Axis Finance, JC Flowers Have No Locus To Object To Merger With Sony, Says Zee

Axis Finance Ltd. and JC Flowers and Co. have no locus to object to the merger with Sony Pictures Networks India Pvt. since they are not creditors of Zee Entertainment Enterprises Ltd., the counsel for Zee told the National Company Law Tribunal on Monday.

Moreover, they cannot seek access to the 'non-compete' agreement signed as part of the deal, as they are unable to prove the relevance of the document to the objection, said senior advocate Janak Dwarkadas, while arguing for Zee.

As part of the merger, Zee's founder and promoter Subhash Chandra will get non-compete fees of around Rs 1,100 crore from a Sony Group company. This fee is meant to restrain the promoters from using their competitive advantage to the disadvantage of the merged entity.

Both Axis Finance and JC Flowers have no right to object to the merger as they are not creditors of Zee, but of the Essel Group, Dwarkadas said. Even if they were creditors, they would have to prove fraud (perpetrated by the scheme) on the creditors, to have any right to object, he said.

The fact that these claims are disputed further takes away any right accruable to the creditor. JC Flowers has extinguished any right to object when the actual lender, Yes Bank Ltd., has not raised any objection to the merger, Dwarkadas said.

According to him, there's no logical reason in the objection of a lender who was a creditor of a company with a net worth of Rs 8,000 crore to becoming the creditor of a Rs 44,000 crore company. "This is an abuse of the court's proceeding," he said.

Axis Finance and JC Flowers' case is that the non-compete agreement, if executed, would result in alienation of assets held by Chandra, who is a personal guarantor to various loans advanced by both the lenders.

Axis Finance had extended a loan of approximately Rs 150 crore to two Essel Group entities—Cyquitor Media Services Pvt. and Primat Infrapower and Multiventures Pvt.—whereas Yes Bank Ltd. has extended a loan of Rs 377 crore to Essel Infra Projects Ltd.

Yes Bank’s loan was later assigned to JC Flowers.

The court will continue hearing the matter on April 28.