The Securities Appellate Tribunal (SAT) on Wednesday questioned the rationale behind the Securities and Exchange Board of India’s (SEBI) debarment of Zee Entertainment Enterprises Limited (ZEEL) from the capital markets for two months (Zee Entertainment Enterprises Ltd and Punit Goenka v. SEBI).
A bench of Presiding Officer PS Dinesh Kumar and Technical Members Meera Swarup and Dheeraj Bhatnagar raised queries over the logic behind halting ZEEL’s proposed ₹3,143 crore capital raise for a two-month window.
“If a thing which can be done after two months is not illegal, it is permissible by the regulator, and when the order was pending from December to August, you say that no, I will today stop, you can do it after two months. What is the logic?” the Presiding Officer asked SEBI.
“Is there any illegality in raising the money after two months? And in the teeth of this order, if it is to be stopped in a security market, what is the logic?" he orally remarked.
This was after SEBI found that a land parcel in Hyderabad was secretly used by ZEEL in 2018 to secure loans for promoter-linked entities without board approval or proper disclosure.
It barred ZEEL from the securities market for two months and Goenka for 12 months over alleged irregularities.
ZEEL and Goenka challenged the order before SAT. The parties sought urgent stay on the order till the appeal is finally heard.
Senior Advocate Ravi Kadam, appearing for ZEEL, argued that SEBI's order severely prejudices the company's capital-raising plans.
He highlighted that while the hearing concluded in December 2025, SEBI passed its order late at night on July 31. This was the exact day ZEEL’s shareholders approved a ₹3,143-crore capital raise.
Kadam submitted that the company's board approved issuing fully convertible warrants to Sunbright Mauritius Investments, a promoter group entity. Under Regulation 170 of SEBI LODR Regulations, the fundraise must be completed within a strict 15-day window.
Kadam argued that SEBI served the order on August 1, just as the 15-day clock began. He warned that any delay would cause irreversible prejudice due to price fluctuations. He further added that the title deeds had long been recovered and the property sold at a profit.
Furthermore, Kadam urged the tribunal to clarify that market access restrictions should not prevent ZEEL from accessing its liquid mutual fund units worth ₹1,200 crore required for day-to-day business expenses, receivables and upcoming dividend payments.
Senior Advocate Pesi Modi, appearing for Punit Goenka, highlighted that 96 percent of public shareholders overwhelmingly voted in favor of the resolution. He submitted that the ₹3,143 crore is capital coming directly into the company, which benefits public investors.
Modi pointed out that following SEBI's late-night order, ZEEL's stock price crashed. He contended that forcing a two-month delay would require recalculating the issue price at a lower valuation, causing severe prejudice.
The Bench observed that if the fundraise is legally permissible after the two-month debarment period expires, then SEBI must explain what harm or illegality would occur if the transaction proceeds now.
Additionally, the Bench queried why ZEEL was debarred when SEBI had not framed charges of fraudulent market activity against it.
Senior Advocate Chetan Kapadia, representing SEBI, defended the order. He argued that debarment orders serve as deterrence, prevention, and punishment. He maintained that debarment naturally restricts raising funds during the penalty period, noting the capital raise could simply be executed after the two-month debarment expires.
After hearing all sides, the appellate tribunal admitted the appeal, granted SEBI six weeks to file its reply, and reserved its order on interim relief.
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