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Synopsis

The Securities Appellate Tribunal (SAT) has quashed and set aside the order of the Securities and Exchange Board of India (SEBI) that prohibited Punit Goenka, Chief Executive Officer (CEO) of Zee Entertainment Enterprises Limited (ZEEL), from holding any Directorial or Key Managerial Position in listed companies until the completion of the investigation in the embezzlement case.

The order of the Securities Appellate Tribunal (SAT) passed by a bench composed of Presiding Officer Justice Tarun Agarwala and technical member Meera Swarup, now allows Punit Goenka to hold positions as a director or a key managerial person following the Zee-Sony merger, which was approved by the National Company Law Tribunal (NCLT).

In June 2023, the market regulator passed an interim order directing Goenka and Essel Group Chairman Subhash Chandra not to hold any position as a director or Key Managerial Person (KMP) in any listed companies or their subsidiaries.

In July 2023, both of them challenged SEBI's order before the Securities Appellate Tribunal (SAT). The SAT rejected the appeal and directed them to approach SEBI. Additionally, SAT asked SEBI to appoint a Whole Time Member to consider the contentions of Goenka and Chandra.

Following the order of SAT, SEBI appointed a Whole Time Member (WTM) who confirmed the interim order passed by SEBI. However, the WTM directed SEBI to complete the probe against the duo within 8 months.

Goenka and Chandra challenged the order of the WTM before the SAT. SAT heard both parties extensively and reserved its order on September 27.

The SAT has now set aside SEBI's order restraining Goenka and Chandra from holding any directorial or KMP positions.

The SAT, in its order, noted that the WTM directed the market regulator to complete the probe within 8 months but did not provide any reasons for the 8-month duration, especially when only the bank transactions needed to be looked into.

The SAT also took judicial note of the track record of SEBI and said that no investigation is completed by SEBI within the stipulated period.

“The investigation is going on and considering the track record of SEBI for which we take judicial notice, no investigation is completed within the stipulated period. We have seen that on numerous occasions whenever this Tribunal or the superior Court has directed SEBI to complete the investigation within a stipulated period, the same has not been done and applications after applications are being filed by SEBI seeking time to extend the period of investigation,” the order reads.

The SAT also noted that prima facie the diversion of funds has not as yet been proved and Sufficient explanation backed by genuine document have been shown by Goenka as having validly discharged their burden.

“We are of the view that prima facie the diversion of funds has not as yet been proved. Sufficient explanation backed by genuine document have been shown by Goenka and having validly discharged their burden. Considering the fact that a wider investigation is now being undertaken by SEBI to consider the various Letters of Credit (LoC) issued by ZEEL and its promoter companies, we are of the opinion that there is no real urgency and therefore this Tribunal will not place any impediment in restricting the period of investigation,"  the order states.

Case title: Punit Goenka vs SEBI