Zee-Sony Merger: After IDBI Bank, Axis Finance Challenges NCLT Order Allowing $10 Billion Deal

The NCLT Mumbai bench granted approval to the merger scheme on August 10, rejecting objections from various lenders of Zee Entertainment Enterprises Ltd (ZEEL).

Axis Finance has filed an appeal with the National Company Law Appellate Tribunal (NCLAT), Delhi against the NCLT approval order of the merger between Zee Entertainment and Culver Max Entertainment (formerly Sony Pictures Networks India). The NCLT Mumbai bench granted approval to the merger scheme on August 10, rejecting objections from various lenders of Zee Entertainment Enterprises Ltd (ZEEL), including IDBI Trusteeship, IDBI Bank, Axis Finance, JC Flowers Asset Reconstruction Co, and Imax Corp.

This order has now been contested at the NCLAT. IDBI Bank has also approached the appellate tribunal to challenge the Mumbai bench's approval of the merger.

"The company has been served with an appeal on behalf of Axis Finance Limited against the company before the NCLAT, Delhi, challenging the order dated August 10, 2023 passed by NCLT, Mumbai Bench, dismissing the Interlocutory Application No. 124 of 2022 in CP (CAA) No. 209 of 2022 in CA (CAA) No. 204 of 2022 and approving the composite scheme of arrangement amongst Zee Entertainment Enterprises Limited, Bangla Entertainment Private Limited and Culver Max Entertainment Private Limited (formerly Sony Pictures Networks India Private Limited)," it said in a release.

The $10 billion merger, originally announced in 2021, has faced many setbacks even after receiving approval from the National Stock Exchange, BSE, and regulators, such as the Competition Commission of India (CCI) and the Securities and Exchange Board of India (SEBI). 

According to a report by the Economic Times, in August 2023, the Bombay High Court rejected a plea submitted by Axis Finance to involve Zee, Essel Mauritius, and Sony in its commercial summary lawsuit against Subhash Chandra Goenka, the promoter of ZEEL, and others. The lawsuit aimed to reclaim Rs 146 crore from Subhash Chandra Goenka.

Meanwhile, SEBI has imposed a one-year ban on Zee's CEO, Punit Goenka and Chairman Subhash Chandra Goenka. Punit Goenka becoming the CEO of the merged entity was reportedly the key part of the merger scheme. In response, Zee has established an interim committee overseen by its board to manage operations.

Punit Goenka expressed in June that the merger would proceed regardless of his role as CEO of the new entity. Earlier, in February, a tribunal halted insolvency proceedings initiated by IndusInd Bank Ltd against Zee, bringing significant relief to the media company. The company later resolved its dispute with the lender.

To address regulatory concerns, Zee and Sony offered concessions like pricing discounts last year and obtained antitrust approval for the merged entity, positioning it as a competitor to Walt Disney India and Network18, owned by billionaire Mukesh Ambani, according to a Business Standard report. 

Separately, IDBI Bank is involved in another matter against ZEEL, and the NCLAT has issued notice to the entertainment firm led by the Subhash Chandra family. IDBI Bank challenged the NCLT's May 19 order, which had rejected a plea to initiate insolvency proceedings against the media major.