Final Order in the matter of unauthorised pledge of immovable property of Zee Entertainment Enterprises Ltd.

QJA/MN/CFID/CFID-SEC4/32566/2026-27

SECURITIES AND EXCHANGE BOARD OF INDIA

ORDER

UNDER SECTION 11(1), 11(4), 11(4A), 11B (1) and 11B(2) OF SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 READ WITH RULE 5 OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (PROCEDURE FOR HOLDING INQUIRY AND IMPOSING PENALTIES) RULES, 1995.

In respect of:

In the matter of unauthorised pledge of immovable property of Zee Entertainment Enterprises Ltd.

(The aforesaid entities are referred to by their corresponding names/numbers and collectively referred to as “Noticees”)

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BACKGROUND

1. Securities and Exchange Board of India (“SEBI”) during the course of investigation in pursuance of the SEBI interim order passed on June 12, 2023 observed that the Statutory Auditors of Zee Entertainment Enterprises Ltd. (hereinafter referred to as “ZEEL/ the company”) had reported in their audit report for the FY ending March 31, 2019, that the title deeds of certain immovable properties of ZEEL were missing.

2. SEBI took up the investigation of missing title deeds for possible violation of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (“PFUTP Regulations”) and Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“SEBI LODR Regulations”), if any.

3. Show Cause Notice and Allegation: Based on the findings of the investigation, the following allegations were made against the Noticees:

3.1 The allegations arise from the use of ZEEL’s immovable property situated at Road No. 78, Jubilee Hills, Shaikpet Village, Hyderabad, admeasuring 17,639.64 square metres (hereinafter referred to as ‘Hyderabad land’), as security for loans availed by four entities belonging to the Essel Group.

3.2 On December 13, 2016, four entities of Essel Group viz. Gnex Projects Private Limited, Vivek Infracon Private Limited, Gnex Infrabuild Private Limited and Renu Realtech Private Limited (“the borrowing entities”) had availed four separate loans aggregating to ₹726 crores from Indiabulls Housing Finance Limited (“IHFL”). The respective loan amounts were ₹116 crores, ₹170 crores, ₹230 crores and ₹210 crores. Essel Home Private Limited (“Essel Home”) was the ‘co-borrower’ under the loan arrangements.

3.3 As on March 31, 2019, Essel Home held the entire share capital of each of the four borrowing entities. Though the ownership of Essel Home was held through multiple corporate layers, the investigation traced its ultimate ownership and control to Ms. Sushila Goenka, Noticee No.2 and Essel International Limited.

3.4 Noticee No.3 had held the entire beneficial ownership of Essel International Limited as on January 21, 2013 and July 30, 2015. As on June 19, 2023, its entire beneficial ownership was held by Celestine Family Trust, whose beneficiaries were the family members of Noticee No.3. On this basis, the SCN alleged that the borrowing entities and Essel Home were ultimately controlled by Noticee No.3, Noticee No.2 and their family members.

3.5 This connection was also sought to be supported by ZEEL’s own financial disclosures. Edisons Infrapower & Multiventures Private Limited and Konti Infrapower & Multiventures Private Limited, which indirectly held interests in the borrowing entities, had been disclosed by ZEEL as related parties in its financial statements for FY 2018-19 and FY 2019-20. They were described as companies controlled by key managerial personnel and their relatives.

3.6 On November 14 and 15, 2018, IHFL issued two notices to the four borrowing entities and Essel Home for failure to maintain the stipulated security cover. The borrowing entities were called upon to create or provide additional security and to pay default interest under the respective loan agreements.

3.7 It is in the above background that, it is alleged that on December 27, 2018, Noticee No.3 executed a Declaration and Acknowledgment in favour of IHFL on behalf of ZEEL (“2018 D&A”). He signed the document as the authorised signatory of ZEEL and deposited with IHFL the original title deeds relating to the Hyderabad land. The document recorded that the title deeds were deposited with the intention of creating a first-ranking mortgage over the property in favour of IHFL.

3.8 ZEEL property was offered as additional security for repayment of the loans availed by the borrowing entities. Thus, it was alleged that the benefit arising from the deployment of ZEEL’s property flowed to entities allegedly controlled by Noticee No.3, Noticee No.2 and their family members.

3.9 It was further alleged that Clause 18 of the 2018 D&A contained a declaration that ZEEL had obtained all requisite permissions and approvals from the competent authorities and persons for creating the first-ranking mortgage and that ZEEL possessed the necessary power to secure the dues of the borrowing entities.

3.10 The investigation, however, did not find any prior approval of the Audit Committee, the Board of Directors or the shareholders of ZEEL for the creation of security over the Hyderabad land.

3.11 ZEEL subsequently stated, in its email dated April 10, 2024 submitted during the investigation on behalf of its directors and officers, that the company was unaware of the mortgage. Thus, while the 2018 D&A represented to IHFL that all necessary corporate approvals had been obtained, ZEEL’s subsequent stand was that its management and Board had no knowledge of the transaction and had never authorised it. In view of this there was an allegation that the representation contained in Clause 18 of the 2018 D&A was incorrect.

3.12 Since the borrowing entities were allegedly controlled by the key managerial personnel of ZEEL and their relatives, they were alleged in the SCN as related parties of ZEEL under Ind AS 24. Ind AS 24 treats a transfer of resources, services or obligations between a reporting entity and a related party as a related-party transaction, irrespective of whether any consideration is charged.

3.13 ZEEL and the borrowing entities were alleged to be related-parties. Consequently, the execution of the 2018 D&A and the deposit of ZEEL’s title deeds were alleged to constitute a related-party transaction requiring prior approval of the Audit Committee under Regulation 23(2) of the SEBI LODR Regulations. The transaction was not placed before the Audit Committee. The borrowing entities were also not disclosed as related parties, and the use of the Hyderabad land for securing their loans was not disclosed as a related-party transaction in ZEEL’s financial statements.

3.14 In the meantime, IHFL filed an application under Section 9 of the Arbitration and Conciliation Act, 1996, before the Hon’ble Delhi High Court for protection of the securities provided against the four loans to the borrowing entities. Noticee No.3 (Respondent No. 1) and ZEEL, through its directors (Respondent No. 18), were among the respondents in those proceedings. IHFL sought orders restraining the respondents from disposing of or altering the securities furnished for the loans during the pendency of the arbitration proceedings and for restraining Noticee No.3 from disposing of his movable and immovable assets and securing an amount of ₹461.83 crore in favour of IHFL.

3.15 The proceedings were first heard on April 1, 2019. Advocates appeared on behalf of all the respondents, including ZEEL. On May 1, 2019, the Hon’ble Delhi High Court granted interim protection in favour of IHFL. The pendency of the proceedings and the orders passed therein were not disclosed by ZEEL to the stock exchanges.