The ministry of corporate affairs is investigating the books of Zee Entertainment Enterprises.
“We are in receipt of the letter dated January 21, 2020, from the ministry of corporate affairs (MCA), seeking certain information and inspection under Section 206(5) of the Companies Act, 2013,” the company said. The ministry’s inquiry comes months after two independent directors on the company’s board resigned in November 2019, citing poor corporate governance.
The company said it is collating the information to present to the ministry. “You may note that no conclusion or adverse inference has been drawn by any authority against the company,” it stated. Section 206 (5) of the Company’s Act deals with the ministry’s powers to conduct inquiries or investigation into the affairs of a company. The company has also written to the market regulator, Securities and Exchanges Board of India (Sebi), stating that “some persons have been trying to manipulate our stocks and have been spreading false rumours,” Zee entertainment said in an exchange filing.
Prompted by the exchanges, Zee Entertainment had in November 2019 disclosed the letters of the two independent directors who had resigned. One of the independent directors, in the letter, had highlighted several instances of poor corporate governance, including the fact that “advances given for film acquisition and aggregation in the financial year 2018-2019 were highly unusual.” The ex-directors had also flagged that the company had not taken action on the large outstanding of DishTV and SITI Cable Networks.
Last year, Subhash Chandra, founder of Zee Entertainment Enterprises, stepped down as chairman of the company after the promoter group sold a majority of its pledged stake in the company to domestic and foreign investors. The promoter group currently owns 4.87% in the company. Shares of Zee Entertainment Enterprises closed at Rs 226.70 on BSE, down 7.5% on Wednesday.