NCLAT reserves order on IDBI, Axis Bank pleas against Zee-Sony merger

New Delhi: The National Company Law Appellate Tribunal (NCLAT) on Thursday reserved its order on pleas filed by IDBI Bank and Axis Bank challenging the Zee-Sony merger which has been called off.

The appellate tribunal will decide on 15 April whether the challenges to legal sanction of the Zee-Sony merger could be heard when the merger itself has been called off.

IDBI Bank and Axis Bank had urged NCLAT to defer the pending case until the National Company Law Tribunal (NCLT) decides on Zee's plea to enforce the merger. However, Zee argued that the pendency of the plea in NCLT will have no bearing on the present case and urged NCLAT to continue hearing the case.

Also read: After spurning Zee, Sony sets sights on aha

On 10 August, the Mumbai bench of the NCLT approved the merger of Zee Entertainment and Sony Pictures Networks India (SPNI), paving the way for the creation of a $10-billion media giant in the country and rejected the claims of dissenting creditors to the merger.

These dissenting creditors, including Axis Finance, JC Flower Asset Reconstruction Co, IDBI Bank Ltd, and others, mainly took issue with a non-compete clause in the merger deal. This clause entailed an Essel Group company receiving ₹1,100 crore as non-compete fees from a Sony Group company in return for Subhash Chandra's commitment not to challenge the merged entity.

This led IDBI Bank, IDBI Trusteeship and Axis Bank to challenge the merger in NCLAT. In December, NCLAT refused to put an interim stay on the merger and deferred the case to January.

However, on 22 January, the mega-merger between Zee Entertainment Enterprises Ltd (ZEEL) and Sony Pictures Networks India (SPNI) was called off with the latter issuing a termination letter to formally exit from the amalgamation agreement.

One of the main reasons behind the $10 billion deal being derailed was the lack of consensus over who would head the merged entity. While ZEEL MD and CEO Punit Goenka were earlier agreed upon as the candidate to be at the helm of the merged company, Sony reportedly sought a reconsideration after Goenka came under a SEBI probe.

Following that, Zee moved to NCLT Mumbai for the implementation of the merger where NCLT agreed to hear the Zee plea and issued notice. Zee alleges that the decision to terminate the merger was premeditated, and argues that it incurred costs of ₹700 crore or $80 million to comply with the requirements in preparation for the merger. The case is pending with the NCLT.

Sony separately addressed Zee, saying it had initiated emergency arbitration proceedings against it before the Singapore International Arbitration Centre (SIAC). In its application, Sony asked the tribunal to prevent Zee from seeking legal remedies from the National Company Law Tribunal (NCLT) and other legal forums.

However, on 4 February, SIAC rejected Sony Group's emergency petition against Zee Entertainment Enterprises' plea before India's insolvency tribunal seeking implementation of the merger scheme with the Japanese media company's local unit.