Sebi clubs fund diversion, disclosure violation probes against ZEE, Punit Goenka and Subhash Chandra | Company Business News

The capital market regulator on Thursday clubbed proceedings against Zee Entertainment Enterprises Ltd (ZEEL), its chief executive Punit Goenka and former chairman Subhash Chandra over allegations of fund diversion and violation of disclosure requirements.

The Securities and Exchange Board of India (Sebi) will now investigate these allegations together, as per its order dated 2 January.

Sebi had accused ZEEL of failing to comply with certain provisions of the Sebi (Listing Obligations and Disclosure Requirements) Regulations, and Chandra and Goenka of violating corporate governance rules.

The regulator had issued a show-cause notice on 6 July 2022 questioning their actions and asking why penalties should not be imposed.

In response, Zee and Goenka filed settlement applications with Sebi, which the regulator rejected in April 2023 and referred the case for further investigation.

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In August 2023, Sebi issued an interim order-cum-show-cause notice barring Chandra and Goenka from holding key positions in any listed company for allegedly diverting assets of Subhash Chandra-owned Essel Group companies. 

The Securities Appellate Tribunal set aside this order but Sebi was permitted to continue its investigation. To be clear, this investigation was different from the probe into LODR violations by ZEEL and its top executives.

While investigating the LODR violations, Sebi concluded that its findings in that probe could be subsumed in the diversion of funds case.

“The allegations in the show-cause notice of 6 July 2022 issued by the adjudicating officer are to be subsumed with the findings of the further investigation carried out by SEBI in the instant (funds diversion) matter,” the order said.

Accordingly, the LODR proceedings against the company and executives were dropped. This, according to securities law experts, seems to be a move to avoid multiplicity of proceedings.