Relief for Zee Entertainment as NCLAT stays insolvency proceedings

The National Company Law Appellate Tribunal or NCLAT today stayed insolvency proceedings against Zee Entertainment Enterprises Ltd (ZEEL). Admitting a plea by ZEEL Managing Director and chief executive Punit Goenka, a two-member NCLAT bench stayed the order passed by the Mumbai bench of the National Company Law Tribunal (NCLT). On Wednesday, NCLT had admitted a insolvency plea against ZEEL by private sector lender IndusInd Bank and also appointed Sanjeev Kumar Jalan as the resolution professional in the matter.

The matter pertains to a default of Rs 83 crore by Siti Networks, a sister company owned by Essel Group. IndusInd Bank invoked the guarantee when Siti defaulted the payment.

NCLAT today issued notices to respondents, asking them to file reply in two weeks. The appellate tribunal will hear Zee’s appeal against insolvency on March 29.

IndusInd Bank has also filed a separate insolvency petition against Siti Networks at NCLT. The tribunal has appointed Mohit Mehra as the resolution professional in this matter. The development comes at a time when ZEEL is at advanced stages of merging with Culver Max Entertainment (Sony) in one of the biggest deals in the media and entertainment sector.

Shares of Zee Entertainment Enterprises had moved to positive territory in noon trade today, after falling as much as 5% in early trade. On Thursday, Zee had tumbled 4% on Thursday after insolvency proceedings were initiated against the company.

Analysts have raised concerns about possible delays due to the insolvency proceeding on the Zee-Sony merger that is aimed at creating a $10 billion media powerhouse in India. Meanwhile, the National Stock Exchange on Thursday banned the derivatives trading on Zee’s stock effective from April 28.

Zee and Sony decided to merge in December 2021 to create a powerhouse in a key growth market of 1.4 billion people. The two companies have already received conditional approval from the Competition Commission of India (CCI). The stock exchanges and ZEEL’s shareholders have also approved the deal. (With Agency Inputs)