Zee-Sony merger: IDBI Trusteeship files appeal against Chandra at NCLAT

The NCLT order had said Subhash Chandra had executed a personal guarantee in 2019 in favour of IDBI trusteeship guaranteeing the repayment obligations towards the debentures.

On August 10, the Mumbai bench of NCLT approved the merger scheme between Zee Entertainment Enterprises Limited (ZEEL) and Culver Max Entertainment (Sony).

Zee Sony merger: Zee Entertainment Enterprises (ZEEL) merger deal with Sony Pictures Networks India (Sony) is facing hurdles one after the other. In a recent development, IDBI Trusteeship Services Limited (ITSL) has filed an appeal against Subhash Chandra at the National Company Law Appellate Tribunal (NCLAT) challenging the order of the National Company Law Tribunal (NCLT), Mumbai, which allowed the merger. The NCLT had earlier turned down IDBI trusteeship’s objection to the merger.

The case, which came up for hearing on December 1, was deferred and was transferred to the bench of Chairperson Ashok Bhushan, a report in Moneycontrol said.

The IDBI trusteeship had told NCLT earlier that it is the debenture trustee of 425 debentures issued by Essel Infraprojects Limited (EIL) for certain schemes.

The NCLT order had said Subhash Chandra had executed a personal guarantee in 2019 in favour of IDBI trusteeship guaranteeing the repayment obligations towards the debentures.

However, IDBI trusteeship alleged that Chandra had failed to comply with his obligations under the personal guarantee and thus he is a creditor. It claimed that Chandra owed Rs 500 crore to the trusteeship company.

On the other hand, Zee Entertainment Enterprises had objected to the IDBI Trusteeship claim. “IDBI Trusteeship is admittedly not a creditor of Zee. It has no contractual or legal privity with Zee. It has no locus (right) to object to the merger.”

The NCLT dismissed the objection reasoning that “having failed in ensuring recovery of their alleged dues from other entities of Zee through other legal proceedings are opposing this scheme of Zee as a last resort for their recoveries.”

Before this, IDBI Bank and Axis Finance have also challenged the NCLT order. On October 31, an NCLAT bench transferred the appeals filed by Axis Finance and IDBI Bank challenging the National Company Law Tribunal (NCLT) order approving the Zee-Sony merger to the bench of the Chairperson.

In December 2021, Zee Entertainment Enterprises announced a mega-merger with Culver Max Entertainment (Sony Pictures Networks India), which would bring 75 channels, two video streaming services (Zee5 and SonyLiv) and two film studios (Zee Studios and Sony Pictures Films India) under a single entity.

On August 10, the Mumbai bench of NCLT approved the merger scheme between Zee Entertainment Enterprises Limited (ZEEL) and Culver Max Entertainment (Sony).

At that time, the company had claimed that the company had reached a settlement with IDBI Bank, IndusInd Bank, and the Indian Performing Rights Society (IPRS), and therefore, can go ahead with the deal.

Leadership tussle
Earlier this week it was reported that the companies are facing problems in sealing the deal over leadership arrangements for the merged entity. A report in the Financial Express claimed that the companies are pressing the names of their respective chiefs – NP Singh, MD & CEO of Sony India, and Punit Goenka, MD & CEO of ZEEL, to lead the merged media company.

Later on Thursday, the company in a regulatory filing claimed that the reports are “factually incorrect”.

“We wish to reiterate that the company is continuing to work towards a successful closure of the proposed merger as per the composite scheme of arrangement approved by the NCLT, Mumbai Bench,” Zee said in a regulatory filing a day earlier.

Zee has also claimed that it has spent Rs 176.2 crore on its proposed merger with Sony. The company’s regulatory filings showed that it incurred merger-related expenses of about Rs 7.3 crore in FY23. Business Today