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SEBI punch holes in Punit Goenka’s defence on siphoning off funds at Zee

The Securities and Exchange Board of India has termed Punit Goenka’s claims made to the Securities Appellate Tribunal (SAT) in the matter related to siphoning off funds from Zee Entertainment Enterprises Ltd (ZEEL) as “patently false” and “unsubstantiated by any documentary evidence.”

The counter affidavit filed by SEBI, seen by businessline, revealed that about ₹200 crore claimed to have been repaid to ZEEL by seven entities linked to the Essel group, originated from ZEEL or other listed companies within the Essel Group. Therefore, effectively, ZEEL funded its own repayment.

This came to light because the SEBI official who was involved in another case linked to Essel group was also looking into a settlement application filed by ZEEL.

The case dates back to 2016-18 during which Punit Goenka and Subash Chandra provided letters of comfort (LOC) to Yes Bank for providing term loan to Essel group entities. As per the terms under the LOC, in September 2018, ZEEL created a fixed deposit of ₹200 crore with Yes Bank. This was, however, revoked by Yes Bank in July 2019 in lieu of the dues owed by seven entities linked to ZEEL. Between September and October 2019, these seven entities claimed to have repayed the dues to ZEEL.

An analysis of the transactions by SEBI found that the transfers occurred between the conduit (middlemen) entities on the same date or consecutive days in a sequential fashion and at very quick intervals (within seconds and minutes), indicating that these transactions are not bona fide in nature but that these transfers were only for the purpose of funneling money to the “seven related parties” so that they could make payment to ZEEL of the amounts appropriated by Yes Bank.

Also read: ZEE and SEBI: Why the promoters and controversies are like Siamese Twins and way ahead for the stock

Essentially, the funds for repayment of dues owed by these ‘seven related parties’ originated from Zee and other entities related to the Essel Group.

As SEBI puts it, “Zee funded its own repayment.” Doubling down on this allegation, SEBI also attached, “charts (along with time stamps) depicting the flow of funds from ZEEL or other listed entity in the Essel Group into ZEEL through a web of entities,” in its counter affidavit. 

While Goenka and Chandra have also stated in their appeal that there was no urgency in this matter, SEBI reiterated that it was obliged to pass an ex-parte ad interim order to safeguard the interest of investors and protect the integrity of the securities market. 

The SEBI’s interim order, which Goenka-Chandra are appealing at the SAT at the moment, essentially bars Punit Goenka and Subhash Chandra from holding any leadership positions at Zee.

Key terms

One of the key terms of Zee’s merger with Sony is that Punit Goenka, who was serving as the MD and CEO of Zee until the SEBI ban, will continue to head the merged entity as its MD and CEO.

Also read: Zee taking legal advice on SEBI order against Goenka, Subhash Chandra

Zee writes to SEBI on June 11 that repeated investigations will impact the merger process. “(the) said merger is at an advanced stage post receipt approvals from various regulators….. (and SEBI’s) continuous and repetitive investigations on the same cause of action creates prejudice for the company and shareholders and can potentially impact the merger process,” Zee said. 

Case Timeline

May 31, 2016: Punit Goenka issued a Letter of Comfort to Yes Bank for a term loan granted by Yes Bank to a group company of ZEEL. The letter was issued without approval from its board. 

September 4, 2018: Subhash Chandra provided a Letter of Comfort towards credit facilities availed by group companies of Yes Bank. Assures that a fixed deposit of at least ₹200 crore is available with Yes Bank Ltd from any one of Essel Group of companies 

September 4-5, 2018: ZEEL created a fixed deposit of ₹200 crores with Yes Bank maturing on September 10, 2019

July 24, 2019: Yes Bank adjusted the fixed deposit against the dues owed by seven entities related to ZEEL

Sept 26 – Oct 10, 2019: The seven entities transferred amounts to ZEEL claiming to repay the amounts due from them to Yes Bank

27 April 2023: SEBI ask ZEEL for the bank details regarding the amounts repaid by the related parties

12 June 2023: SEBI passed interim order barring Goenka and Chandra from holding any managerial position in Essel group



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