Big relief for Zee Entertainment: SAT allows warrants issue, dividend access despite SEBI ban

The tribunal granted the relief subject to the condition that the company deposit the penalty amount.

SAT has allowed ZEEL to proceed with its proposed preferential issue of warrants and also permitted the company to access its mutual fund units for the distribution of dividends.

What did SEBI find?

SEBI found that a ZEEL-owned property in Hyderabad had been pledged as collateral for loans taken by promoter-linked entities without the necessary approvals and disclosures.

The regulator treated the transaction as a violation of securities laws and corporate governance requirements.

What action did SEBI take?

SEBI imposed the following penalties and restrictions:

• Rs 30 lakh penalty on ZEEL
• Rs 58 lakh penalty on Punit Goenka
• Rs 60 lakh penalty on Subhash Chandra
• Total penalty of Rs 1.48 crore
• ZEEL barred from accessing the securities market for two months
• Subhash Chandra barred from the securities market for one year
• Punit Goenka barred from the securities market for one year

Why was the property pledged?

The case relates to a Hyderabad property owned by ZEEL that was used to secure loans taken by promoter-linked Essel Group entities.

SEBI's concern was that an asset belonging to a listed company had been exposed to liabilities connected to promoter-related entities without the required corporate approvals and disclosures.

ZEEL challenges SEBI order

ZEEL and Punit Goenka challenged the SEBI order before SAT.

During a hearing on August 12, SAT questioned SEBI about the rationale behind imposing a two-month restriction on ZEEL's access to the securities market and reserved its order on the company's plea for interim relief.

The latest interim relief allows ZEEL to continue with key corporate actions while the broader legal challenge against the SEBI order remains pending.