NCLT admits IndusInd Bank's insolvency plea against Zee Entertainment

The National Company Law Tribunal on Wednesday greenlit insolvency proceedings against Zee Entertainment Enterprises. The order came in response to a petition filed by IndusInd Bank after Zee failed to fulfill its obligations under a Debt Service Reserve Account Agreement. 

Last week, the National Company Law Appellate Tribunal had set aside an earlier order allowing insolvency proceedings against the Essel group firm. The Mumbai bench of the NCLT had been directed to pass a fresh order.

IndusInd Bank claims a default of ₹83.08 crore against the media and entertainment firm promoted by media baron Subhash Chandra. According to reports, the court has appointed Sanjay Kumar Jhalani as the interim resolution professional.

Also read: AIDCF cautions advertisers against advertising on Star, Zee and Sony channels

Under the terms of the DSR account agreement between the bank and Siti Networks - to which Zee is also a party - the Essel group firm had guaranteed the bank's ₹150 crore loan to the latter. Despite assurances, Zee had failed to maintain an amount equal to one quarter's interest and one quarter's principal at all times in the account - for the purpose of servicing its debts.

The bank claims that Siti had failed to maintain the account since September 2019, with the dues amounting to ₹89 crore. It argues that Zee should also be held liable as a guarantor.

Zee however insists that the IndusInd petition is an “act in breach or violation” of previous orders passed by the Delhi High Court. In February 2022, the company had moved an application before the NCLT requesting the dismissal of IndusInd Bank's plea. 

Also read: ZEEL moves NCLT for dismissal of IndusInd Bank's insolvency plea

Meanwhile, private lender IDBI bank had also moved the NCLT against Zee seeking insolvency proceedings to recover dues of ₹149.60 crore in mid-December last year. As per a regulatory update from the media major, the claim has been disputed by Zee.

Tangentially, Zee Entertainment Enterprise Ltd reported a 91.86% decline in its consolidated net profit earlier this month. The company clocked in at ₹24.32 crore for the December quarter on account of higher content cost and investment in its OTT platform.

According to the company, "challenging macro economic environment continues to impact operating performance."

(With inputs from agencies)