Zee-Sony merger: Goenkas' fate hangs in balance as SAT reserves judgment on SEBI debarment

Despite securing all necessary clearances for the Zee-Sony merger that would according to some estimates create a $10-billion media giant, the original promoter family of Zee Entertainment Enterprises Ltd (ZEEL) remains enmeshed in legal wrangles, with all eyes now on the Securities Appellate Tribunal (SAT) ruling. On Wednesday, the SAT reserved its judgment on the applications filed by ZEEL promoter Subhash Chandra and his elder son Punit Goenka, challenging the prohibitions imposed by the Securities and Exchange Board of India (SEBI). A date for the order is yet to be announced.

Order of developments

In June, the market regulator passed an interim order restricting Chandra and Goenka from holding any board or key managerial position in ZEEL, its subsidiary companies or any company resulting from a merger with these companies.

They appealed against this order at the SAT, but the tribunal refused to stay the order and directed them to file a reply/objection along with an application to vacate the stay given in the interim order.

In August, SEBI passed an order revising the directions it had given to them, asking its investigating officials to complete the enquiry in eight months. It further barred the father and son from holding key managerial positions till the conclusion of the investigation. They again went to the tribunal, which heard the arguments and reserved its order.

Expert opinion

“While SEBI has the power to debar a person from holding positions, the same should be exercised with ultimate caution. SEBI’s power to debar an individual from taking managerial positions during investigation is a preventative measure with the object of fair investigation, the same should not be punitive. SEBI investigation should be time-bound and an interim bar on someone taking a position should only extend up to the time of Investigation,” said Rohit Jain, managing partner, Singhania & Co.

“Recently, NCLT approved the proposed ZEEL-Sony merger, which makes the debarment of the individuals concerned a topic of debate. Ideally SEBI should, instead of a complete ban on individuals taking managerial positions, restrict the powers of individuals to take actions while being in such positions which can adversely affect ongoing investigations,” added Jain.

Desirable SAT order

While the merger has no more legal roadblocks, whether or not Goenka would be able to lead the merged entity is still the big question. It all depends on the SAT order in the matter.

“The desirable outcome for any accused is to have the appeal in his favour as that would then bring the accused out of all the alleged rigours of law. Similarly, in Goenka’s case, he would desire the outcome of the appeal to be in his favour, otherwise he risks losing his market stature as well as directorship from all the companies where he is a director,” said Delhi High Court advocate Shashank Agarwal.