Zee Entertainment Enterprises Ltd (ZEEL) shares fell 10% on August 3 after Sebi prohibited the company from the securities market for two months and its Chairman Emeritus Subhash Chandra and MD & CEO Punit Goenka for one year over unauthorised pledge of the company's Hyderabad land to secure loans availed by promoter-linked Essel Group entities.
Additionally, the regulator imposed a total penalty of Rs 1.48 crore on them, according to a 150-page final order passed late on Friday.
Individually, the regulator imposed penalties of Rs 30 lakh on ZEEL, Rs 60 lakh on Chandra, and Rs 58 lakh on Goenka.
At 11:25 am on August 3, ZEEL shares were trading 10.3% lower at Rs 102.69 apiece.
The case relates to the execution of a Deposit and Declaration Agreement (D&A) on December 27, 2018, under which the original title deeds of ZEEL's Hyderabad property were handed over to Indiabulls Housing Finance Ltd (IHFL) as security for loans taken by Essel Home and other borrowing entities linked to the Essel Group.
Sebi noted that the deployment of ZEEL's property constituted a related-party transaction and the company failed to obtain prior approval from its audit committee, thereby violating LODR (Listing Obligations and Disclosure Requirements) regulations.
The regulator further observed that ZEEL failed to make necessary disclosures in its financial statements despite Goenka and Chandra having knowledge that the Hyderabad land had been deployed as security and the title deeds remained with the lender until June 2020.
In its findings against Chandra, Sebi said he misused his position as chairman by handing over the original title deeds of ZEEL's Hyderabad property to IHFL after falsely representing that the action had the approval of ZEEL's management.
"Noticee No.3 being the chairman of ZEEL, misused his position and authority in ZEEL and handed over the original title deeds of the asset (Hyderabad Land) of ZEEL to IHFL by falsely declaring that the said action had the approval of the management of ZEEL. Through such actions, the noticee put the material asset of ZEEL at risk for his personal benefit," Sebi said in its order.
It further said the true nature of the transaction was never disclosed and was instead portrayed as a case of misplaced documents, despite becoming the subject of litigation and arbitration.
According to Sebi, Chandra failed to act in good faith, exercise due diligence and safeguard interests of ZEEL and its shareholders, amounting to abuse of his position and authority.
Sebi directed ZEEL, Chandra, and Goenka to pay the penalties within 45 days. The order came into force with immediate effect.
ZEEL said the company is evaluating the Securities and Exchange Board of India's order barring the company and its Managing Director and Chief Executive Officer Punit Goenka and Chairman Emeritus Subhash Chandra from the market. Zee Entertainment is evaluating the contents and impact of the order and is exploring relevant options, the company said in an exchange filing.
With inputs from PTI