SAT agrees to modify its directions in case involving Zee promoters

The Securities Appellate Tribunal (SAT) on Thursday agreed to modify its directives passed in an order dated July 10 in the fund diversion case involving Zee Entertainment Enterprises’ promoters Punit Goenka and Subhash Chandra.

The Securities and Exchange Board of India (Sebi) had filed an application on July 24 for modification in the SAT order due to lack of whole-time members (WTMs) to take up the Zee case.

On July 10, SAT had directed Sebi to appoint a WTM other than Ashwani Bhatia, who had passed an interim order against Goenka and Chandra to remove any kind of bias. However, Sebi will soon be left with only one WTM other than Bhatia as Ananta Barua is scheduled to retire on July 31.

SK Mohanty’s term ended on June 23.

The only other available WTM Ananth Narayan was a part of a settlement hearing related to Zee in an insider trading and non-disclosure matter.

Modifying the previous order, Justice Tarun Agarwala said, “We direct Sebi to appoint another WTM and if no WTM is available, then any authorised officer higher in grade or rank or position to the WTM would hear and decide the matter.”The tribunal refused appointment of Narayan for the case. SAT pointed out Narayan was a part of the settlement hearing and there was a possibility that he could be influenced by the discussions during the settlement.

It remains to be seen how SAT’s latest directive is interpreted and whether the regulator appoints an executive director or the chairperson to take the case forward.

The tribunal has added that the person appointed will have to pass the order in the stipulated time.

SAT had directed Zee promoters to file a response within two weeks of passing the order on July 10 and had asked Sebi to give them an opportunity of hearing within a week of the responses. Sebi was also directed to pass the order within two weeks of the hearing.

Senior counsels representing Chandra and Goenka said that they had filed a response to Sebi within the stipulated time by July 24. However, they argued against the appointment of Sebi WTM Ananth Narayan or an executive director to pass a fresh order.

They pointed out that in the delegation of powers and hierarchy at Sebi, an ED is a junior officer to a WTM and could be influenced. They argued that the matter could be delegated to the Sebi chairperson or a sub-committee of the board.

However, Sebi counsel said that if an ED was appointed to the case, then he will be provided with necessary protection and safeguards to issue the order without any bias. He added that as SAT order mentioned a WTM to pass the order, the chairperson was not included in it.

While modifying the order, the tribunal noted that it is not known when the central government will appoint new WTMs to Sebi while the matter is of urgency.

According to the timeline, Sebi has to give an opportunity of hearing to the Zee promoters by July 31.

Sebi WTM Ashwani Bhatia had issued an ex-parte interim order on June 12 barring the father-son duo from holding any key managerial position or directorship at a listed company. He was also the officer who passed an order in the Essel-Group firm Shirpur Gold in April. Business Standard