In a major relief to media major Zee Entertainment Enterprises Ltd. (ZEEL), the National Company Law Appellate Tribunal (NCLAT) on Friday stayed the insolvency proceedings initiated against it earlier this week.
Admitting a petition filed by ZEEL's Managing Director and Chief Executive Punit Goenka, the appellate tribunal issued notices to private sector lender IndusInd Bank and the interim resolution professional, directing them to file a reply in two weeks.
NCLAT said the submissions made by both sides need a detailed hearing.
"List the appeal for final disposal on March 29. In the meantime, the order passed by the adjudicating authority on February 22, 2023, remains stayed," said the NCLAT bench comprising Chairperson Justice Ashok Bhushan and Barun Mitra.
Commenting on the development, Goenka said in a statement, "WWe respect the decision taken by NCLAT and remain committed to protecting the interests of all stakeholders. Our focus continues to be on the timely completion of the proposed merger (Culver Max Entertainment)." On Wednesday, the Mumbai bench of the National Company Law Tribunal (NCLT) had admitted a plea filed by IndusInd Bank to initiate insolvency proceedings and had appointed Sanjeev Kumar Jalan as the interim resolution professional in the matter.
The matter pertains to a default of Rs 89 crore by Essel Group's multisystem operator arm Siti Networks claimed by IndusInd Bank, for which ZEEL was a guarantor.
The NCLAT order is a major reprieve for ZEEL, which is merging with rival Culver Max Entertainment, formerly known as Sony Pictures Networks India, creating India's biggest media empire.
The company has received necessary approvals from shareholders, creditors, bourses and CCI and a final go-ahead from NCLT is awaited.
During the proceedings, senior advocate Mukul Rohatgi representing ZEEL submitted that insolvency was initiated against the media firm for being a corporate guarantor for a loan provided to Siti Networks.
Terming it a "comedy of errors", Rohatgi told NCLAT that ZEEL was "not a regular guarantor" of the loan under which a comfort amount was to be maintained in the Debt Service Reserve Account (DSRA) for payment of the interest.
According to him, ZEEL had not given a special guarantee for the debt. The guarantee was given only if Siti Networks doesn't maintain one tranche of interest comfortably.
He also submitted that ZEEL is going through an amalgamation with Culver Max and has all the approvals but the merger will get stuck because of this order.
While senior advocate Rajiv Nayar, representing IndusInd Bank said ZEEL was a "principal debtor" as per the agreement. A cash buffer was to be maintained but instead ZEEL was going from one court to another, taking their chance.
IndusInd had approached NCLT claiming a financial debt of around Rs 92 crore. However, this was challenged by ZEEL by filing another appeal against the maintainability of the petition by the bank.
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