NCLAT Set To Hear IDBI's Plea For ZEE Entertainment's Insolvency Proceedings Today
The National Company Law Appellate Tribunal (NCLAT) is slated to hear the plea filed by IDBI Bank against Zee Entertainment regarding insolvency proceedings. The hearing is scheduled for Thursday. The NCLAT bench, consisting of Chairperson Justice Ashok Bhushan and Member Barun Mitra, has allowed the appellant a week's time to submit an additional affidavit, as reported by a media house.
IDBI Bank had raised objections to the decisions made by the Mumbai bench of the National Company Law Tribunal (NCLT), which had rejected the private lender's request to initiate insolvency proceedings against Zee Entertainment.
Recently, the Mumbai NCLT bench granted approval for the merger of ZEE with Culver Max Entertainment (formerly known as Sony Pictures Networks India). IDBI Bank had taken the matter to NCLAT challenging the NCLT order issued in May of this year. The private lender, in its plea, sought insolvency against Zee Entertainment, citing Section 10A of the Insolvency and Bankruptcy Code (IBC).
According to Section 10A, applications for corporate insolvency resolution processes (CIRP) cannot be filed against any debtor by financial and operational creditors for defaults occurring on or after 25 March 2020, for a one-year period. This provision was introduced by the government in the IBC to support companies as economic activities resumed gradually post-lockdown.
The NCLT's ruling stated that Section 10A absolutely bars the filing of applications under Sections 7, 9, and 10 of the Code for defaults that occurred between 25 March 2020 and 25 March 2021.
Siti Networks, the principal borrower of IDBI Bank, had taken a loan of Rs 150 crore for a working capital facility, requiring the maintenance of a Debt Service Reserve Account (DSRA). However, there was a default in maintaining the required credit balance under DSRA.
On 5 March 2021, IDBI Bank invoked the guarantee provided by ZEEL and demanded payment of Rs 61.97 crore, along with additional interest from 18 February 2021. The bank claimed a total default amount of Rs 149.60 crore.
ZEEL contested the claim, arguing that its guarantee implied limited and restricted liability for the guarantor. The company maintained that it could not be held accountable for the entire debt in case of a borrower's default.
