SEBI issues show cause notice to ZEEL; company denies allegations, files settlement plea

The Company has disclosed that it is currently facing regulatory scrutiny from both the Securities and Exchange Board of India (SEBI) and the Ministry of Corporate Affairs (MCA) over certain historical transactions involving its vendors and one of its subsidiary companies.

According to Note 8 of the accompanying statement, SEBI is conducting an ongoing investigation, while the MCA is carrying out an inspection under Section 206(5) of the Companies Act. These inquiries pertain to specific vendor transactions, which had earlier prompted the company’s Board of Directors to set up an Independent Investigation Committee (IIC).

The IIC conducted a comprehensive review of the transactions in question and submitted its findings to the Board. The committee’s report concluded that there were no material irregularities and confirmed that the transactions were undertaken in the normal course of business. The Board and management, after reviewing company and subsidiary records, determined that all payments—including refunds—were made in exchange for legitimate goods and services received from the vendors.

During the quarter ended September 30, 2025, SEBI issued a show cause notice (SCN) to the company, a current key managerial personnel (KMP), and a former director. The SCN alleged certain violations of SEBI Regulations in connection with a lien on a property during the financial year 2018–19.

In response, the company has submitted a detailed reply, based on legal advice, denying all allegations made in the SCN. It has also filed a settlement application with SEBI, which is currently under consideration.

The management stated that it does not expect any material adverse impact on the company’s financial position or operations arising from the ongoing investigations or the SCN.

The case dates back to a letter of comfort (LoC) issued by ZEEL promoters to Yes Bank in support of a ₹200 crore loan extended to Essel Green Mobility, an Essel Group entity. When seven Essel Group companies defaulted on loan repayments, Yes Bank appropriated ZEEL’s ₹200 crore fixed deposit to recover its dues.

Although Essel Group entities later claimed to have reimbursed the amount to ZEEL, SEBI alleged that the reimbursement did not come from their own funds but was routed through ZEEL, its subsidiaries, and other listed Essel Group companies, raising concerns of circular fund movement.

SEBI had earlier withdrawn the show cause notice (SCN) issued to ZEEL and its promoters, Subhash Chandra and Punit Goenka. However, the allegations contained in the withdrawn SCN were not dropped but were incorporated into the findings of SEBI’s ongoing investigation against the two executives.

SEBI had also rejected the settlement applications submitted by ZEEL and Punit Goenka on September 2, 2022. These applications pertained to allegations of siphoning funds from ZEEL to other promoter-linked entities. The settlement proposals were turned down during adjudication proceedings held on April 18, 2023.

Following the rejection, the regulator decided to proceed against ZEEL and the father-son duo under Section 11B of the SEBI Act, 1992. This section empowers SEBI to issue directions, levy penalties, and take necessary action in the interest of investors and the securities market.

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