The order came after Punit Goenka challenged the Sebi's confirmatory order (Representational)
In a major relief to Zee Entertainment Enterprises' promoter Punit Goenka, the Securities Appellate Tribunal on Monday quashed Sebi's order that had barred him from holding key managerial posts in the company and other group firms.
While setting aside the order, the tribunal also directed Punit Goenka to cooperate with Sebi's probe against him. If any material comes out against Punit Goenka during the course of the investigation, then the appropriate procedure can be adopted by the regulator in accordance with the law.
Any observation made in this order is only a prima facie observation and will not influence the investigation nor will be utilised by either of the parties, it added.
The order came after Punit Goenka challenged the Sebi's confirmatory order, passed on August 14, which confirmed the directions of the regulator that had debarred ZEEL promoters -- Punit Goenka and Subhash Chandra -- from holding any directorship or other key managerial positions in the company and other organisations, including the merged entity of ZEEL and Sony Pictures Networks India until further directions.
In a 94-page ruling on Monday, the tribunal said Sebi's order cannot be sustained and is quashed insofar as it relates to the appellant (Goenka).
"The restraint order passed by the respondent (Sebi) pursuant to the ad interim order and the confirmatory order restraining the appellant to function as a Managing Director and is set aside," it said.
While orally delivering the order, Presiding Officer Justice Tarun Agarwala said, "The appellant shall however cooperate in investigation. In the event any material comes out against the appellant during the course of the investigation, appropriate proceeds can be adopted by Sebi".
The tribunal noted that there is a delay in the issuance of an ex parte ad interim order and the alleged transaction is of the year 2019.
No further evidence has come on record to indicate any further diversion of funds. Consequently, the impugned order is "harsh and unwarranted" as there was no real urgency at this late stage in passing the ad interim order, as per the appellate tribunal.
Passing a restraint order at this stage virtually restrains the appellant from his right to continue as a Managing Director on the basis of a needle of suspicion, which in our opinion is unfounded, it added.
It was also found that shareholders of ZEEL had reposed faith in Punit Goenka to continue as MD and CEO of the merged entity between Zee Entertainment and Sony.
Pursuant to the interim order, the NCLT has also approved the scheme of amalgamation in which the appellant would hold the post of an MD of the merged entity.
This aspect has wrongly been construed by Sebi's chairperson that it will wield substantial power of management of the affairs of the merged company upon the appellant, which he cannot be permitted to do so.
Such an approach is unwarranted apart from the fact that there is no evidence to show that the appellant exercised positive control over the borrowed entities, the tribunal said.
"When investigations are being done on mere possibilities without any concrete evidence as on date then, in our opinion, passing an ad interim order was wholly unjustified and, in any case, the continuation of the interim order till the completion of the investigation is per se arbitrary and cannot be sustained," the appellate tribunal said.
In June this year, Sebi had barred then Essel Group Chairman Subhash Chandra and Punit Goenka from holding the position of a director or key managerial personnel in any listed company for siphoning off funds of the media firm.
Subsequently, the watchdog passed the confirmatory order in August.
The case pertains to Subhash Chandra, who was also the chairman of ZEEL, and Punit Goenka, having allegedly abused their position as directors or Key Managerial Persons (KMPs) of a listed company for siphoning off funds for their own benefit.
Sebi had said that Subhash Chandra and Punit Goenka alienated the assets of ZEEL and other listed companies of Essel Group for the benefit of associate entities, which are owned and controlled by them.
The siphoning of funds appears to be a well-planned scheme since, in some instances, the layering of transactions involved using as many as 13 entities as pass-through entities within a short period of two days only, it had said.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)