The Securities Appellate Tribunal (SAT) on Friday granted interim relief to media firm Zee Entertainment Enterprises (Zee), permitting it to go ahead with the issuance of ₹3,143 crore of preferential warrants.
Zee and its chief executive officer, Punit Goenka, had approached the tribunal against the July 31 order of the Securities and Exchange Board of India (Sebi), which restrained them from accessing the securities market.
The two-month bar on Zee had affected its proposed fundraising.
“Appellant company and Goenka are permitted to complete the issuance of fully convertible warrants to the promoter group entity on a preferential basis, subject to deposit of full penalty within one week by both the applicants,” the bench stated in an oral order.
The tribunal extended the time for completing the preferential issuance by one week. The earlier 14-day window was set to expire on Friday, August 14.
However, the debarment from the securities market mentioned in Sebi’s order will continue.
The markets regulator, in its order dated July 31, barred Goenka for 12 months, while Zee was restrained from accessing the securities market for two months. Sebi also imposed a penalty of ₹58 lakh on Goenka and ₹30 lakh on Zee. Promoter Subhash Chandra was also barred for 12 months and fined ₹60 lakh.
While challenging Sebi’s order, Zee had sought permission to proceed with its proposed ₹3,143 crore preferential warrant issue and a relaxation in the 14-day window for completing it, considering the time that had already elapsed since the resolution was approved. The preferential warrants are to be issued to promoter group company Sunbright Mauritius Investments.
Zee had also sought relief to access its mutual fund units for dividend distribution in September following its annual general meeting (AGM).
“Appellant company is permitted transactions of mutual fund units for day to day requirements in ordinary course of business and not for any other purpose including payments of proposed dividend,” the bench ordered.
The matter pertains to the use of one of Zee’s land assets in Hyderabad as security for loans availed of by four entities of the Essel Group. The entities had availed of four separate loans aggregating ₹726 crore from Indiabulls Housing Finance Ltd (IHFL).
Sebi’s order notes that in December 2018, Chandra executed a Declaration and Acknowledgement (D&A) in favour of IHFL on behalf of Zee.
The regulator alleged that the benefit arising from the deployment of Zee’s property flowed to entities allegedly controlled by Goenka and Chandra, as well as their family members.
While the D&A contained a declaration that Zee had obtained all permissions and approvals from the authorities for creating the first-ranking mortgage and that it possessed the necessary power to secure the dues of the borrowing entities, Sebi’s investigation showed that there was no prior approval from Zee’s audit committee, board of directors or shareholders for the same.
