IDBI Bank on Thursday moved the National Company Law Appellate Tribunal (NCLAT), challenging a National Company Law Tribunal order of 19 May, that rejected IDBI Bank’s plea to initiate insolvency proceedings against Zee Entertainment Enterprises (ZEE), said a counsel aware of the matter.
The insolvency application was filed before the dedicated bankruptcy tribunal to recover dues of ₹149.60 crore from Zee Entertainment. The case has been filed with the court registrar but is yet to be listed for hearing.
The public sector lender had filed the petition under section 7 of the Insolvency and Bankruptcy Code (IBC), which allows a financial creditor to file an application for initiating CIRP against a corporate debtor before the adjudicating authority.
IDBI Bank’s claim against ZEE arises out of a debt service reserve account (DSRA) guarantee that it alleged ZEE provided to secure loans provided by IDBI Bank to Siti Networks Ltd—both were part of Essel Group. IDBI Bank insisted before the NCLT that its claim is identical to that of IndusInd Bank and on that ground, the application must be permitted.
Similarly, IndusInd Bank had filed an application against ZEE, which was admitted by the NCLT on 22 February. However, the National Company Law Appellate Tribunal (NCLAT) granted relief against the NCLT order to the media company led by managing director and chief executive Puneet Goenka. Later in March, ZEE entered into a settlement agreement with IndusInd Bank, inching closer to its planned merger with Sony Pictures (Culver Max Entertainment)
Both IndusInd Bank’s claim and IDBI Bank’s claim were opposed by ZEE mainly on the grounds that the guarantee was invoked during the pandemic. Under Section 10A of the IBC, insolvency proceedings cannot be initiated if the alleged default occurred before the period of 25 March 2020 to 25 March 2021, which is termed as the covid period. This statutory bar has troubled financial creditors because the insolvency proceeding can never be initiated for defaults during the covid period. ZEE’s stand was also that the guarantee is a limited guarantee and does not extend to the entire debt.
Pertinently, ZEE’s proposed merger with Sony Pictures (Culver Max Entertainment) has been facing legal hurdles due to the constant opposition of various parties including IndusInd Bank, Axis Finance and JC Flower ARC. The Mumbai bench of NCLT has heard all the parties and has reserved its verdict in the matter.
ZEE, however, argued that the merger has been approved by the majority of shareholders. “With regards to the merger, members are happy, creditors are happy, unsecured creditors are happy, who are the only ones unhappy? Those whose debts are disputed and ZEE is not their debtor. The total value of claims raised by non-creditor objectors is ₹1,259 crore. They have no locus in the matter,” ZEE said.
