NCLAT reserves order on IDBI, Axis Bank pleas against failed Zee-Sony merger

Delhi: The National Company Law Appellate Tribunal (NCLAT) has deferred its decision on the petitions brought forth by IDBI Bank and Axis Bank challenging the Zee-Sony merger, which has now been called off.

Scheduled for April 15, the tribunal will deliberate on whether it should entertain challenges to the legal approval of the Zee-Sony merger given the merger's cancellation.

IDBI Bank and Axis Bank had requested the NCLAT to postpone the ongoing case until the National Company Law Tribunal (NCLT) reaches a verdict on Zee's plea to enforce the merger. However, Zee countered, asserting that the NCLT's ongoing consideration would not impact the current case, urging the NCLAT to proceed with the hearings.

On August 10, the Mumbai bench of the NCLT greenlit the merger between Zee Entertainment and Sony Pictures Networks India (SPNI), marking the path for the establishment of a $10-billion media powerhouse in India. The dissenting creditors, including Axis Finance, JC Flower Asset Reconstruction Co, IDBI Bank, among others, contested primarily a non-compete clause within the merger agreement. 

This clause involved an Essel Group entity receiving ₹1,100 crore as non-compete fees from a Sony Group entity, in exchange for Subhash Chandra's commitment not to contest the merged entity.

This dispute prompted IDBI Bank, IDBI Trusteeship, and Axis Bank to challenge the merger in the NCLAT. Despite their efforts, in December, the NCLAT declined to impose an interim stay on the merger and deferred the case until January.

However, on January 22, the ambitious merger between Zee Entertainment Enterprises (ZEEL) and Sony Pictures Networks India (SPNI) was abandoned, with the latter formally terminating the amalgamation agreement.

Following this development, Zee sought recourse with the NCLT Mumbai to execute the merger, where the NCLT agreed to hear Zee's plea and issued a notice accordingly. Zee contends that the decision to terminate the merger was premeditated and claims it incurred expenses of ₹700 crore or $80 million in preparation for the merger. The case remains pending with the NCLT.

In a separate move, Sony initiated emergency arbitration proceedings against Zee through the Singapore International Arbitration Centre (SIAC), urging the tribunal to prevent Zee from pursuing legal remedies from the NCLT and other forums.

However, on February 4, SIAC dismissed Sony Group's emergency petition against Zee Entertainment Enterprises' plea before India's insolvency tribunal, seeking the implementation of the merger scheme with the Japanese media company's local unit.