The Securities Appellate Tribunal (SAT) granted temporary permission to the media company Zee Entertainment Enterprises (Zee) to continue issuing preferential warrants worth 3143 crore rupees.
Zee and its CEO, Poonam Goenka, appealed to the tribunal against the order by the Securities and Exchange Board of India (Sebi) dated July 31, which restricted the company's access to the securities market.
The two-month ban affected the company's planned fundraising. In its oral order, the bench stated that 'the appellant company and Goenka may complete the issuance of fully convertible warrants for the group promoters on a concessional basis provided that the full amount of the penalty is paid within one week by both applicants.'
The tribunal extended the deadline for completing the concessional issuance by another week. The previously set 14-day period was due to expire on Friday, August 14.
However, the ban on accessing the securities market mentioned in the Sebi order will remain in effect.
The market regulator banned Goenka for 12 months, while Zee was restricted from accessing the securities market for two months. Sebi also imposed a fine of 58 lakh rupees on Goenka and 30 lakh rupees on Zee. Promoter Subhash Chandra was also banned for 12 months and fined 60 lakh rupees.
Challenging the Sebi decision, Zee sought permission to conduct the planned issuance of preferential warrants worth 3143 crore rupees, as well as an extension of the 14-day period for its completion, considering the time elapsed since the decision was made. These preferential warrants are to be issued to the Sunbright Mauritius Investments group of promoters.
Zee also requested permission to access its mutual funds to distribute dividends in September after the Annual General Meeting (AGM).
The bench ruled: 'The appellant company is permitted to operate the mutual funds for day-to-day business needs, and not for any other purposes, including the payment of proposed dividends.'
The matter relates to the use of one of Zee's land assets in Hyderabad as collateral for loans obtained by four entities of the Essel Group. These entities received four separate loans totaling 726 crore rupees from Indiabulls Housing Finance Ltd (IHFL).
The Sebi order notes that in December 2018, Chandra signed a Declaration and Undertaking (D&A) in favor of IHFL on behalf of Zee. The regulator asserted that the benefit from using Zee's property transferred to the entities presumably controlled by Goenka and Chandra, as well as their family members.
Although the D&A contained a statement that Zee had obtained all necessary permissions and approvals from the authorities to create a first-rank mortgage and possessed the requisite authority to secure the debts of the borrowed entities, the Sebi investigation revealed that prior approval from Zee's audit committee, board of directors, or shareholders had not been obtained.
