Punit Goenka plea against Sebi: Understanding the outcome

The fate of Punit Goenka and his father Subhash Chandra, embroiled in a legal tussle with Sebi after it barred them from holding key positions in Zee and the merged Zee-Sony entity, is likely to be soon decided by the Securities Appellate Tribunal (SAT).

On Wednesday, the tribunal reserved its verdict on Goenka’s appeal.

exchange4media spoke to legal and industry experts to dive deep into the issue and understand the repercussions of the SAT verdict, whether in favour or against, on the father-son duo and the merged entity of Zee-Sony.

If SAT allows Punit Goenka’s appeal and overrules the ban

According to Sandeep Bajaj, Advocate, Supreme Court, if the SAT order comes in favour of Punit Goenka, it does not necessarily signal the cessation of SEBI's investigation into the alleged fund diversion.

“SEBI will continue its inquiries into the matter, albeit without the ban on Punit Goenka, thereby allowing him the freedom to participate and cooperate in the investigative process.

“This ruling by SAT could also set a significant legal precedent for future cases involving regulatory actions by SEBI, potentially providing guidelines for the standard of fair evidence required in such matters,” said Bajaj.

According to Elara Capital’s Karan Taurani, if the outcome of the case is in Goenka’s favour, he would become part of the key managerial positions of the Zee-Sony merged company.

“Also, it will be a respite for the Goenka family as the proceedings have been expedited, as against earlier indications by SAT that proceedings would take eight months to be resolved,” Taurani told exchange4media.

If SAT upholds SEBI’s ban order

Experts believe that in such a scenario, Goenka could approach the Supreme Court against the verdict but till then he would be kept in abeyance from holding any key positions in the company.

“SAT’s order turning out to be in favour of SEBI would result in him remaining barred from key positions of the ZEE-Sony entity and the said investigation as stated by the SEBI order would last till April 2024, which means that till the time he doesn’t get the clearance from Sebi he will be kept in abeyance from one of the key positions,” said advocate Soayib Qureshi, Partner, PSL Advocates & Solicitors.

Sharing a similar view, Bajaj said, Goenka would be legally obligated to adhere to the terms of the ban as SAT's decision carries binding authority, and any failure to comply could result in legal repercussions.

Impact on ZEEL and Zee-Sony merged entity

As per the experts, if SAT upholds the Sebi ban on Goenka, significant implications would arise for the companies involved.

“Firstly, it would necessitate a substantial modification of the fundamental terms outlined in the merger agreement, particularly with regard to the continuation of Goenka as the MD and CEO. This is crucial as the proposed Zee-Sony merger explicitly identified Goenka as the key figure to assume this leadership role.

“His participation in negotiations and decision-making processes will undoubtedly have a positive influence on the merger, minimizing potential disruptions and governance challenges that may have arisen in his absence. It's worth noting that this merger, originally agreed upon by both parties in 2021, has already encountered its fair share of challenges, including legal disputes involving lenders such as Axis Finance and IDBI Bank over loan defaults by Zee Group entities. A favourable SEBI ruling will introduce yet another significant hurdle for the merger's progression,” said Qureshi.

“Given their (Goenka and Chandra) pivotal roles, this could have a profound impact on collaboration between the merging entities. Consequently, the governance and operational dynamics of the merged entity would be substantially affected by SAT's decision, ultimately influencing its performance in the market and its future prospects,” said Bajaj.

However, if the SAT order is in favour of Goenka, it will be a positive development for Zee Group and its future prospects.

According to Taurani, in either of the scenarios, the Zee-Sony merger is expected to go through as per timelines, as the NCLT approval is without any conditions.

“We expect the merged company to get re-listed by the first week of December this year. We maintain our positive stance on the merged company, backed by synergy benefit, MNC control, the positive impact of consolidation in the TV industry and scaling up of the OTT business,” Taurani said.

The SAT verdict is expected to come out in the next 8-10 days.