Tribunal stays ZEEL’s insolvency proceedings

The order comes as a relief for Zee which is closing a merger with Sony Group

MUMBAI: The National Company Law Appellate Tribunal (NCLAT) on Friday stayed insolvency proceedings against broadcaster Zee Entertainment Enterprises Ltd (ZEE).

Hearing an urgent petition filed by Punit Goenka, managing director and chief executive of ZEE, the appellate bench led by Justice Ashok Bhushan and Justice Barun Mitra asked IndusInd Bank, a financial creditor which had initiated the bankruptcy petition, to file its reply in two weeks.

On Wednesday, the National Company Law Tribunal (NCLT), the dedicated bankruptcy court, admitted ZEE into insolvency proceedings on IndusInd Bank’s plea under Section 7 of the Insolvency and Bankruptcy Code (IBC).

“We respect the decision taken by the NCLAT and remain committed to protecting the interests of all stakeholders,” Goenka said on Friday. “Our focus continues to be on the timely completion of the proposed merger.” ZEE is currently going through a merger with Culver Max Entertainment, formerly Sony Pictures Networks India.

The tribunal had also admitted a similar insolvency petition against Siti Networks, an Essel Group company.

The matter pertains to a loan taken by Siti, wherein ZEE was the guarantor of the loan in terms of a Debt Service Reserve Account Guarantee Agreement dated 29 August 2018.

Arguing for Goenka, senior advocate Mukul Rohatgi said ZEE had given a special guarantee, not for Siti Networks’ debt, but only to maintain a shortfall in only one tranche of the interest repayment account. “ZEE is the corporate guarantor, not the principal debtor. The principal debtor is Siti Networks. The entire amount of Siti Networks’ debt is not recoverable from ZEE. The demand on ZEE can only be raised if Siti Networks fails to keep one tranche of the interest repayment.”

“The demand of ₹83 crore is the principal amount loaned to Siti Networks. ZEE never issued a guarantee for the loan, and recovery of the loan must go through the Debts Recovery Tribunal and not through the insolvency code,” he said.

The appellate tribunal was also informed that, primarily, no argument was heard by the NCLT on the initiation of insolvency proceedings against ZEE.

In 2021, IndusInd Bank first approached the Delhi high court. Last February, it also filed a case against ZEE under the Corporate Insolvency Resolution Process in the NCLT, claiming a default of over ₹90 crore. The Delhi high court gave its ruling on the plea last September, making it clear that it had not prohibited IndusInd Bank from bringing ZEE before a bankruptcy court. This cleared the way for the private lender to file a bankruptcy petition against the media business to recover debts it claims are owed by Siti Networks.

Meanwhile, a circular issued by NSE on Friday stated that the media firm had been removed from the F&O segment.

REUTERS Punit Goenka, chief executive officer and managing director of Zee appealed the NCLT’s insolvency order.