The ongoing investigation by the Securities and Exchange Board of India (Sebi) into alleged diversion of funds by Zee promoters – Subhash Chandra and Puneet Goenka – is set to enter an interesting phase. A hearing is scheduled in the Bombay High Court on Wednesday on Chandra’s plea against Sebi’s conclusive summons.
The court’s final verdict may breathe new life into the markets regulator’s scrutiny of the `200-crore ‘hole’ in the company’s books of accounts. Sebi is investigating alleged sham transactions undertaken by Chandra and Goenka to divert funds from Zee. In particular, the issue is about a letter of credit (LoC) issued by Chandra towards a `200-crore fixed deposit in Yes Bank. Goenka’s lawyers have argued in court that he was not aware of the LoC issued, adding that it should not be given importance in the matter.
While some reports earlier this year have speculated that Zee’s alleged divergence of funds was 10 times more than the initial estimate, the markets regulator has not said anything so far.
In January, Sony had called off its proposed $10-billion merger with Zee, saying it was unable to agree upon an extension to the January 21 deadline to the merger. It also cited non-fulfilment of closing conditions for termination of the merger agreement dated December 21, 2021, adding that it was disappointed with the outcome after two years of negotiations.
In August, Sebi in a confirmatory order had barred both Chandra and Goenka from holding key positions in any listed entity, and said it will finish the investigation within eight months. The ban on Goenka, however, was short-lived as the Securities Appellate Tribunal (SAT) reinstated him as Zee’s managing director and CEO in October last year, while Sebi was instructed to widen its probe into the alleged siphoning of funds.
Sebi’s investigation hit a wall when Essel Group chairman Subhash Chandra challenged its summons in the Bombay HC in March, arguing that it was more conclusive than inquisitorial. Sebi, in response, agreed not to enforce the summons until April 10, buying themselves two weeks to formulate a response. The HC first extended Sebi’s stay to April 30, which was extended further till June 30.
Sebi did not respond to queries from FE on the status of the case.