Zee Entertainment Insolvency: NCLT Dismisses IDBI Bank's Plea

The National Company Law Tribunal on Friday dismissed IDBI Bank Ltd.’s petition to initiate insolvency proceedings against Zee Entertainment Enterprises Ltd.

IDBI Bank had approached the insolvency court in December last year to initiate an insolvency petition against Zee for a claim of nearly Rs 150 crore. The claim arises from a debt service account agreement entered into by IDBI Bank and Siti Networks Ltd., the bank said.

As per the agreement, Zee agreed to guarantee a working capital loan facility that IDBI had provided to Siti Networks. Zee, under the agreement, was expected to maintain a credit balance of two quarters of the interest of the loan at all times for the purpose of servicing such debt in the event of Siti’s failure to do so. Zee failed to fulfill its obligations, according to IDBI.

However, according to Zee, its guarantee was limited only to the DSRA amount and not the entire debt. Its entire debt cannot exceed more than Rs 50 crore, as guaranteed under the agreement. Moreover, the guarantee was invoked during the period in which the insolvency petitions were suspended, it was argued.

The court, finding merit in Zee’s argument, dismissed IDBI Bank’s petition.

However, earlier this year, the tribunal accepted a similar application from IndusInd Bank Ltd. This was later settled by both parties.

To be clear, in IndusInd’s case, the liability arose from a separate DSRA guarantee agreement undertaken between Zee and the bank, whereas in IDBI’s case, the liability arose from sanction letters between Zee and the bank. There was no separate agreement, as Zee had submitted.

The present verdict comes as a breather for Zee Entertainment, which is in the process of merging with Culver Max International Pvt. (Sony Pictures).