In a major relief to Zee Entertainment Enterprises, a bankruptcy court on Friday dismissed a petition filed by IDBI Bank seeking initiation of insolvency proceedings against the media firm.
This comes at a time when Zee is close to completing a merger with Sony Pictures Network India, a subsidiary of Japan’s Sony Corporation. Section 14 of the Insolvency and Bankruptcy Code (IBC) bars transactions or deals if insolvency cases are pending against a firm.
The Mumbai bench of the National Company Law Tribunal (NCLT) rejected the petition, filed in December, that had claimed a default of Rs 149.60 crore. “In view of the forgoing discussion, this bench is of the considered view that the present application is barred by Section 10A of the code. This application is also not maintainable on the ground that it is not in accordance with the intent and purport of the Code,” the tribunal said in its order.
The lender had filed the application under Section 7 of IBC, claiming to be a financial creditor. The bank’s claim arose under a debt service reserve agreement with Zee for a financial facility availed by Siti Networks, according to a regulatory update in December.
Zee had said it “vehemently” disputed the claim and that it did not expect any financial implications in way of compensation or penalty. SITI Networks, formerly known as SITI Cable Network, is an Essel Group company.
Zee had earlier reached agreements with IndusInd Bank and Indian Performing Right Society on NCLT cases filed against it on alleged defaults of loans and payments.
In September 2021, Zee entered into an agreement with Sony Pictures Networks India, a subsidiary of Japan’s Sony Corp, for a merger that would create the country’s largest media and entertainment company, with standalone revenues of $2 billion. The merger is pending as the companies await certain regulatory approvals.
At its ‘Sony Corporate Strategy Meeting 2023’ held in Tokyo on Thursday, Sony Group Corporation chairman, president and CEO Kenichiro Yoshida said it expects to complete the merger this fiscal.
The deal is yet to get clearance from NCLT, with the latest hurdle being an interim order by Securities and Exchange Board of India (Sebi). Last week, a Sebi order dated April 25, in which the regulator said the financial statements of Shirpur Gold Refinery were “misrepresented”, was placed before the tribunal. The refinery was part of the Subhash Chandra led-Essel Group and was taken to bankruptcy court by its lenders.