The National Company Law Tribunal has approved the scheme of arrangement for the merger between Zee Entertainment Enterprises Ltd. and Culver Max Entertainment Pvt.—also known as Sony Pictures.
"All the objections are dismissed," the bench said in an oral pronouncement. The court had reserved its order on July 10.
Zee and Sony had agreed to merge in December 2021. Subsequent to receiving the required nods from the NSE, BSE, and other sectoral regulators, including SEBI and the Competition Commission of India, the company approached the tribunal for final sanction of the merger.
The process came to a standstill after several creditors of the Essel Group filed objections against the non-compete clause included in the scheme. According to the clause, Essel Mauritius—an Essel Group entity—will receive Rs 1,100 crore as non-compete fees from SPE Mauritius—a Sony Group entity—in exchange for Subhash Chandra's right to compete against the resulting entity.
Axis Finance Ltd., JC Flowers Asset Reconstruction Co., IDBI Bank Ltd., IDBI Trusteeship Ltd., and Imax Corp. were among the creditors of the Essel Group that objected to this clause.
According to them, this clause is a scheme to defraud the creditors and round-trip the amount that should have ideally accumulated to Chandra. Any money that had accrued to Chandra could have been used to settle the debts because he had provided personal guarantees to several of these creditors. The plan effectively denies Chandra's creditors any claim to such a sum by channeling it to a third party, they had argued.
Along with the objections, the NSE and BSE also placed on record two SEBI orders pertaining to Essel Group entities. This included an order against Punit Goenka, the former CEO of Zee, barring him from company boards. The Securities Appellate Tribunal later upheld the order and remanded it back to SEBI for further consideration.
The objectors had argued that the order was of material importance to the merger, as one of the key parts of the scheme is the appointment of Goenka as the managing director of the merged entity. However, Zee had submitted that the provision is not critical and that the merger must go on regardless of Goenka's disqualification.
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