NCLAT stays insolvency proceedings against Zee Entertainment

Mumbai: The National Company Law Appellate Tribunal (NCLAT) on Friday stayed insolvency proceedings against Zee Entertainment Enterprises Ltd initiated earlier this week on orders of the National Company Law Tribunal (NCLT).

A bench comprising justices Ashok Bhushan and Barun Mitra asked IndusInd Bank and the interim resolution professional to file a reply in two weeks in a plea by Zee Entertainment's managing director and chief executive Punit Goenka. 

On Wednesday, the Mumbai bench of NCLT led by justice H.V. Subba Rao and technical member Madhu Sinha had allowed IndusInd Bank’s petition to initiate corporate insolvency resolution process against Zee. 

Following which Goenka had moved the NCLAT on Thursday seeking a stay on the proceedings, saying the move was aimed at protecting the interests of stakeholders of Zee and to achieve timely completion of the proposed merger with Sony Pictures Networks India.

"We respect the decision taken by the Hon’ble National Company Law Appellate Tribunal (NCLAT) and remain committed towards protecting the interests of all stakeholders. Our focus continues to be on the timely completion of the proposed merger" Goenka said on Friday.

IndusInd Bank, one of Zee’s financial creditors, in February 2021 had moved a section 7 application before the NCLT to initiate insolvency proceedings against the media firm, seeking a resolution of total financial debt of ₹92 crore.

A similar petition was filed by the lender against Siti Networks, an Essel Group firm.

The matter pertained to a loan take by Siti wherein ZEE was the guarantor of the loan in terms of the Debt Service Reserve Account Guarantee Agreement on 29 August 2018.

Thereafter, Zee had filed an interlocutory application before the NCLT for dismissal of IndusInd bank's petition under section 7 of the IBC.

Senior advocate Mukul Rohtagi, while arguing for Goenka said that, “ZEE had given a special guarantee not for Siti Networks’ debt, but only to maintain 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.”

Recovery of the loan must go through the Debts Recovery Tribunal and not through the Insolvency Code, the counsel said.

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

Meanwhile, National Stock Exchange has removed Zee Entertainment from the F&O segment.