Zee Entertainment Enterprises Ltd (ZEEL) has cleared another hurdle in the way of its proposed merger with Sony Pictures Networks India (SPNI), as the National Company Law Appellate Tribunal (NCLAT) disposed of IndusInd Bank’s appeal. The appeal challenged the order of the National Company Law Tribunal (NCLT), which had approved the merger between ZEEL and SPNI.
Chirag Gupta, advocate, Delhi High Court, says now that the insolvency proceedings have been withdrawn, the merger can be considered by NCLT on merits.
On what could have gone south for ZEE, Gupta said, “The insolvency proceedings filed by IndusInd bank would have had great ramifications on the merger if not disposed of by NCLAT. The merger would have been stalled indefinitely as the creditors would have gained control and started scouting for a buyer. It is in the interest of the company and specifically the merger that the dues of IndusInd Bank have been settled.”
According to Sandeep Bajaj, Managing Partner, PSL Advocates & Solicitors, had the Corporate Insolvency Resolution Process (CIRP) continued, it would have resulted in the suspension of the powers of the board of directors of ZEEL.
In such a case, the merger may not have been possible as once a company is under CIRP, only three possible outcomes remain, says Bajaj.
“These outcomes could be approval of a resolution plan, liquidation, and withdrawal in terms with section 12A,” (Section 12 A of Insolvency and Bankruptcy Code permits the applicant to withdraw the application before NCLT after its admission) Bajaj added.
However, experts also said that there is still uncertainty surrounding the merger in view of the proceedings pending against Punit Goenka before the Securities and Exchange Board of India (SEBI) and the Securities Appellate Tribunal (SAT).
According to Harvinder Singh, Partner, DSK Legal, “As per the current merger scheme which is in the NCLT for its approval, Goenka was to lead the merged company. However, the NCLT has already deferred the case twice in the last two weeks and has posted the matter for July 6. Additionally, with this new SEBI development, Sony will have to take a call on whether they want to hire a representative from their side to steer the newly-merged entity or not,” he said.
Also, there have been no developments on the appeals made by Goenka. If the SAT makes an adverse ruling against Goenka, he has the option of moving the Supreme Court. In that case, the merger scheme will have to be amended to propose a new head for the merged entity. This amended scheme will have to be filed with the NCLT for its approval, and all of this will take a significant amount of time.