Bankruptcy court admits Zee Entertainment under the insolvency resolution process

The Mumbai bench of the National Company Law Tribunal (NCLT), in two separate applications filed by the IndusInd Bank, has appointed Sanjeev Kumar Jalan and Mohit Mehra as resolution professionals for Zee Entertainment and Siti Network respectively. Jalan is a partner at BDO India in its restructuring practice.

The division bench of judicial member HV Subba Rao and a technical member Madhu Sinha, while allowing applications, had also rejected ZEEL counsel’s oral request to stay the order for two weeks.

“Once the company gets admitted into CIRP, the powers of the board of directors stand superseded in relation to the Corporate Debtor (Zee Entertainment),” said Prachiti Shah, managing partner of law firm Nanavati & Nanavati Advocates.

“The only way out for the original promoters is to settle the dues with the lender under 12 (A) for post-admission settlement. Unless that happens, any scheme matters including merger or amalgamation will not be possible,” adds Shah.

“Now the outcome is completely dependent on lenders,” said Srishti Ojha, founder of law firm Verist Law. “It will depend on the ZEEL’s Committee of Creditors (CoC) to decide to formulate the resolution plan and design the outcome of this process.

The detailed order was not uploaded till the time of filing the story.In December 2021, Sony and Zee signed a merger deal to combine their linear networks, digital assets, production operations, and program libraries.

After the closing of the merger deal, SPE will indirectly hold 50.86% of the combined company while the ZEEL promoters will hold 3.99%, and the other ZEEL shareholders will hold a 45.15% stake. Punit Goenka will serve as the MD & CEO of the merged entity.

Under the terms of the definitive agreements, the merged entity will have a cash balance of $1.5 billion at closing through infusion by the current shareholders of Culver Max Entertainment, an indirect subsidiary of Sony Pictures Entertainment (SPE), and the promoters (founders) of ZEEL.

IndusInd Bank had approached the tribunal against Subhash Chandra-promoted ZEEL seeking payment of default of over Rs 89 crore.

“The Company is a party to the Debt Service Reserve Account Guarantee Agreement entered into with IndusInd Bank for the term loan facility advanced to Siti Networks Limited said the company in its exchange filing, at the time when the lender had approached the tribunal in February last year. “The issue of the Company’s alleged default under the DSRA Guarantee Agreement is sub-judice before the Delhi High Court filed by the Company against IndusInd Bank.”

Siti owes a group of nine lenders a total of Rs 850 crore.

The development comes at the time when ZEEL is seeking approval for the merger with Sony Pictures, where four lenders such as Axis Finance, IDBI Bank, and IndusInd bank are opposing as debtors of the company, while Indian Performing Right Society Ltd (IPRS) is opposing as operational creditor and claimant of the company.

The Securities and Exchange Board of India (Sebi), Competition Commission of India (CCI), stock exchanges, and the Regional Director (RD) of the Ministry of Corporate Affairs have approved the scheme of arrangement between Sony and Zee.

This is the third company of the Essel Group to be admitted under the resolution process. Earlier, on February 10, the tribunal had also allowed an application against Zee Learn Ltd.

ZEEL’s share price was down 2.39% to Rs 205.90 at the close of market hours today.