NCLAT sets aside NCLT order on Zee Entertainment-Sony India merger

The National Company Law Appellate Tribunal (NCLAT) on Friday set aside an order by the National Company Law Tribunal (NCLT), which had directed the National Stock Exchange (NSE) and BSE to review their no-objection certificate (NoC) given for the Zee-Sony merger.

The appellate tribunal gave the order on an appeal filed by Zee Entertainment Enterprises Ltd (ZEEL) against the verdict by the Mumbai Bench of the NCLT on May 11.

The appellate tribunal set aside the NCLT order on grounds of “violation of principles of natural justice”.

The NCLAT said Zee should have been heard, and sent the case back to the NCLT.

“We are of the opinion that the impugned order is required to be set aside primarily on the ground of non-compliance with the principle of natural justice. Accordingly, the impugned order is set aside and the matter is remitted to the NCLT to examine the same and pass appropriate order after hearing both the parties without being influenced by this order,” said the NCLAT Bench comprising Justice Rakesh Kumar and Alok Srivastava.

Now the NCLT will hear fresh arguments on the merger of Zee Entertainment with Culver Max Entertainment (earlier known as Sony Pictures Networks India).

The NCLT had on May 11 instructed the NSE and the BSE to review their clearances for the merger between Zee and Sony as well as revaluate the non-compete clause of the merger, which was cleared by the Securities and Exchange Board of India (Sebi).

Aggrieved by this, Zee appealed against the NCLT order, saying it was not given a fair opportunity to present its case. It argued the NCLT did not have jurisdiction over non-compete issues.

Counsel for Zee told the appellate tribunal the NCLT had passed the order without hearing its case and its consequence virtually nullified all the regulatory approvals it obtained in the past one year.

Counsel also said both stock exchanges merely screen-shared a copy of an order of Sebi in April, which was regarding another company of the Essel group (to which Zee belongs), but the NCLT directed them to review the approval.

The lawyers representing the stock exchanges told the NCLAT that they were instructed to place Sebi’s order at the NCLT and not make any submissions.

Sebi issued an interim order in April against Shirpur Gold Refinery, an Essel group company, as well as its former chairman Amit Goenka, promoters Jayneer Infrapower and Multiventures, and five others for allegedly siphoning off funds from the company.

This ruling led to the NCLT order of May 11.

The proposed deal would see Sony Pictures Entertainment indirectly hold a 50.86 per cent stake in the combined company, while Zee’s founders will have a 3.99 per cent share. The remaining 45.15 per cent will belong to other shareholders, including the public.

A non-compete fee of Rs 1,100 crore will be paid by Sony to the promoters of the Essel group. A definitive merger agreement between Zee and Sony was signed in December 2021.

The proposal has been approved by the BSE, NSE, and shareholders of Zee. It has also been approved with modification by the Competition Commission of India.