SAT reserves order in appeal by Subhash Chandra and Punit Goenka against SEBI interim order divesting them of posts in Zee
The duo claimed violation of the principles of natural justice, as no show-cause notice was issued to them
The Securities Appellate Tribunal (SAT) has reserved orders in the appeal filed by Subhash Chandra, the Chairman of the Essel Group and Punit Goenka, the Chairman and CEO of Zee Entertainment Enterprises Limited, against an order barring them from holding directorial or key managerial posts in listed companies.
A Coram of Justice Tarun Agarwala and Presiding Officer Meera Swarup heard the counsels for both sides for two days before reserving the matter for orders.
Chandra and Goenka had challenged an interim order passed by the Securities and Exchange Board of India (SEBI) barring them from holding directorial or Key Managerial Positions (KMPs) in any listed company or its subsidiaries.
Filed through Economic Laws Practice, the appeal claimed that SEBI’s order violated the principles of natural justice. The appellants highlighted that no show-cause notice was issued to them before the order was passed.
Appearing for Goenka, Senior Advocate Janak Dwarkadas challenged the procedure adopted by SEBI.
The lawyer questioned, “I am against their assumption that I need not be heard before passing an order, and not giving me a hearing is fully justified basis reasons in the order. I am saying those findings are based on conjectures. Is it like this that ‘I have this material, you show your material? Is this some ping-pong match going on?”
Dwarkadas also pointed out that when SEBI asked to provide bank statements, Goenka promptly shared them. He argued, “They have come to drastic findings on siphoning based on bank statements. Even though the transactions are from 2019-2020, they are stating there is immediate urgency with no new material to show some default, which requires investigation...What has he done that requires him to be removed from the helm of affairs immediately?”
Appearing for Chandra, Advocate Somasekhar Sundaresan argued that Chandra was not mentioned as a noticee in the order of the Debts Recovery Tribunal (DRT), based on which SEBI passed the interim order. He added that Chandra was the Chairman Emeritus, an honorary position, and not at the helm of affairs at Zee. The lawyer added, “It is just a titular honorific. The question would be ‘was there a need for the order’ and not ‘is there a need to set aside the order?”
Meanwhile, appearing for SEBI, Senior Advocate Darius Khambata, opposed the prayer for stay on the order.
He stated, “The facts before SEBI prima facie showed that Chandra and Goenka abused their position as directors of Zee for siphoning off funds for their own benefit. Although they were only holding 3.99 percent of the total shares at ZEEL, the two continued to be at the helm of affairs.”
Khambatta added that since the two enjoyed the trust of the shareholders, SEBI deemed it fit not to allow them to continue in key positions.
He urged the Tribunal, “We have a situation before us where the Chairman Emeritus and CEO of this company are involved in schemes and transactions through which vast amounts of public money belonging to listed companies are diverted to private entities owned and controlled by these persons.”
He concluded that SEBI had provided them the opportunity, so the onus was on Goenka and Chandra to come clean.