Zees Goenka Moves Appellate Tribunal

In a statement shared by Goenka, he said he is taking all the necessary steps as per law to protect the interests of all stakeholders of Zee and to achieve timely completion of the proposed merger with Culver Max Entertainment Pvt. Ltd (Sony Pictures Networks India). “Goenka firmly believes in the potential of the merger, to deliver immense value to all stakeholders. Zee is a debt-free and financially strong company and believes in value creation for its stakeholders."

On Wednesday, the Mumbai bench of NCLT led by Justice H.V. Subba Rao and technical member Madhu Sinha allowed IndusInd’s petition to initiate a corporate insolvency resolution process against Zee. It is likely that the proposed merger between Zee and Sony will be delayed by the latest legal developments.

Essentially, IndusInd, one of Zee’s financial creditors, in February 2021 had moved a section 7 application before the NCLT to initiate insolvency proceedings against the media firm, seeking a resolution of total financial debt of ₹92 crore.

A similar petition was filed by the lender against Siti Networks, an Essel Group firm.

The matter pertained to a loan take by Siti wherein ZEE was the guarantor of the loan in terms of the Debt Service Reserve Account Guarantee Agreement on 29 August 2018.

Thereafter, Zee had filed an interlocutory application before the NCLT for dismissal of IndusInd bank's petition under section 7 of the IBC.

In its interlocutory petition before the NCLT, Zee said the tribunal inherently lacked jurisdiction to entertain such plea as the alleged default forming the basis of insolvency petition by IndusInd is in amount less than the statutorily prescribed threshold for filing a petition.

Meanwhile, ZEE had argued that under the IBC section 10A was introduced , barring absolutely and forever the filing of application under Section 7, 9 and 10 for default committed after 25 March 2020 up to 24 March 2021.

Senior counsel , Ravi Kadam appearing for IndusInd argued that "The courts and Tribunals have to merely see whether the occurrence of default is intimated to the borrower/guarantor or not. The Courts and Tribunals shall not dismiss or invalidate the proceedings filed by banks and financial institutions against defaulting borrowers merely on hyper technical pleas of this nature. More so when no serious prejudice is caused to the borrower/guarantor in this case ZEE".

The senior counsel also added that the default prescribed in 10-A is only for a temporary period of one year from 25 March 2020 to 25 March 2021 due to extraordinary circumstances of Covid-19 and since the default in this case continues even as on today and the above Company Petition being filed on 01 March 2022 much after cessation of Section 10-A is certainly, maintainable and liable to be admitted.

Thereafter, the court rejected the interlocutory petition filed by Zee citing it did not have any merit.

Kundan Shahi, CEO of LegalPay said: “ Since Zee Entertainment has been moved under the Corporate Insolvency Resolution Process under the Bankruptcy Code, the power of board of directors are taken over by the Resolution Professional. Such companies require Interim Finance which helps in safeguarding the maximum value of assets of the company as well as ensure smooth process in a timely manner till the company is revived or liquidated."