SEBI issues show cause notice to ZEEL over alleged irregularities

The Securities and Exchange Board of India (SEBI) has issued a show cause notice against Zee Entertainment Enterprises Ltd (ZEEL), a current Key Managerial Personnel (KMP) and an ex-director alleging certain violations of SEBI Regulations relating to an alleged lien on a property for the financial year 2018-19.

The company said that it has been legally advised that it has a strong case against the notice, which was issued on August 7.

However, to avoid protracted litigation, Zee has furnished its detailed reply denying all allegations against it in the notice.

“Further, the Company has also filed a settlement application in the said matter with SEBI in terms of the provisions of SEBI (Settlement Proceedings) Regulations, 2018, which is under consideration,” it added.

Relating to the uncertainties on account of the ultimate outcome of the ongoing investigation being conducted by the Securities and Exchange Board of India ('SEBI') and inspection being conducted by the Ministry of Corporate Affairs with respect to certain transactions with the vendors and one of the subsidiary companies, the Board of Directors of ZEEL had constituted Independent Investigation Committee ('IIC') which had concluded the investigation and the report was placed before the Board, noting no material irregularities and that the transactions (under investigation) were in the normal course of business.

The Board and the management based on review of records of the Company and its subsidiary, has determined that the transactions (including refunds) were against consideration for valid goods and services received from such vendors.

SEBI had passed an ex-parte interim order on 12 June 2023 and Confirmatory Order dated 14 August 2023 (SEBI Order) against one of the current KMP of the Company for alleged violation of Section 4(1) and 4(2)(f) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices (FUTP) relating to Securities Market) Regulations, 2003.

On 30 October 2023, the Securities Appellate Tribunal (SAT) set aside the above order passed by SEBI granting relief to the current KMP. The SAT order also recorded that the SEBI will continue with the investigation.

Pursuant to the above, SEBI had issued various summons and sought comments/ information/explanation from Company, its subsidiary, directors under period of consideration and KMPs who have been providing information to SEBI from time to time, as requested.

With respect to the ongoing enquiry being conducted by SEBI, a writ petition challenging the same was filed by an ex-director (petitioner) before the Bombay High Court against SEBI during the quarter ended 31 March 2024, wherein, the Company was impleaded as a respondent. The Company had filed its reply to the writ petition. The Bombay High Court on 26 June 2024 provided certain reliefs to the petitioner and this order has no implications with respect to the Company.

During the previous year, the Company had received a follow-up communication from the Ministry of Corporate Affairs (MCA) for the ongoing inspection under section 206(5) of the Companies Act, 2013 against which the Company had submitted its response. The management had informed the Board of Directors of the Company (the 'Board') that based on its review of records of the Company/ subsidiary, the transactions (including refunds) relating to the Company/ subsidiary were against consideration for valid goods and services received.

On 23 February last year, the Board had constituted an Independent Investigation Committee headed by a former judge of the Allahabad High Court along with two independent directors of ZEEL to review the allegations against it.

The Committee in October last year submitted its report to the Board after carrying out an extensive fact-checking exercise with the help of external experts to verify the documents and information provided by the Company during the investigations to SEBI.

The Board noted that the transactions under investigation were found to be a part of normal course of business and no material irregularities were reported within the same. The Committee did not find any need for further corrective and disciplinary measures, policy changes or legal steps to be implemented.

Based on approval of the Board, the Company had filed a settlement application with respect to the ongoing investigation which has been rejected during the quarter ended 30 June 2025.