Mumbai, August 1: The Securities and Exchange Board of India (SEBI) has taken significant action against Zee Entertainment Enterprises Limited (ZEEL) and its top executives, Punit Goenka and Subhash Chandra, banning them from participating in the securities market. The regulator discovered that the company’s land in Hyderabad was mortgaged without necessary corporate approvals in exchange for loans taken by Essel Group companies.
According to a final order issued by SEBI’s quasi-judicial authority, ZEEL is barred from entering the securities market for two months. Meanwhile, Punit Goenka and Subhash Chandra face a one-year ban from trading in the securities market.
In addition, SEBI has imposed a total fine of ₹1.48 crore on the three parties involved. This includes a penalty of ₹30 lakh on ZEEL, ₹58 lakh on Punit Goenka, and ₹60 lakh on Subhash Chandra.
The regulator found that all parties violated the Listing Obligations and Disclosure Requirements (LODR) Regulations, 2015, and the Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) Regulations, 2003. SEBI has instructed all parties to pay the penalty within 45 days.
This case originated during the statutory audit of ZEEL for the fiscal year 2018-19. The audit revealed that the company lacked original ownership documents (title deeds) for some of its real estate assets.
The investigation uncovered that in December 2016, four Essel Group companies borrowed ₹726 crore from Indiabulls Housing Finance Limited (IHFL), with Essel Home Private Limited as a co-borrower.
It was also discovered that Punit Goenka, Subhash Chandra, and their families controlled these companies through various corporate levels.
SEBI reported that when the borrowing companies failed to maintain necessary securities, IHFL issued a notice in November 2018 for additional collateral.
Subsequently, on December 27, 2018, a declaration and acknowledgment were signed by ZEEL, wherein the original documents of the Hyderabad land were submitted to IHFL, aiming to create a first-ranking mortgage on the property as additional security for the loans.
However, ZEEL claimed that all necessary corporate approvals for this mortgage had been obtained. Yet, SEBI’s investigation found no prior approval from the audit committee, board of directors, or shareholders.
SEBI also noted that ZEEL later informed the regulator that the company’s management and board were unaware of this mortgage and had never approved the transaction.
According to the regulator, this was a related-party transaction based on the financial statements for the fiscal years 2018-19 and 2019-20, which required necessary approvals and disclosures under applicable regulations.
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