NCLAT refuses to stay Zee-Sony merger, case to be heard on January 8

Tribunal agrees to hear appeal against it on Jan 8

The National Company Law Appellate Tribunal (NCLAT) on Friday refused to stay the merger between Zee Entertainment Enterprises Limited (ZEEL) and Sony Corporation but agreed to hear the appeal against it on January 8.

Axis Finance and IDBI had challenged the merger in NCLAT.

IDBI Bank counsel told the tribunal to stall the merger as ZEEL was the guarantor for loans the bank gave to the Essel entity.

Once the merger happens, it would not be able to recover the loan from ZEEL, he said.
 

Meanwhile, ZEEL argued that neither IDBI nor Axis Finance have the locus standi to file the plea as they do not have the requisite lending or share capital under law to challenge the merger.
 

 

The NCLAT said it cannot stay the merger without hearing the case on merits and posted the matter for January.
 

Reports said that Zee-Sony merger negotiations had hit a stalemate over Punit Goenka’s appointment as chief executive officer (CEO) of the proposed Zee-Sony merged entity.

While Goenka has made it clear that the merger can happen only with him leading the company, Sony is pushing Goenka to take on a non-executive role, reports said.
 

The NCLAT had on May 26 set aside a May 11 order by the National Company Law Tribunal (NCLT), Mumbai.

The order had directed the National Stock Exchange (NSE) and BSE to review their no-objection certificate (NoC) to the Zee-Sony merger.
 

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 in the matter, and sent the case back to the NCLT.
 

The NCLT on August 10 approved the merger of Zee Entertainment with Culver Max Entertainment (earlier known as Sony Pictures Networks India). It paved the way for the creation of a $10-billion media giant in the country.
 

When this was challenged in NCLAT, the appellate tribunal transferred the cases to a Bench led by Chairperson Justice (retd) Ashok Bhushan.
 

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 be held by other shareholders, including the public.
 

A non-compete fee of Rs 1,100 crore will be paid by Sony to the promoters of 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.