The National Company Law Appellate Tribunal (NCLAT), on November 8, deferred the hearing of IDBI Bank’s appeal against the National Company Law Tribunal (NCLT) order rejecting the insolvency plea against media major Zee Entertainment Enterprises Limited (ZEEL) to December 6.
In May 2023, the NCLT’s Mumbai bench refused to entertain IDBI’s plea noting that it was barred under Section 10A of the Insolvency and Bankruptcy Code (IBC).
Section 10A mandates that no application for initiation of a corporate insolvency resolution process (CIRP) can be filed against any debtor by any financial and operational creditor for any default arising on or after March 25, 2020, for a period of one year.
This was a special provision inserted by the government in the IBC to help the companies when economic activities resumed after the Covid-induced lockdowns in phases. A two-member NCLT bench said that ZEEL, which was the corporate guarantor for the loan availed by Siti Networks -the principal borrower of IDBI Bank – committed a default. The default was committed during the time specified under Section 10A.
ZEEL’s dispute with IndusInd Bank:
Earlier this year, the NCLT’s Mumbai bench admitted ZEEL to insolvency in a petition moved by IndusInd Bank. The proceedings were initiated as Zee was a guarantor for IndusInd Bank’s Rs 150 crore loan to Essel Group’s Siti Networks under the Debt Service Reserve Account Guarantee Agreement (DSRA). However, it failed to honour the agreement, resulting in an Rs 83 crore shortfall.
Punit Goenka of ZEEL appealed against this order in NCLAT. In February, NCLAT stayed the order directing the initiation of insolvency proceedings against the media and entertainment firm.
In July 2023, ZEEL and IndusInd Bank told the appellate tribunal that they have arrived at a settlement, as a result of which the insolvency proceedings were closed.