Supreme Court to hear insolvency plea against Zee promoters, issues notices
NEW DELHI : The Supreme Court has issued notices to two promoter companies of Zee Entertainment Enterprises Ltd, agreeing to hear a plea filed by IDBI Trusteeship Services for insolvency proceedings. IDBI Trusteeship had challenged a recent order of the National Company Law Appellate Tribunal rejecting IDBI Bank’s plea to initiate insolvency proceedings against Cyquator Media Services and Direct Media Distribution Ventures. The apex court has now granted the two promoter companies four weeks to respond to its notices.
The case’s origin dates back to 2015 when Essel Infraprojects, a subsidiary of Zee TV founder Subhash Chandra’s Essel Group, proposed the sale of 425 non-convertible debentures worth Rs425 crore on a private placement basis. IDBI had agreed to act as the debenture trustee. A debenture trust deed was executed between IDBI Trusteeship Services and Essel, with Cyquator Media and Direct Media Ventures acting as corporate guarantors.
The disbursal of the Rs425-crore debt occurred in two tranches–Rs200 crore in May 2015 and Rs225 crore the following month. The non-convertible debentures were due in May 2020, but when that didn’t happen IDBI Trusteeship Services invoked the corporate guarantee clause. IDBI issued a notice to Cyquator to make the payments in June 2020, and an insolvency notice in May 2022 alleging a default of Rs591 crore.
The National Company Law Tribunal, however, rejected IDBI’s claim. Subsequently, the appellate tribunal too rejected its plea arguing that the default in payment had occurred in June 2020, which fell within the period excluded under Section 10A of the Insolvency and Bankruptcy Code. The government had introduced Section 10A to provide relief to companies facing defaults during
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