IDBI Bank has taken the matter to the National Company Law Appellate Tribunal (NCLAT) on Thursday, challenging the rejection of its plea by the National Company Law Tribunal (NCLT) on May 19. The NCLT had turned down IDBI Bank’s request to initiate insolvency proceedings against Zee Entertainment Enterprises (ZEE), and now IDBI Bank is seeking a review of that decision.
The insolvency application was filed with the dedicated bankruptcy tribunal to recover dues of ₹149.60 crore from Zee Entertainment. Although the case has been filed with the court registrar, it is yet to be listed for a hearing.
IDBI Bank filed the petition under section 7 of the Insolvency and Bankruptcy Code (IBC), which allows financial creditors to apply for initiating Corporate Insolvency Resolution Process (CIRP) against a corporate debtor before the adjudicating authority.
IDBI Bank’s claim against ZEE arises from a debt service reserve account (DSRA) guarantee, which the bank alleges was provided by ZEE to secure loans extended by IDBI Bank to Siti Networks Ltd, both of which were part of the Essel Group. IDBI Bank argued before the NCLT that its claim was similar to that of IndusInd Bank, and on that basis, the application should be accepted.
Similarly, IndusInd Bank had also filed an application against ZEE, which was accepted by the NCLT on February 22. However, the NCLAT later provided relief to the media company, led by managing director and chief executive Puneet Goenka, against the NCLT’s order. ZEE subsequently reached a settlement agreement with IndusInd Bank in March, inching closer to its planned merger with Sony Pictures (Culver Max Entertainment).
Both IndusInd Bank’s and IDBI Bank’s claims were opposed by ZEE, mainly on the grounds that the guarantee was invoked during the pandemic. According to Section 10A of the IBC, insolvency proceedings cannot be initiated for defaults that occurred during the covid period from March 25, 2020, to March 25, 2021. ZEE also asserted that the guarantee was limited and did not extend to the entire debt.
Notably, ZEE’s proposed merger with Sony Pictures (Culver Max Entertainment) has faced legal obstacles due to opposition from various parties, including IndusInd Bank, Axis Finance, and JC Flower ARC. The Mumbai bench of NCLT has heard all parties and is yet to give its final verdict on the matter.
ZEE has contended that the merger has been approved by the majority of shareholders and claimed that those opposing it are non-creditor objectors with no locus in the matter.