 "Zee-sony, Sony, Zee")
The National Company Law Appellate Tribunal (NCLAT) on Monday said that it will start hearing on the Zee-Sony merger challenge from May 17. Axis Finance and IDBI had challenged the merger in NCLAT.
Both IDBI Bank and Axis Finance had urged the appellate tribunal to wait for the outcome of Zee’s plea in the NCLT Mumbai to enforce the merger, which has been called off.
The plea asking Sony to enforce the merger is pending with the Mumbai bench of NCLT and is expected to be heard from April 25.
Additional Solicitor General (ASG) N Venkatraman, appearing for IDBI Bank, said the outcome of Zee’s NCLT plea would have a bearing on the case as it would decide the future of the merger.
Meanwhile, Senior Advocate Arun Kathpalia, appearing for Zee Entertainment Enterprises Limited (ZEEL), said the NCLAT case was an appeal against the sanction to the Zee-Sony merger, while the one in NCLT dealt with the implementation of the merger.
Termination and penalty
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Following two years of negotiations, Sony Pictures Networks India – the wholly-owned subsidiary of Sony Group Corporation of Japan – had in January issued a termination notice to ZEEL on the merger agreement. The company has also sought $90 million in termination fees from ZEEL.
Reacting to the notice, ZEEL said it would take all steps to protect the interest of shareholders.
ZEEL had inked the merger cooperation agreement with Culver Max Entertainment (formerly Sony Pictures Networks India) and Bangla Entertainment (BEPL) in relation to the composite scheme of the arrangement, which was approved by the Mumbai Bench of the National Company Law Tribunal (NCLT) in August 2023.
Sony Pictures Networks India had filed the petition against Zee Entertainment after terminating their merger, which would have created a $10 billion entertainment giant with 25 per cent of the market share among the general entertainment channels.
The litigation between Zee and Sony started after Sony sought $90 million as termination fees from Zee, saying it did not comply with several pre-conditions set in the merger agreement. Zee denied Sony’s allegations and made counterclaims against the Japanese firm at the Singapore International Arbitration Centre (SIAC).
Lack of reasonable efforts
The Singapore International Arbitration Centre earlier this year rejected the emergency arbitration petition filed by the Japanese major Sony against Zee Entertainment Enterprises over their failed merger, citing lack of jurisdiction.
As per news reports, Sony’s notice to Zee alleged the Indian company had not made commercially reasonable efforts to meet specific financial thresholds, including cash availability. According to Sony, Zee’s cash position as of September 30 last year was Rs 476 crore. It fell “much below the requirements” of the merger agreement.
Sony also expressed reservations about Punit Goenka becoming the managing director and chief executive officer of the merged entity after the Securities and Exchange Board of India (Sebi) took action against Goenka for alleged fund diversion. The Securities Appellate Tribunal had set aside the Sebi order in October last year.
