India’s regulatory body, the Securities and Exchange Board of India (SEBI), has banned Zee Entertainment Enterprises’ (ZEEL) CEO, Punit Goenka, and Chairman Emeritus, Subhash Chandra, from holding any managerial or directorial positions in any listed company. The ban comes in the wake of SEBI carrying out investigation into allegations of insider trading. The interim order issued by SEBI names Goenka and Chandra as noticees and highlights multiple references to “siphoning” of funds. The 16-page notice claims that ZEEL’s own funds were rotated through multiple layers to eventually end up in ZEEL’s accounts. The notice alleges that the management attempted to piggybank on the flagship company’s success to bankroll associate entities owned and operated by them. SEBI’s order cites a prima facie case of Chandra and Goenka siphoning off funds for their own benefit, abusing their positions as directors, and Key Managerial Personnel in a listed company.
The order raises concerns about the lack of structure and processes within the company that could control such immoral behaviour.
The SEBI order also mentions that although the promoter family held only 3.99% shares, Chandra and Goenka continued to be the head of affairs of ZEEL. Therefore, their continuation as directors/Key Managerial Personnel in any listed company or its subsidiaries was considered prejudicial to the interest of the companies, and its investors, while the investigation continued.
As a result, ZEEL must place the order before their board of directors within seven days, and Goenka and Chandra have 21 days to file a reply or objections.
It is a significant development in the media industry, as in 2021, ZEEL and Sony Pictures Networks India (later renamed Culver Max Entertainment) signed definitive agreements to merge and create an Indian broadcast giant. Goenka was expected to lead the merged entity as MD and CEO, pending regulatory approval. It remains unclear how the SEBI order may impact the merger’s current process.
