SAT reserves order in appeal by Punit Goenka, Subhash Chandra against SEBI interim order divesting them of their posts in Zee

The Securities Appellate Tribunal (SAT) has reserved for orders the appeal filed by Essel Group Chairman Subhash Chandra and Chief Executive Officer (CEO) of Zee Entertainment Enterprises Limited (ZEEL) Punit Goenka 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 counsel for both sides at length for over 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) that barred them from holding directorial or key managerial positions (KMPs) in any listed company or its subsidiaries. Their appeal, filed through Economic Laws Practice, claimed that the SEBI order involved a violation of the principles of natural justice. In this regard, the appellants highlighted that no show-cause notice was issued to them before the SEBI order was passed..Senior Advocate Janak Dwarkadas, appearing for Goenka, pointed out that he was not on the merits of the case, and that he was challenging the procedure adopted by SEBI for passing the order. “I am against their assumption that I need not be heard before passing an order and not giving me 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?” the senior lawyer contended.Dwarkadas also pointed out that Goenka had promptly provided bank statements when SEBI asked for the same.“They have come to drastic findings on siphoning based on the bank statements. Even though the transactions are of 2019-20, 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 helm of affairs immediately?” Dwarkadas argued..Advocate Somasekhar Sundaresan argued that Chandra was not mentioned as a noticee in the Debts Recovery Tribunal (DRT) order on the basis of which the SEBI had passed the interim order under challenge. He added that Chandra was the Chairman Emeritus, an honorary position, and was not at the helm of affairs at Zee.“It is just a titular honorific. The question to ask would be ‘was there a need for the order’ and not ‘is there a need to set aside the order’”, the lawyer said. .Meanwhile, Senior Advocate Darius Khambata, appearing for SEBI, opposed the prayer for stay on the order. “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% of the total shares at ZEEL, the two of them continued to be at the helm of affairs,” he argued. He added that the two enjoyed the trust of the shareholders. In view of this, SEBI deemed it fit not to allow the two to continue in their key positions after prima facie evidence emerged that they had siphoned off funds.“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,” Khambata urged the tribunal to note. He concluded that SEBI had put the onus on discharging the burden on Goenka and Chandra, and that it was important for them to avail that opportunity.