IDBI Bank moves NCLAT against NCLT order on ZEE

livemint.com:

₹149.60 crore from Zee Entertainment. The case has been filed with the court registrar, but is yet to be listed for hearing. The public sector lender had filed the petition under Section 7 of the Insolvency and Bankruptcy Code (IBC), which allows a financial creditor to file an application for initiating Corporate Insolvency Resolution Process (CIRP) against a corporate debtor before the adjudicating authority.

IDBI’s claim against Zee arises out of a debt service reserve account (DSRA) guarantee that it alleged Zee provided to secure loans provided by IDBI to Siti Networks Ltd – both were part of Essel Group. IDBI insisted before the NCLT that its claim is identical to that of IndusInd Bank and, on that ground, the application must be permitted. IndusInd Bank had filed a similar application against ZEE, which was admitted by the NCLT, on 22 February.

However, the NCLAT granted relief against the NCLT order to the media company led by managing director and chief executive Puneet Goenka. Later in March, Zee entered into a settlement agreement with IndusInd Bank, inching closer to its planned merger with Sony Pictures (Culver Max Entertainment). Both IndusInd’s claim and IDBI’s claim were opposed by Zee mainly on the grounds that the guarantee was invoked during the pandemic.

Under Section 10A of the IBC, insolvency proceedings cannot be initiated if the alleged default occurred between 25 March 2020 and 25 March 2021, which is termed as the Covid period. This statutory bar has troubled financial creditors because insolvency proceedings can never be initiated for defaults during the Covid period. Zee’s stand was also that the guarantee is a limited guarantee and does not extend to the entire debt.