Eros International Media Ltd. has moved the Securities Appellate Tribunal (SAT) challenging a Securities and Exchange Board of India (SEBI) order barring the company, its managing director (MD) Sunil Arjun Lulla, and chief executive officer (CEO) Pradeep Kumar Dwivedi from accessing the securities market until further orders.
The interim order barring these parties from buying, selling or dealing in securities directly or indirectly until further orders, was passed by the SEBI on June 22.
It also prohibited Lulla and Dwivedi from holding the position of a director or key managerial personnel in any listed company, including Eros International and its subsidiaries until further orders.
The order was passed in view of prima facie findings that the company appeared to have engaged in misreporting its financials and diversion of funds.
"I am of the view that pending completion of the detailed investigation initiated by SEBI, there is a need to pass an ad-interim ex-parte order to protect the interests of public shareholders as well as the interest of the general investors and to prevent any further deterioration of funds/assets of Eros," the SEBI's ex parte interim order stated.
The company and its senior executives have filed an appeal challenging this ruling in the SAT through the law firm Naik Naik & Co.
A coram of Justice Tarun Agarwala and presiding officer Meera Swarup will hear the appeal on July 13.
The appellants have also sought an urgent stay on the effect of SEBI’s order.
As a final relief, the appellants have sought setting aside the SEBI order including every finding, observation and conclusion in the order.
Eros has contended in the appeal that the interim order ought to be set aside as it was passed without establishing that there was any manipulation of the security market.
It added that such interim orders could be passed only in extreme cases of urgency, where the action to be prevented is imminent. This was not the situation in Eros' case, the company has submitted.
As recounted in the appeal, the case started in 2019 when Eros made disclosures of certain impairments with respect to amounts receivable from certain content advance entities and trade receivable entities.
The National Stock Exchange (NSE) of India examined these statements and sent a preliminary examination report to the SEBI.
Based on this report, SEBI initiated a detailed investigation into the affairs of the company in relation to transactions from 2011-12. This happened after an unexplained delay of 11 years, the appeal pointed out.
The SEBI later sought the production of certain documents from Eros and its executives. In response, Eros sought time to submit the same.
On April 24, 2023, the SEBI summoned the executives to provide a clarification of a payment of ₹21.75 crores made to Viyaana Media Works.
Responding to the summons, the executives sent the relevant information and documents sought by the SEBI on April 28, the appeal stated.
Post this, SEBI passed the interim order on June 22, 2023, which has now been challenged before the SAT.
