Zee-Sony merger: IDBI Trusteeship appeals NCLT decision on Subash Chandra’s guarantee

The merger between Zee Entertainment Enterprises (ZEEL) and Sony Pictures Networks India (Sony) is faced with another obstacle. In a recent turn of events, IDBI Trusteeship Services Limited (ITSL) has lodged an appeal at the National Company Law Appellate Tribunal (NCLAT) against Essel Group chairperson Subhash Chandra, contesting the decision of the National Company Law Tribunal (NCLT) in Mumbai that had approved the merger. 

The appeal contests the decision of the National Company Law Tribunal (NCLT) in Mumbai, which had rejected the objection raised by IDBI Trusteeship against the merger and granted it approval, media reports said.

Earlier, the IDBI trusteeship had told NCLT that it is the debenture trustee of 425 debentures issued by Essel Infraprojects Limited (EIL) in favour of certain schemes managed by Franklin Templeton Asset Management (India).

According to the NCLT ruling, Subhash Chandra had provided a personal guarantee  on June 25, 2019, to IDBI Trusteeship, assuring the fulfillment of repayment obligations related to the debentures.

However, the trusteeship company alleged that Chandra failed to comply with his obligations under the personal guarantee and thus he is a creditor. It claimed over Rs. 500 crore from Chandra.

ZEEL had opposed this objection contending that "IDBI Trusteeship is admittedly not a creditor of Zee. It has no contractual or legal privity with Zee. Therefore, it has no locus (right) to object to the scheme (merger)." 

The NCLT dismissed the objection reasoning that "having failed in ensuring recovery of their alleged dues from other entities of Zee through other legal proceedings are opposing this scheme of Zee as a last resort for their recoveries."

The case, which came up for hearing on December 1, was deferred as the case was transferred to the NCLAT bench of Chairperson Ashok Bhushan.