SEBI Bars ZEE, Punit Goenka, Subhash Chandra From Securities Market

The Securities and Exchange Board of India (SEBI) has barred Zee Entertainment Enterprises (ZEE), its Chief Executive Officer Punit Goenka and Essel Group founder Subhash Chandra from accessing the securities market, over the alleged unauthorised mortgaging of the company's Hyderabad property.

In its final order, SEBI's Quasi-Judicial Authority N Murugan barred ZEE from the securities market for two months, while Goenka and Chandra, who is Chairman Emeritus of ZEE, have been restrained for 12 months each.

The regulator also imposed penalties totalling ₹1.48 crore, comprising ₹30 lakh on ZEEL, ₹58 lakh on Goenka and ₹60 lakh on Chandra. SEBI directed the noticees to pay the penalties within 45 days.

Case Backdrop

The case originated from a report by ZEE's statutory auditors in the FY2018-19 audit, which flagged that title deeds of certain immovable properties were missing. This prompted SEBI to investigate possible violations of the SEBI Listing Regulations and the Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) Regulations.

According to the order, four Essel Group companies, Gnex Projects, Vivek Infracon, Gnex Infrabuild and Renu Realtech, had borrowed ₹726 crore from Indiabulls Housing Finance (IHF) in December 2016, with Essel Home as co-borrower. SEBI said its probe traced the ultimate ownership of these borrowing entities to the promoter family through multiple corporate layers.

The regulator said that after the borrowers failed to maintain the required security cover, IHF sought additional collateral in November 2018. On December 27, 2018, a declaration was executed on ZEE's behalf depositing the original title deed of its Hyderabad land with IHF, creating a first-ranking mortgage over the property.

SEBI said this declaration claimed all necessary corporate approvals had been obtained, but its investigation found no prior approval from ZEE's Audit Committee, Board of Directors or shareholders. The regulator noted that ZEE had later informed it that the company's management and board were unaware of the mortgage.

SEBI further held that the transaction qualified as a related-party transaction requiring specific approvals and disclosures, since ZEE's financial statements for FY2018-19 and FY2019-20 listed intermediary entities linked to the borrowers as related parties.

Holding that the noticees violated provisions of the SEBI LODR and PFUTP Regulations, the regulator passed the final order accordingly.