Axis Finance Ltd (AFL) has challenged an order of the National Company Law Tribunal (NCLT) approving the merger of Zee Entertainment Enterprises Ltd and Culver Max Entertainment (earlier known as Sony Pictures Networks India).
The merger has been challenged before the National Company Law Appellate Tribunal (NCLAT), Delhi.
The Mumbai bench of the NCLT on August 10 approved the proposed merger that would create a $10-billion media house in the country.
The NCLT had dismissed the objections raised by several lenders of Zee, including IDBI Trusteeship, IDBI Bank, Axis Finance, JC Flowers Asset Reconstruction Co. and Imax Corp. Earlier this month, IDBI Bank had filed an appeal against the NCLT order.
“This is to intimate you that the company has been served with an appeal on behalf of Axis Finance Ltd against the company before the NCLAT, Delhi, challenging the order... approving the composite scheme of arrangement amongst Zee, Bangla Entertainment Pvt Ltd and Culver Max Entertainment Pvt Ltd (formerly Sony Pictures Networks India Pvt Ltd),’’ Zee said in a regulatory filing on Thursday.
The disclosure led to its shares ending lower 1.11 per cent at Rs 272.75 in the BSE.
Though Zee did not disclose the grounds for challenge, it is likely Axis Finance has
opposed the non-compete clause in the merger wherein a fee of Rs 1,100 crore would be paid by a Sony group entity to Essel Mauritius, a Zee promoter firm.
The applicants who had moved against the scheme of arrangement in the NCLT had alleged that the non-compete arrangement is ``bogus and a disguised mechanism to cheat lenders and public shareholders of Zee and if the non-compete fee was not going to the promoters’’, the amount would have come to Zee’s shareholders from whom they can recover the dues.
During the hearing at the NCLT, Axis Finance had contended that its claim arises from credit facilities of Rs 100 crore given to Cyquator, an Essel Group entity.
The facility was secured by pledging part of promoter companies’ shares in Zee in favour of AFL.
The company subsequently invoked the pledge and in October 2019 sold the pledged shares of Zee held by the promoter group and recovered around Rs 41.36 crore.
AFL had maintained that the alleged outstanding payable to it about the facility granted to Cyquator was over Rs 61 crore.
AFL claimed it had objected to the merger based on the fact it is a creditor to Essel Group and therefore also an unsecured creditor to Zee.
AFL said that it has a locus to object to the scheme and that the notice of the meeting of unsecured creditors (for the merger) should have been sent to AFL.
Zee, however, denied AFL’s claim, It said AFL is neither a shareholder nor a creditor to Zee. It also maintained that AFL has no contractual or legal privity with Zee and thus it has no locus to object to the scheme.
Win for Zee
The National Company Law Appellate Tribunal (NCLAT) on Thursday dismissed the petition of IDBI Trusteeship Services challenging the order of the NCLT which had denied starting insolvency proceedings against Essel group firm Cyquator Media Services.
A two-member bench of the appellate tribunal observed that the default, claimed by IDBI Trusteeship, had happened during June 2020, which is covered under the period excluded under Section 10A of the Insolvency and Bankruptcy Code, 2016.
Section 10A bars absolutely and forever, the filing of any application under Sections 7, 9 and 10 of the Code, for defaults committed on or after March 25, 2020, up to March 25, 2021.
In June this year, the Mumbai bench of the National Company Law Tribunal (NCLT) dismissed the petition filed by IDBI Trusteeship Services under section 7 of the IBC as a financial creditor.
