The Securities and Exchange Board of India (SEBI) has barred Zee Entertainment Enterprises Ltd (ZEEL), Chief Executive Officer Punit Goenka and Essel Group founder Subhash Chandra from accessing the securities market after finding irregularities related to the mortgage of the company’s Hyderabad property.
According to a report by Moneycontrol, SEBI’s Quasi-Judicial Authority N Murugan, in the final order, restricted ZEEL from accessing the securities market for two months, while Goenka and Chandra have been barred for 12 months.
The regulator also imposed a total penalty of Rs 1.48 crore, including Rs 30 lakh on ZEEL, Rs 58 lakh on Goenka and Rs 60 lakh on Chandra.
The proceedings originated after ZEEL’s statutory auditors reported during the FY2018-19 audit that title deeds of certain immovable properties were missing. Following this disclosure, SEBI examined whether the transactions violated listing regulations and provisions related to fraudulent and unfair trade practices.
According to SEBI’s order, four Essel Group entities — Gnex Projects Pvt. Ltd., Vivek Infracon Pvt. Ltd., Gnex Infrabuild Pvt. Ltd. and Renu Realtech Pvt. Ltd. — had raised loans of Rs 726 crore from Indiabulls Housing Finance Ltd. (IHFL) in December 2016. Essel Home Pvt. Ltd. acted as a co-borrower in the arrangement.
The regulator stated that its investigation traced the ownership and control of these borrowing entities to members of the promoter family through multiple corporate structures.
SEBI noted that after the borrowers failed to maintain the required security cover, IHFL issued notices in November 2018 seeking additional collateral. Subsequently, on December 27, 2018, a Declaration and Acknowledgement was executed on behalf of ZEEL, under which the original title deed of the company’s Hyderabad land was deposited with IHFL to create a first-ranking mortgage as additional security.
The regulator said the declaration claimed that ZEEL had obtained all necessary corporate approvals for creating the mortgage. However, SEBI’s investigation found no prior approval from ZEEL’s Audit Committee, Board of Directors or shareholders.
SEBI also noted that ZEEL later informed the regulator that its management and board were unaware of the mortgage arrangement and had not authorised the transaction.
The order highlighted that ZEEL’s financial statements for FY2018-19 and FY2019-20 disclosed intermediary entities linked to the borrowing companies as related parties. SEBI concluded that the mortgage constituted a related-party transaction requiring appropriate approvals and disclosures.
The regulator held that ZEEL, Goenka and Chandra had violated applicable SEBI LODR Regulations and PFUTP Regulations and directed them to pay the penalties within 45 days.
