SAT quashes SEBI interim order barring ZEE CEO Punit Goenka from holding directorial positions

The Securities Appellate Tribunal (SAT) on Monday set aside an interim order of the Securities Exchange Board of India (SEBI) barring Chief Executive Officer (CEO) of Zee Entertainment Enterprises Limited (ZEEL) Punit Goenka from holding directorial positions in listed companies pending an investigation into a fund embezzlement case..A coram of Presiding Officer Justice Tarun Agarwala and technical member Meera Swarup found that continuing the interim order was harsh and unwarranted, stating,"In view of the fact that the foundational facts have not been established coupled with the fact that the respondent has restrained the appellant on a preponderance of probabilities while rejecting the genuine documents on the ground that it does not prove the transactions beyond a reasonable doubt, we are of the opinion that continuation of the interim order would be harsh and unwarranted and thus, cannot be allowed to continue any further.".This order paves the way for Goenka to take up a directorial position in the entity which will be formed post the merger between Zee Entertainment Enterprises (ZEE) and Culver Max Entertainment (earlier known as Sony Pictures Networks India)..On June 12, SEBI had passed an interim order barring Goenka and Essel Group Chairman Subhash Chandra from holding directorial or key managerial positions (KMP) in any listed company or its subsidiaries.Chandra and Goenka challenged this order before SAT, which dismissed the appeal on July 10.However, SAT directed SEBI to appoint another whole time member (WTM) to hear allegations that Goenka and Chandra were involved in siphoning off funds.Accordingly, the matter was heard by a new WTM, who confirmed the interim order on August 14 and modified it. The new WTM also ordered SEBI to complete its investigation against Goenka and Chandra in eight months. Meanwhile, the duo continued to remain barred from holding directorial positions until this probe was completed..This confirmatory order was challenged before the SAT by Goenka. SAT extensively heard the appeal and reserved the same for orders on September 27, before allowing the appeal on October 30.In its order allowing the appeal, the SAT also remarked that there was no justification given for setting a time limit of eight months to complete the investigation."We are of the view that prima facie the diversion of funds has not as yet been proved. Sufficient explanation backed by genuine document have been shown by Goenka and having validly discharged their burden. Considering the fact that a wider investigation is now being undertaken by SEBI to consider the various Letters of Credit (LoC) issued by ZEEL and its promoter companies, we are of the opinion that there is no real urgency and therefore this Tribunal will not place any impediment in restricting the period of investigation.".The appellate tribunal further remarked that SEBI had a track record of not completing its investigation within a stipulated period. Therefore, restraining Goenka from holding a directorial post during this time was unwarranted, it opined. "The investigation is going on and considering the track record of SEBI for which we take judicial notice, no investigation is completed within the stipulated period. We have seen that on numerous occasions whenever this Tribunal or the superior court has directed SEBI to complete the investigation within a stipulated period, the same has not been done and application after application are being filed by SEBI seeking time to extend the period of investigation.".Senior Advocates Dr Abhishek Manu Singhvi and Navroz Seervai along with Advocates Somasekhar Sundaresan, Amit Bhandari, Nitesh Jain, Shruti Rajan, Mudit Jain, Vivek Shah, Anubhav Ghosh, Hari, Jitendra Motwani, Abhiraj Arora, Deepanshu Agarwal and Samreen Fatima, briefed by Economic Laws Practice, appeared for Goenka. Senior Advocate Darius Khambatta with Advocates Aditya Mehta, Vidhi Shah, Mihir Mody and Arnav Misra, briefed by K Ashar & Co, appeared for SEBI..[Read order]