The Securities Appellate Tribunal on Thursday declined to grant immediate relief to Essel group chairman Subhash Chandra and his son Punit Goenka against directions passed by the Securities and Exchange Board of India (Sebi) in an alleged fund diversion case.
The tribunal directed Sebi to file a reply within 48 hours and put the matter for disposal on June 19.
Lawyers representing the promoters of Zee Entertainment Enterprises (ZEEL) appealed for a stay on Sebi’s interim order, which debars them from taking up any key managerial and director positions at listed companies.
"Having heard the learned counsels for the parties, we are of the opinion that passing an interim order at this stage would be virtually allowing the appeal," said the SAT bench.
Goenka’s lawyer argued that Sebi had "jumped to conclusions" and had requested for an initial stay on the order for 14 days.
He said that the merger of ZEEL with Sony Pictures Networks India is pending for consideration before the National Company Law Tribunal (NCLT). The next hearing before the NCLT is slated for June 16.
Sources said ZEEL may make a plea to NCLT for deferment of hearing on the merger.
Goenka was to be the managing director of the merged entity worth Rs 40,000 crore.
Chandra’s lawyer said the ZEEL founder was not on board of any listed company as a director or held a key managerial post.
The tribunal enquired about the time required by Sebi to complete the investigation in the matter.
In an interim order issued on June 12, Sebi alleged that Chandra and Goenka abused their position as directors and key managerial personnel for siphoning off funds for their own benefit.
“While the investigation is still underway, their continuation as a director/Key Managerial Personnel in any listed company or its subsidiaries is likely to be prejudicial to the interest of those companies, particularly its investors,” said the order by Sebi whole time member Ashwani Bhatia.
Calling it a poor case of corporate governance, the markets regulator had observed that there were no structures in place to control irresponsible behaviour by the individuals and that Chandra and Goenka used ZEEL as their ‘piggy bank’.
Sebi had alleged that the duo had a direct role in diversion of assets of ZEEL and other listed companies of Essel Group and benefited from liquidation of FD of ZEEL by Yes Bank through associated entities.
In the order, the market watchdog had provided the father-son duo a window of 21 days to submit their objections or replies to the allegations before Sebi.
Sebi had initiated the probe following the resignation of two independent directors from the company in November 2019.
The regulator in its order also noted that while the promoters held only a 3.99 per cent stake in ZEEL, Chandra and Goenka continued to be at the helm of the affairs of the company.