Challenges Arise in Zee-Sony Merger: IDBI Trusteeship Appeals Against Subhash Chandra at NCLAT Over NCLT Merger Approval
The Zee Entertainment Enterprises (ZEEL) merger with Sony Pictures Networks India (Sony) encounters successive obstacles. Recently, IDBI Trusteeship Services Limited (ITSL) lodged an appeal against Subhash Chandra at the National Company Law Appellate Tribunal (NCLAT), contesting the National Company Law Tribunal's (NCLT) authorization of the merger. Previously, the NCLT had dismissed ITSL's objections to the merger.
During the hearing on December 1, the case was postponed and reassigned to Chairperson Ashok Bhushan's bench, as reported by Moneycontrol.
IDBI trusteeship previously informed the NCLT of being the debenture trustee for 425 debentures issued by Essel Infraprojects Limited (EIL) for specific schemes.
The NCLT ruling stated that Subhash Chandra had provided a personal guarantee in 2019 to IDBI trusteeship, assuring repayment responsibilities for the debentures. However, the trusteeship alleged non-compliance by Chandra with the personal guarantee, asserting him as a creditor. It asserted a debt of Rs 500 crore owed by Chandra to the trusteeship company.
However, Zee Entertainment Enterprises opposed the claim made by IDBI Trusteeship, stating, "IDBI Trusteeship is admittedly not a creditor of Zee. It lacks any contractual or legal relationship with Zee and lacks the right to object to the merger."
The NCLT rejected this objection, stating that "after failing to recover their purported dues from other Zee entities through prior legal proceedings, they are opposing this Zee scheme as a final attempt to reclaim their losses."
Prior to this, IDBI Bank and Axis Finance contested the NCLT ruling. On October 31, the NCLAT bench transferred the appeals by Axis Finance and IDBI Bank, challenging the NCLT's approval of the Zee-Sony merger, to the Chairperson's bench.
In December 2021, Zee Entertainment Enterprises revealed a significant merger with Culver Max Entertainment (Sony Pictures Networks India). This merger would consolidate 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 NCLT's Mumbai bench granted approval for the merger plan involving Zee Entertainment Enterprises Limited (ZEEL) and Culver Max Entertainment (Sony).
During that period, the corporation asserted that it had settled matters with IDBI Bank, IndusInd Bank, and the Indian Performing Rights Society (IPRS), enabling the deal to proceed.
Leadership Conflict Arises in Merged Entity Negotiations
Earlier this week, reports emerged indicating obstacles in finalizing the merger due to disagreements over leadership roles in the combined entity. The Financial Express reported that both companies are advocating for their respective chiefs—NP Singh, the MD & CEO of Sony India, and Punit Goenka, the MD & CEO of ZEEL—to assume leadership positions in the merged media company.
However, in a regulatory filing on Thursday, the company refuted these reports as "factually incorrect."
"We want to emphasize that the company remains dedicated to achieving a successful conclusion of the proposed merger as per the approved composite scheme of arrangement by the NCLT, Mumbai Bench," Zee stated in a regulatory filing a day prior.
Zee also stated that it has incurred expenses amounting to Rs 176.2 crore for its proposed merger with Sony. According to the company's regulatory filings, merger-related expenses totaled about Rs 7.3 crore in FY23.
