The Mumbai bench of the bankruptcy court recently disposed of an application filed by Phantom Studios India (PSIPL), which sought to implement a merger scheme between Zee Entertainment Enterprises (ZEEL) and Sony Group companies Bangla Entertainment Private (BEPL) and Culver Max Entertainment (CMEPL).
The National Company Law Tribunal bench ruled that the application from a minor shareholder, seeking to enforce the scheme, is moot. It said that the shareholder’s right to enforce the scheme lapsed after the companies’ boards approved the scheme’s withdrawal, despite his minor shareholding.
PSIPL, formerly known as Mad Man Film Ventures, owned about 1.3 million shares of Zee Entertainment, valued at around ₹50 crore, at the time of the tribunal filing.
Last month, the tribunal officially withdrew its approval for the proposed $10 billion merger between ZEEL and Sony’s Indian media entities, CMEPL and BEPL.
“During the course of the hearing, we were informed that the PSIPL has attended the meeting of shareholders and voted in favour of the scheme. As Section V para 10 permits the withdrawal by parties, the PSIPL cannot insist on the implementation of the scheme,” said the division bench of judicial member Lakshmi Gurung and technical member Charanjeet Singh Gulati in its October 24 order.
PSIPL, represented by counsel Shyam Kapadia, argued that once shareholders approve a scheme, its essential terms cannot be changed without their consent. However, Sony’s entities, represented by senior counsel Darius Khambata and Meghna Rajadhyaksha of Shardul Amarchand Mangaldas & Co, countered saying that PSIPL lacked the standing to file the application, being a third party to the scheme. In this case, Nitesh Jain of Trilegal appeared for the Zee Entertainment Enterprises.
The companies also contended that the tribunal did not have the authority to enforce a scheme that had not taken effect and that the scheme was approved with conditions.
Ruchi Khatlawala Pandya, a partner at law firm Little & Co, said shareholder rights are crucial, especially when a merger scheme includes a withdrawal clause. “The tribunal’s order sets a precedent for cases where parties may reconsider implementation even after approval,” she said.
In August, ZEEL and Sony’s Indian units agreed to a non-cash settlement to resolve all disputes over their failed merger. The companies agreed to withdraw claims in the ongoing arbitration at the Singapore International Arbitration Centre and all related proceedings in the NCLT.
The settlement, aimed at independently pursuing future growth, followed Sony’s January termination of the merger, citing ZEEL’s unmet closing conditions and leadership disagreements. Sony then filed a $90 million arbitration claim against ZEEL.
Source: Economic Times