Ketan Parekh scam: SEBI lets off Zee TV promoters with a warning

The Securities and Exchange Board of India has said that the promoters of Zee Telefilms had by their conduct and actions given an impression that they aided and abetted Ketan Parekh (KP) entities in large scale market manipulation of various scrips, including Zee, during 1999-2001 period.

Dr. T.C. Nair, Whole-Time Member, SEBI, in his order, however, said that on a cumulative view of findings, he is persuaded to the conclusion that though the noticees were not involved directly in manipulating the scrip of Zee, yet had by their conduct and actions given an impression that they aided and abetted KP entities.He also said that in exercise of the powers conferred under the SEBI Act, he would warn Zee Telefilms Ltd (since changed to Zee Entertainment Enterprises Ltd) and its promoter investment companies against such conduct in the future. The SEBI investigation showed that the price of Zee scrip moved from Rs 476 as on October 1, 1999, to Rs 1,555 as on February 24, 2000, and came crashing to Rs 121 as on March 30, 2001. It was found that “the entities related/connected/associated” with Mr Ketan Parekh were “involved in market manipulation” in the Zee share. The investigations revealed that the Essel Group had advanced money worth Rs 706.40 crore to eight entities owned by KP. Of this, it was found that Rs 251.10 crore was returned back by KP entities and the balance remained unpaid. Enquiries showed that during this period, KP entities “indulged in manipulative trading in various scrips by using these funds given by Essel Group, the promoters of Zee.” In their written submissions made to SEBI on January 4, 2008, the representatives of Zee claimed that on the basis of observation and conclusion of SEBI and other regulatory agencies, JPC came to the conclusion that the Essel Group did not deal in the shares of ZTL during the period April 1, 1999 to March 31, 2001. In an earlier submission made in March 2006 in response to the SEBI notice, the Zee/Essel Group said that what Essel Group contemplated at the time of entering into the transactions with KP was that since he was in liquidity problems, Essel Group could make a “double bargain of helping out someone who has substantial stakes in ZTL shares with which he could cause considerable instability to the company’s share in the market, and at the same time taking advantage of by acquiring certain investment of him at attractive valuations.” They had further said that the Essel Group did not buy a single share of ZTL during January 1999 to March 2001 from the market. On the contrary, Delgrada, a group company, had sold 116,75,000 ZTL shares during September-December 2000. In his order, Dr. T.C. Nair, said that he was “conscious of the fact that there is no direct evidence of the involvement of Zee and its promoter companies in manipulation of the scrip of Zee.” Further, he said that though KP was in financial difficulty they, “for reasons best known to them only, but apparently for purchasing media shares” continued to give huge advances to KP entities who later proved to have manipulated the securities market in a big way.