The SAT found that continuing the interim order was harsh and unwarranted, especially given SEBI’s “track record” of not completing investigations on time.
On Monday, the Securities Appellate Tribunal (SAT) overturned an interim order issued by the Securities and Exchange Board of India (SEBI) that had prevented Punit Goenka, the CEO of Zee Entertainment Enterprises Limited (ZEEL), from assuming directorial roles in public companies while a fund embezzlement case was under investigation.
A bench comprising Presiding Officer Justice Tarun Agarwala and technical member Meera Swarup concluded that maintaining the interim order was excessive and unwarranted. They stated, “We do not find it necessary to keep the interim order in place since the fundamental facts have not been established. The respondent had restrained the appellant based on a high level of probability while rejecting valid documents that failed to prove the transactions beyond a reasonable doubt. This case can no longer proceed.”
This decision paves the way for Goenka to take on a directorship role in the new entity that will be formed following the merger of Zee Entertainment Enterprises (ZEE) and Culver Max Entertainment (formerly known as Sony Pictures Networks India).
SEBI had issued an interim order on June 12, prohibiting Goenka and Essel Group Chairman Subhash Chandra from holding key managerial positions (KMP) in any listed company or its subsidiaries. Chandra and Goenka had contested this order before SAT, but their appeal was denied on July 10. However, SAT had directed SEBI to appoint an additional full-time member (WTM) to investigate the allegations against Goenka and Chandra regarding the misappropriation of funds. On August 14, a new WTM heard the case and amended the interim order accordingly. This new order also mandated that SEBI complete its investigation into Goenka and Chandra within eight months. During this investigative period, the two were barred from holding directorships.
Goenka had challenged this confirmation order before SAT. After careful consideration, SAT reserved the judgment on September 27 and granted the appeal on October 30. In its order, SAT emphasized that there was no reason to impose an eight-month deadline on the investigation.
“We believe, at first glance, that the diversion of funds has not been substantiated. Goenka has effectively met their burden of proof by providing ample explanations supported by authentic documents. Given that SEBI is currently conducting a broader investigation into the various Letters of Credit (LoC) issued by ZEEL and its promoter companies, we see no real sense of urgency, and therefore, this Tribunal will not place any restrictions on the investigation’s duration.”
The appellate tribunal also noted that SEBI had a history of failing to conclude investigations within specified time frames. It concluded that preventing Goenka from holding directorial positions during this period was unwarranted.
“The investigation is ongoing, and considering SEBI’s track record, which we have taken judicial notice of, no investigation has been completed within the stipulated time frame. We have observed that SEBI has repeatedly disregarded orders from this Tribunal or the appellate court to complete investigations within a specified timeframe, and SEBI has filed multiple applications seeking extensions of the investigation period.”
Dr. Abhishek Manu Singhvi, Navroz Seervai, and a team of Advocates represented Goenka, and they were guided by a legal firm specializing in economic law. SEBI was represented by Senior Advocate Darius Khambatta and a team of Attorneys, who were briefed by K. Ashar & Co.
