NCLAT stays insolvency proceedings against Zee
In a major relief to Zee Entertainment Enterprises Ltd (ZEEL), the National Company Law Appellate Tribunal (NCLAT) on Friday stayed the insolvency proceedings against Zee. The NCLAT order saves the the MD and CEO Punit Goenka from embarrassment, who last year survived an hostile attempt by minority shareholders to get him ousted from his position.
A two-member NCLAT bench ruled in favour of Zee and stayed the order passed by the Mumbai bench of the National Company Law Tribunal (NCLT). However, this is just a stay order, and the risk of insolvency proceedings has not been eliminated completely.
The troubled media and entertainment company risks undergoing insolvency proceedings after the Mumbai bench of the National Company Law Tribunal on 22 February admitted the insolvency petition filed by IndusInd Bank.
The bank filed the plea against Zee Entertainment Enterprises for defaulting on a payment of Rs 83.08 crore. The tribunal has appointed Sanjay Kumar Jhalani as the interim resolution professional.
“In the petition filed by Indusind Bank against the Company under Section 7 of the Insolvency & Bankruptcy Code, 2016, the Hon’ble National Comp Tribunal, Mumbai Bench (NCLT) has pronounced its Order dated February 22, 2023 admitting the Company to corporate insolvency resolution process under the provisions of the Code,” said Zee Entertainment Enterprises in a filing to the Bombay Stock Exchange on 22 February.
According to the filing, ZEEL is a party to the Debt Service Reserve Account (DSRA) Guarantee Agreement entered into with IndusInd Bank for the term-loan facility advanced to another Essel Group firm, Siti Networks Ltd.
Earlier, IDBI Bank and Indian Performing Right Society Limited had also filed insolvency petition against Zee Entertainment.
ZEEL recently merged with Sony Pictures Network India after the final go-ahead from the Competition Commission of India (CCI), which has raised several market dominance related concerns over the merger. The company had to agree to sell three of its Hindi entertainment channels — Big Magic, Zee Action and Zee Classic – to address the concerns raised by CII.
But even before the merger met regulatory hurdles, ZEEL’s minority shareholders – Invesco Group – had vehemently opposed the merger. The foreign institutional investor had even tried to force the MD and CEO Punit Goenka to step down from the post. However, Zee Entertainment managed to sailed through those opposition to not only complete the merger but also retain its MD and CEO.
Another Zee group company – Zee Learn – is also facing insolvency proceedings after NCLT admitted the insolvency application filed by Yes Bank after the former defaulted on a payment of Rs 469 crore.
