NCLT approves Zee-Sony merger, paves way for creation of USD 10 bn media giant

The National Company Law Tribunal (NCLT) on Thursday allowed the merger of Zee Entertainment Enterprises Ltd and Culver Max Entertainment (earlier known as Sony Pictures Networks India).

This order by the Mumbai bench, headed by H V Subba Rao and Madhu Sinha, will pave the way for the creation of a USD 10-billion media company, the biggest in the country. The tribunal also dismissed all objections regarding the merger. The NCLT, on July 11, had reserved its order on the merger after hearing objections from several creditors. It heard arguments from creditors, including Axis Finance, JC Flower Asset Reconstruction Co, IDBI Bank, Imax Corp and IDBI Trusteeship.

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In December 2021, Zee Entertainment and Sony Pictures agreed to merge their businesses. Both media houses approached the tribunal for sanctioning the merger after obtaining permissions from National Stock Exchange, BSE and sectoral regulators such as the Competition Commission of India and the Securities and Exchange Board of India. However, the process stopped at the tribunal when a few creditors raised objections. Several creditors of Essel Group raised objections against the non-compete clause added to the scheme.

NSE and BSE had informed the Mumbai bench of NCLT about two orders related to the Essel Group entities, where the promoters allegedly diverted funds from the listed entity for the benefit of their associate entities. This also included the Securities Appellate Tribunal (SAT) order against Punit Goenka barring him from holding a directorial position in any listed company. SAT upheld Sebi the Securities and Exchange Board of India’s (Sebi’s) interim order which restrained both Zee Entertainment promoters Subhash Chandra and Punit Goenka from holding board positions in public listed companies for a year on account of alleged fund diversion.

According to the creditors objecting to the merger, the order has a direct bearing as one of the integral parts of the scheme of merger is the appointment of Goenka as the Managing Director of the merged entity. As there is a regulatory bar on Goenka holding such positions, the merger shouldn’t go through, they submitted.