Deloitte Gets Clean Chit From Sebi Over Zee's Hyderabad Property Row

An audit firm has walked away without penalty in a case that once raised questions about its conduct.

Sebi investigated Deloitte Haskins & Sells LLP in 2024 for its work as statutory auditor of Zee Entertainment Enterprises Ltd (ZEEL), specifically over a property transaction that had bypassed board approval, according to a Mint report.

But the regulator's final order, issued on July 31, found no fault with the audit firm, concluding that Deloitte did not have complete knowledge of the transaction and that disclosure obligations could not be pinned on an auditor.

Origins Of The Dispute

The controversy traces back to December 2018. That month, ZEEL promoter Subhash Chandra signed off on a declaration committing the company's Hyderabad property, measuring 17,639.64 square metres, as collateral with Indiabulls Housing Finance Ltd (IHFL).

This land was pledged as a first-ranking mortgage to secure ₹726 crore in loans drawn by four Essel Group firms, namely Gnex Projects, Vivek Infracon, Gnex Infrabuild and Renu Realtech, with Essel Home named as co-borrower. Sebi's objection centred on the fact that this arrangement had never been placed before ZEEL's audit committee, board or shareholders for sign-off.

Questions Around Deloitte's Conduct

Deloitte stepped down from its role at ZEEL in 2022, but its involvement in the case dates back to May 17, 2019, when it flagged in its CARO Report for FY19 that the original title deed to the Hyderabad property could not be located.

When Sebi launched its inquiry in 2024, it wanted to know why Deloitte had not dug deeper into the missing deed at the time, and why the matter went unmentioned again in the firm's FY20 audit.

A statutory auditor and a forensic auditor serve different functions. Deloitte's job was confined to alerting shareholders about the missing document, not uncovering the reasons behind its disappearance. At the time, the firm was informed that the deed was held by prospective buyers interested in the property. By the time Deloitte finalised its FY20 report, it had reportedly been shown the deed, which is why no fresh disclosure followed, a sequence of events the firm laid out before Sebi during its 2024 examination.

What Sebi Ruled

In clearing Deloitte, Sebi's order stated, "The complete facts relating to the execution of the 2018 D&A, the absence of authorisation by the Board and the interest of Noticee Nos. 2 and 3 (Goenka and Chandra) in the transaction were not known to Deloitte. The responsibility for determining whether the event was required to be disclosed cannot be shifted upon the statutory auditor. The reliance placed upon the report of Deloitte is also misplaced."

The same order came down harder on ZEEL itself. The company was barred from the securities market for two months, while promoter Subhash Chandra and MD and CEO Punit Goenka each received a 12-month ban.

Zee Seeks Relief From SAT

ZEEL responded on Wednesday, August 12, by moving the Securities Appellate Tribunal (SAT), asking for the ban to be lifted. The company argued it would need to sell close to ₹1,200 crore worth of liquid mutual fund holdings just to keep daily operations running.

Two days later, on Friday, August 14, SAT offered partial relief, permitting Zee to go ahead with its planned ₹3,143 crore fundraise while leaving Sebi's market-access curbs in place. This relief, however, comes with a condition; Zee must deposit the entire penalty amount ordered by Sebi within a week.

Although the case has stirred fresh debate on how far an auditor's duties extend, Sebi itself does not hold the authority to punish audit firms directly. A similar tension played out in 2018, when Sebi banned Price Waterhouse (PwC) for two years over its role in the ₹7,800 crore Satyam scandal. SAT later overturned that order, holding that Sebi had no power to bar auditors, but the Supreme Court stayed SAT's ruling in 2019.