ZEEL stock dips on ₹1.48 crore penalty notice: Why SEBI barred Zee’s Goenka, Chandra for 1 year

Zee Entertainment Enterprises Ltd (ZEEL) found itself in a precarious position on Monday morning after its stock took a nose-dive after the opening bell. Shares of the company slumped to the ₹100s, down by as low as 12.37 per cent from last week's close in Monday morning trade.

The reason? The Securities and Exchange Board of India has passed a detailed final order against ZEEL, its managing director Punit Goenka and non-executive chairman Subhash Chandra, imposing a combined penalty of ₹1.48 crore over an unauthorised pledge of company land, and barring Goenka and Chandra from the securities market for a year, while ZEEL itself faces a two-month securities market ban.

ZEEL operates the general entertainment television channels, movie production (Zee Studios), and the digital platform ZEE5, while a separate listed firm, Zee Media Corp (ZMCL), operates news networks like Zee News, Zee Business, WION, and various regional news channels.

SEBI's 150-page order centres on the mortgaging of a freehold plot of land in Jubilee Hills, Hyderabad, owned by ZEEL, which was allegedly pledged as collateral for loans taken by entities linked to the Chandra family from India Home Finance Limited.

The regulator found that a Declaration and Acknowledgement executed in December 2018, signed by Subhash Chandra as chairman, allegedly falsely claimed that all requisite corporate approvals had been obtained, when in fact ZEEL's board and audit committee were never informed or consulted.

SEBI traced ultimate control of the borrowing entities back to Subhash Chandra and family through a web of holding companies, and concluded that both Chandra and Goenka were allegedly aware of the mortgage from its inception, despite their claims to the contrary.

The order also found that Goenka allegedly gave incorrect statements on oath during SEBI's investigation and signed CEO-CFO certifications for FY 2018-19 and FY 2019-20 that failed to disclose the pledge, even though he had knowledge of it.

ZEEL, separately, was held liable for allegedly failing to disclose the pledge and subsequent developments, including the eventual release of the title deeds in June 2020, to stock exchanges as required under listing regulations.

Following the breakdown of violations, ZEEL was fined ₹30 lakh, Goenka ₹58 lakh and Chandra ₹60 lakh, taking the total penalty to ₹1.48 crore. Beyond monetary penalties, SEBI barred ZEEL from the securities market for two months, and Goenka and Chandra for twelve months each, citing the grave nature of alleged violations affecting investor interest and the finding of fraud.

The order noted that although no directly quantifiable investor loss was established, the alleged misuse of a corporate asset for personal benefit was inherently detrimental to shareholder interests. Moreover, this does throw some hot water over ZEEL's proposed fundraising plans.

"The Company is evaluating the contents and impact of the Order and exploring the relevant options in that regard," ZEEL stated to the markets. An update from the entertainment firm is expected soon.