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Shares in ZEE Entertainment Enterprises Ltd (ZEEL) will be in focus in Tuesday’s trading after market regulator Sebi banned Subhash Chandra and Punit Goenka from serving as directors or key managers of any listed company. Sebi’s action follows Chandra and Goenka’s alleged abuse of corporate positions and misappropriation of funds for their own benefit. Goenka is the managing director and CEO of the media company and Chandra is the chairman emeritus of the media company.
Recall that two independent directors of ZEEL resigned in November 2019 after raising concerns over several issues, including the appropriation of certain term deposits from ZEEL by YES Bank to settle loans from Essel Group-related entities. The interim order by the capital markets watchdog follows an investigation into such allegations.
According to Sebi’s investigation, ZEEL/Essel Group’s then-chairman Chandra provided a “Letter of Comfort” (LoC) for credit facilities provided by certain group companies of YES Bank. The Sebi order read that the LoC was only known to a few people in the management, not even ZEEL’s board of directors was aware of the letter.
According to the LoC, YES Bank adjusted ZEEL fixed deposits of Rs 200 crore to fulfill the obligations of seven entities (associated entities under Sebi order) which in turn were found to be owned/controlled by family members Chandra and Goenka, as per Sebi investigation .
“…It is proved that Mr. Subhash Chandra and Mr. Punit Goenka abused their positions as directors/KMPs of listed companies to misappropriate funds for their own benefit,” the Sebi order said.
“…funds originating from other listed companies in ZEEL/Essel Group, through multi-layered transfers through entities owned/controlled by the Promoter Family, and ultimately to ZEEL to demonstrate that related entities fulfill their payment obligations towards ZEEL. The above-mentioned flow of funds Clearly showing that ZEEL did not actually receive the net funds, these are only book entries showing receipt of funds,” the Sebi order added.
Chandra and Goenka had filed a settlement application with Sebi to resolve the lawsuit, but it was rejected by the capital markets regulator. “The notifiers (Subhash Chandra, Punit Goenka) will cease to act as directors or key officers of any listed company or its subsidiaries until further order,” the Sebi order said, while adding that Zee Entertainment Enterprises will place Sebi in the collection. to issue an order to its board of directors within seven days of the date of the order.
Sebi is also conducting further detailed investigations into the matter to “uncover the truth and completeness. Sebi has launched a detailed investigation into the matter and is currently in progress,” the Sebi order said.
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