It also barred the company from the securities market for two months.
The case stemmed from an unauthorised pledge of ZEEL’s Hyderabad land to secure loans worth ₹726 crore which were availed by four closely held borrowing companies from lender Indiabulls Housing Finance Ltd (IHFL). ZEEL itself was not a borrower and did not receive any part of the loan proceeds.
SEBI's quasi‑judicial authority N Murugan examined whether use of ZEEL’s asset was part of a fraudulent scheme benefiting entities ultimately controlled by ZEEL’s promoter family.
After examining the matter, Murugan returned adverse findings against the company’s former executives.
He held that both senior executives were involved in or responsible for a scheme in which the Hyderabad land was deployed as security for loans availed by promoter‑related entities, without authorisation from ZEEL’s board, audit committee or any competent corporate authority.
The order concluded that their conduct fell short of the standards of diligence, care, integrity and ethical conduct required of directors of a listed company.
“The noticees did not act in good faith, with due diligence and care and in the best interest of ZEEL and its shareholders. They further failed to maintain high ethical standards expected from a director and such act was also not in the best interest of stakeholders including the listed entity itself and its shareholders,” the order said.
It noted that the borrowing entities and a co‑borrower had already taken loans aggregating ₹726 crore from IHFL under four loan agreements. When IHFL later sought more security, a “declaration and acknowledgement” dated December 27, 2018 was executed in the name of ZEEL.
It identified ZEEL’s Hyderabad land and tied that property to the borrowers’ obligations, stating that required permissions for creating security had been obtained. The document bore the signature attributed to the then chairman acting on behalf of ZEEL, which SEBI noted was not claimed to be forged or fabricated.
Murugan rejected the defence that the document was unregistered and therefore irrelevant. He ruled that registration issues might matter for property law but do not prevent the document from being considered as evidence of the acts.
“In both cases, the legal defect may prevent the creation of an enforceable pledge or assignment. It does not erase the acts undertaken to deploy or divert the corporate asset, the representations made to the counterparty, the intention behind the documentation or the risk to which the asset was exposed,” he held.
He emphasised that no approval of ZEEL’s board or audit committee was obtained before using the Hyderabad land as security and that the transaction was never placed before these bodies.
“I find that they employed a deceptive device and participated in a scheme involving fraud in connection with dealing in ZEEL’s securities, thereby violating SEBI regulations. This deceptive practice resulted in the mis‑utilisation and diversion of ZEEL’s assets to benefit promoter‑related entities,” the order said.
The former executives argued that ZEEL ultimately recovered the title deeds, the land was not sold by IHFL, and the property was later sold at a profit, causing no loss and no investor harm.
SEBI rejected this defence, stressing that securities regulation is concerned with fair disclosure, proper governance and conflicts of interest, not just eventual financial outcomes.
“I find that ZEEL was required to disclose the fraudulent and unauthorised pledging of the Hyderabad land through the 2018 Agreement to the stock exchange and in its website. ZEEL failed to make the said disclosure. The same is in violation of SEBI Regulations,” the order stated.
Thus, the regulator imposed a penalty of ₹30 lakh on ZEEL, ₹58 lakh on Goenka and ₹60 lakh on Chandra, to be paid within 45 days of the order.
They were also barred from accessing securities market for a year.