The Singapore International Arbitration Centre (SIAC) will hear an emergency arbitration on Wednesday after Sony initiated proceedings against Zee Entertainment Enterprises Ltd for alleged breach of merger terms by Zee.
More than a week ago, the Japanese giant terminated a proposed $10-billion merger pact with Zee and claimed $90 million in termination fees from the Subhas Chandra company.
If the SIAC admits Sony’s petition, an emergency arbitrator will be appointed to resolve the dispute.
The development came on a day the Mumbai bench of the National Company Law Tribunal (NCLT) accepted a petition filed by a Zee shareholder, which sought implementation of the merger of the Indian entity with Sony.
The petition was moved by Mad Men Film Ventures on Tuesday before the tribunal,
which issued a notice directing Culver Max Entertainment (earlier Sony Pictures Network India) to file a reply within three weeks.
The NCLT will hear the matter on March 12.
The tribunal did not agree to the arguments made by Sony’s counsel who said the approval by the NCLT was conditional and depended on various conditions, which may be fulfilled or waived off in writing.
The counsel also argued that Mad Men was acting on behalf of Zee.
While both parties have not publicly disclosed the reasons behind the termination of the deal, a Reuters report said Sony cited Zee’s failure to fulfil certain financial terms and provide a viable plan to correct the situation.
The charges were rejected by Zee which alleged in a letter that Sony was acting in “bad faith’’ by pulling out from the merger.
In its 62-page termination notice to Zee, Sony reportedly said several breaches of the merger agreement were “not remediable and any further attempts to discuss mutually would be an empty formality, especially given ... plain denial (by Zee) and failure to provide a proposal to protect” Sony’s interests.
“The breaches committed by Zee are not ‘procedural or technical’ in nature and will have a substantive impact on the transactions,” Sony had claimed.
Sony cited Zee’s cash reserves of less than Rs 500 crore, which it claimed was below the requirement set in the merger agreement.
One of the obstacles to the merger, reportedly, was Sebi’s probe against Zee managing director and CEO Punit Goenka for alleged diversion of funds. Sony is also understood to have expressed concerns in this regard.
The Zee-Sony deal stipulated that the merger was to be completed before December 21, 2023, including regulatory and other approvals with a grace period of one month to complete the transaction.
Zee’s shares have fallen about 30 per cent since the deal collapsed.
Its business has struggled over the years. Zee’s advertising revenues fell to $488 million for the 2022-23 financial year from around $600 million five years earlier.
Cash reserves dropped to $86 million from $116 million in that period.
SpiceJet relief
In a relief to low-cost carrier SpiceJet, the NCLT dismissed an insolvency petition of aircraft lessor Wilmington Trust SP Services on Monday.
A Delhi-based bench of the NCLT comprising members Mahendra Khandelwal and Rahul Prasad Bhatnagar dismissed the petition of the aircraft lessor based in Dublin, Ireland.
Wilmington moved the insolvency plea against SpiceJet in June 2023 over unpaid dues.
With inputs from PTI