SAT Upholds SEBI's Interim Order To Bar Subhash Chandra, Punit Goenka From Holding Position Of Director Or Key Managerial Posts In Listed Companies

The Securities Appellate Tribunal (SAT) has upheld an interim order issued by the Securities and Exchange Board of India (SEBI)'s Whole Time Member (WTM) to bar Subhash Chandra, the Chairperson of Essel Group, and Punit Goenka, the CEO of Zee Entertainment Enterprises Limited (ZEEL), from serving as directors or Key Managerial personnel in any listed company or its subsidiaries until further orders.

The bench of Justice Tarun Agarwala (Presiding Officer) and Meera Swarup (Technical Member) said, “We do not find any reason to interfere in the impugned order at this stage and we dispose of the appeals directing the appellants to file a reply / objection along with a stay vacating application to the ex parte ad interim order dated June 12, 2023 within two weeks from today.”

It also directed SEBI to appoint another WTM to consider the objections of the appellants.

The Tribunal was hearing the plea filed by Chandra and Goenka against the interim order of SEBI's Whole Time Member, passed on June 12, that barred them from holding any director or Key Managerial posts in any listed company or its subsidiaries until further orders. In the interim order, the SEB also opined that Chandra and Goenka had abused their position as director of a listed company for siphoning off funds for their own benefit.

The Tribunal rejected that argument of the appellants that no prima facie case existed in passing the impugned order.

“The contention that the conclusion of siphoning of the funds cannot be arrived at on the basis of the bank statements is an attractive argument but such contention cannot be considered in view of the fact that a prima facie opinion was arrived at based on objective facts indicating diversion of funds from a listed company which was not in the interest of its shareholders and the investors coupled with the fact that no evidence of any sort has been placed before us to show that the prima facie finding is perverse,” said the Tribunal.

It further said in order to challenge the prima facie findings in the impugned order regarding the round-tripping of funds by ZEEL through 13 entities within two days, objections can be filed before the WTM (Whole Time Member) of SEBI to provide evidence that the funds were used for valid considerations.

Stating that there is no reason to interfere in the interim order, the Tribunal said, “we dispose of the appeals directing the appellants to file a reply / objection along with a stay vacating application to the ex parte ad interim order dated June 12, 2023 within two weeks from today.”

The WTM will fix a date for hearing within a week from the date of filing the reply by the appellants and pass appropriate orders within two weeks thereafter after giving the appellants an opportunity of hearing, it added.

Case Title: Punit Goenka v. Securities and Exchange Board of India

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