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MUMBAI : Axis Bank’s subsidiary has demanded promoters of Zee Entertainment to repay its loans, failing which it has threated to drag them to court and also write to the market regulator.  

This latest salvo from Axis Finance comes after Zee and Sony are looking at regulatory bodies to stamp their approval on the proposed merger.  

In a 7 page letter dated 30 December, Axis Finance has threatened legal action against Subhash Chandra and Puneet Goenka including opposing the merger between Zee and Sony Pictures Network India.  

“Please note that if the payments are not made by you or your group companies to our clients within a period of seven days from the receipt hereof, our clients shall be left with no other alternative but to initiate appropriate legal proceedings against you including for opposing the merger between ZEEL and Sony.." said the legal notice sent by MDP Partners on behalf of Axis Finance. “It may also be noted that since ZEEL is a publicly listed company, if the payments are made to our clients and appropriate disclosures are not made to the Regulatory Authorities, our clients shall be constrained to report the same to SEBI, National Stock Exchange, Bombay Stock Exchange and Reserve Bank of India," it added. The letter was marked to Chandra and Goenka. 

Mint has reviewed a copy of Axis Finance’s letter to Zee.  

At the heart of the issue is Axis Finance's 200 crore loan to Chandra’s privately owned firms- Cyquator Media Services Pvt Ltd and Primat Infra Power & Multiventures Pvt Ltd. These loans were backed by securities of Direct Media Distribution Ventures Private Ltd, Essel Corporate LLP and Primat Infrapower & Multiventures Private Ltd. During the ensuing years, Chandra’s family could not repay the loan, forcing Axis Finance to invoke the pledge shares and recover a part of the amount. According to the letter, Chandra owes Axis finance oustanding dues worth 146 crore. 

In its response to the letter on Monday, Zee dismissed all allegations made by Axis Finance, calling it meritless and unjustified.  

“At the outset, Zee has no contractual or legal privity with Axis Finance Ltd. Zee has made no request to AFL for any credit facilities for Cyquator Media Services Private Ltd. Zee is neither a party to any of the loan documents not has it provided any assurance to AFL for repayment. For this reason, not a single allegation raised in your Notice is addressed or makes a case against Zee," said the media company.  

The media company also defended Goenka’s involvement in the case saying, “As regards Mr Goenka, he has no contractual or legal privity with AFL either, as alleged or at all. He has not signed any loan documents or created any security in favour of AFL. It is wrong to allege that Mr Goenka in his capacity as the promoter or MD/CEO of Zee, gave any assurance to AFL that the purported loans will be repaid".  

In its letter, Axis Finance claimed that Chandra has given the assurance that the loan granted to Cyquator and Primat will be repaid by him, something that Zee has dismissed in its response.  

In September last year, Zee was forced to ink a merger with Japan’s Sony after Invesco, the American money manager demanded the removal of Goenka and also reconstitute the board.   

The latest threat from Axis Finance is unlikely to pose any major roadblock in the way of the Zee-Sony merger. It could however prove to be an embarrassment for the promoter group which is looking to close the deal with Sony at the earliest.  

As of March 2021, Axis Finance had assets under management worth 10,092 crore and total debt of 9633 crore. The NBFC reported a net profit of 194 crore as of March 2021 compared to 163 crore in the previous year.

 

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