Hearing an appeal filed by Zee Entertainment Enterprises' (Zee) promoter Punit Goenka, the Securities Appellate Tribunal (SAT) on Wednesday directed the market regulator to file a reply by September 4.
The tribunal has placed the matter for final decision on September 8.
Justice Tarun Agarwala said: "We are not satisfied so far as the eight-month period for investigation is concerned and post that you will serve a notice. So this cannot go on indefinitely. I don’t agree that the impugned order remained outlaid for eight months."
A confirmatory order by the Securities and Exchange Board of India (Sebi) in the alleged fund diversion matter barred Goenka from taking any key managerial position and directorship in four Zee group firms and in the merged entity with Sony Pictures Networks India.
The matter pertains to the appropriation of Rs 200 crore deposit with YES Bank based on a letter of comfort given by Subhash Chandra, another promoter of Zee, and the alleged routing of money through related entities.
Arguing for Goenka, senior counsel Abhishek Manu Singhvi pointed out that Sebi’s order was punitive and not preventive, and that eight months' time makes it a disabling provision.
He added that the board structure of the merged entity with Sony is going to be different, with members from Sony Pictures on the board. He added that over 99.99 shareholders had agreed to this resolution.
"If public interest states that so and so should remain as a director and should manage the affairs, won’t that aspect have a bearing merely because some defalcation may have occurred in the past," Agarwala said.
Singhvi detailed that in the merged entity there would be five board members nominated from shareholders of Sony, three independent directors, of which one will be chairman as recommended by Sony, and the Chief Financial Officer will also be a nominee of Sony.
He submitted that the delegation of authorities will be linked to Sony’s global policy and subject to US regulations.
Arguing on behalf of Sebi, Senior Counsel Darius Khambata said that Goenka’s counsel had presented new material in the court which had not been produced before the market regulator or submitted even after requests. He sought time to respond with respect to the new material submitted.
Singhvi argued that Goenka had been on the board of Zee as a director since 2010, and the alleged matter pertains to 2018 and the allegations are also not of recurrence or repetition.
He said that Sebi’s order was against the interest of public shareholders and that Goenka was not part of certain entities pointed out by Sebi in the alleged circulation of money.
Singhvi added that Zee had long-standing relationships with the entities mentioned in the Sebi order and there was no doubt on the genuineness of the business transactions.
He pointed out that the creation of a Rs 200 crore fixed deposit was a normal course of business for Zee with YES Bank.