash Chandra has also been barred for 12 months along with a penalty of ₹60 lakh.

 

“The request is that the operation of this order may not come into effect till we complete this process and give effect to these resolutions because they don't hurt; they are for the benefit of the company,” argued Zee’s counsel.

 

The opposing counsel argued that the chairman and the managing director made available “a property owned by a listed company to cover security in respect of their private loans taken by their private companies”.

 

He added that Goenka is the ultimate beneficiary of the proposed preferential allotment to Sunbright Mauritius Investments, a promoter group entity.

 

The tribunal questioned Sebi on the rationale behind stopping the fundraise by Zee as the fundraise may be done after the debarment period of two months.

 

“The point is whether after, as per the order presently stands, they can bring money after two months after the debarment. So, there is no blanket ban on investment or money coming in,” said the bench, adding, “If a thing which can be done after two months is not illegal, it is permissible by the regulator, and when the order was pending from December to August you say that — ‘I will today stop, you can do it after two months’. What is the logic?”

 

The matter pertains to the use of Zee’s certain land asset in Hyderabad as security for loans availed by four entities of the Essel group. The entities had availed four separate loans aggregating to ₹726 crore from Indiabulls Housing Finance Ltd (IHFL).

 

The order notes that in December 2018, Chandra executed a Declaration and Acknowledgement (D&A) in favour of IHFL on behalf of Zee.

 

The regulator alleged that the benefit arising from the deployment of Zee’s property flowed to entities allegedly controlled by Goenka and Chandra, and their family members.

 

While the D&A contained a declaration that Zee had obtained all permissions and approvals from authorities for creating the first-ranking mortgage and that Zee possessed the necessary power to secure the dues of the borrowing entities, Sebi’s investigations showed that there was no prior approval from the audit committee, the board of directors or the shareholders of Zee for the same.