The Securities Appellate Tribunal (SAT) on Wednesday reserved its order on Zee Entertainment promoter Punit Goenka's plea against Securities and Exchange Board of India's (SEBI) interim order restraining him from holding any key managerial position in listed entities due to alleged fund diversion.
SAT, reserving the order, directed the Securities and Exchange Board of India (SEBI) and Goenka to file any written submissions, if any, within a week, Newsdrum reported.
SEBI's confirmatory order, passed on August 14, bars ZEEL promoters - Goenka and Subhash Chandra - from holding any directorship or other key managerial positions in the company and other organisations.
The market regulator's counsel Darius Khambata in his argument had said the material gathered by the market regulator in the last four months indicated siphoning of funds and further investigations were already underway.
This was challenged by Goenka, who moved SAT challenging SEBI's confirmatory order, whereby the regulator restrained the duo from holding the post of director or KMP in at least four Zee group companies as well as in the merged entity of ZEEL and Sony Pictures Networks India, until further directions.
Counsels Abhishek Manu Singhvi and Navroz Seervai representing ZEEL promoters, said that SEBI passed the confirmatory order without concluding the investigation and is based on mere speculation.
The market regulator had no evidence beyond the bank statements to prove the allegations of round-tripping of funds, they added.
On September 14, SAT questioned if the market regulator could complete its investigation within a stipulated time in the Zee Entertainment Enterprises (ZEEL) matter.
SEBI's counsel Khambata also informed the tribunal that the market regulator will conclude its investigation on the five transactions by November 30, and the rest will take time, given all parties cooperate.
The National Company Law Tribunal (NCLT) on August 10 gave its approval to the merger of Zee Entertainment Enterprises and Culver Max Entertainment (earlier known as Sony Pictures Networks India) creating a $10 billion media house, the biggest in the country.
According to Karan Taurani, SVP- Research Analyst (Media, Consumer Discretionary and Internet), Elara Capital, the merger process continues to be as per usual, with ongoing discussions on condition precedent (CP) between the two parties (Zee and Sony), as the former expects the merged company listing to complete over next two months. The management has already filed the final NCLT order with ROC (Registrar of Companies), within prescribed timelines.
"The outcome of the legal proceedings could result in one of two scenarios– SAT rules in favour of Punit Goenka or against him. If the outcome of the case is in Goenka’s favour, he will become part of the KMP of Zee-Sony merged company," Taurani said.
"If the outcome of the case is against Goenka, there is a possibility that he may escalate the matter to the Supreme Court, which could potentially prolong the resolution of the matter for several months. In such a case, Zee-Sony merged company may move ahead with the merger without waiting for the case to get fully resolved, which may be a time-consuming process," he added.
Taurani highlighted that in either of the above scenarios, the merger is expected to go through as per timelines, as the NCLT approval is without any conditions.
"We expect the merged company to get re-listed by the first week of December 2023," he added.