NCLAT refuses to stay Zee-Sony merger, next hearing on 8 January

The National Company Law Appellate Tribunal (NCLAT) on Friday denied a plea from Axis Finance and IDBI Bank for a stay on the merger between Zee Entertainment Enterprises Ltd and Sony Pictures Networks India that would create a $10 billion media behemoth.

The tribunal issued a notice to Zee emphasizing that the progress of the merger hinges on court decisions. It, however, clarified that a stay cannot be granted without first conducting a thorough examination of the case’s merits.

The matter will next be heard on 8 January.

On 10 August, the Mumbai bench of the National Company Law Tribunal had approved the merger of Zee and Sony India, paving the way for the creation of a media giant with a substantial presence in the TV, OTT (over-the-top) and content segments.

This approval had overruled objections to the merger scheme by various creditors, including Axis Finance, IDBI Bank and JC Flowers Asset Reconstruction.

During Friday’s hearing, additional solicitor general N. Venkataraman, representing the lenders, pressed for an immediate suspension of the merger. He argued that allowing the merger to proceed would impede the banks’ ability to recover funds. Venkataraman also pointed out that Zee is a guarantor for loans given to another Essel Group firm, digital cable TV and broadband service provider Siti Networks Ltd.

Senior lawyer Mukul Rohatgi, representing Zee, challenged the validity of the lenders’ plea. He asserted that the lenders neither possessed 5% of the company’s debt nor 10% of its shareholding, rendering them non-stakeholders in the merger. Rohatgi also highlighted that the loans in question were extended to Siti Networks, not Zee.

Apart from legal challenges, the merger has been plagued by internal obstacles, primarily concerning leadership roles in the merged entity. Both parties desire their current heads—N.P. Singh, managing director (MD) and chief executive officer (CEO) of Sony India, and Punit Goenka, MD and CEO of Zee—to lead the new company.

This leadership impasse has hindered progress towards finalizing the merger, with the deadline of 21 December rapidly approaching.

According to a report by The Financial Express, Sony disagrees with Zee’s stance. A major sticking point has been the now-reversed Securities and Exchange Board of India’s ban on Goenka holding key management positions in any listed entity. LiveMint