Mumbai: On Wednesday, Zee Entertainment Enterprises Ltd. was given permission to begin insolvency proceedings by the National Company Law Tribunal's Mumbai bench.
Sanjay Kumar Jhalani was chosen by the court to serve as the interim resolution specialist.
The order was issued in response to a petition filed by IndusInd Bank Ltd. after the company failed to meet its obligations under a Debt Service Reserve Account Agreement between the bank and Siti Networks Ltd., to which Zee was also a party.
Siti Networks is a subsidiary of the Essel Group.
According to the terms of the agreement, Zee guaranteed IndusInd Bank's Rs 150 crore loan to Siti Networks, which was required to keep an amount equal to one quarter's interest and one quarter's principal in the account at all times for the purpose of servicing its debts. Zee had promised to keep such a sum under the terms of the agreement, but had failed to do so.
ZEEL MD Punit Goenka's office release a statement saying, “ Mr. Punit Goenka has filed an appeal in the Hon’ble National Company Law Appellate Tribunal (NCLAT) today, seeking relief against the order passed by the Mumbai bench of the National Company Law Tribunal (NCLT). Mr. Goenka is taking all the necessary steps as per law, to protect the interests of all stakeholders of Zee Entertainment Enterprises Ltd. (ZEE) and to achieve a timely completion of the proposed merger with Culver Max Entertainment Pvt. Ltd. Mr. Goenka firmly believes in the potential of the merger, to deliver immense value to all stakeholders. ZEE is a debt-free & financially strong company, and believes in value creation for its stakeholders.” –
According to IndusInd, Siti has been a continuous defaulter since September 2019 and has failed to maintain the account. According to it, the default amounted to Rs 89 crore on that date. Zee, as a guarantor, should be held liable for such defaults, it argued to the tribunal.
Zee Entertainment questioned the petition's viability, claiming that the default occurred in October 2020, when the insolvency code was suspended. According to it, a default cannot occur unless the bank explicitly invokes the guarantee, which did not occur until 2020.
Objections were also raised regarding the default amount, which states that the claim amount cannot exceed Rs 69 lakh as of 2019, which is significantly less than the minimum threshold of Rs 1 crore mandated by the insolvency code.
The tribunal granted the bank's petition despite Zee's arguments. Concurrently, the court granted IndusInd's insolvency petition against Siti Networks. Rohit Mehra has been appointed as the process's interim resolution professional. Zee Entertainment is in the process of merging with Culver Max Entertainment Pvt., a wholly owned indirect subsidiary of Sony Group Corp.
