IDBI Bank has approached the National Company Law Appellate Tribunal (NCLAT) to challenge an earlier National Company Law Tribunal (NCLT) order to initiate insolvency proceedings against Zee Entertainment Ltd. The NCLAT bench, comprising Chief Justice Ashok Bhushan and member Barun Mitra, will hear the petition today. 

Earlier on May 19, 2023, the Mumbai bench of the NCLT dismissed the private lender’s plea, seeking insolvency against the media major. The bench said the plea is prohibited under Section 10A of the Insolvency and Bankruptcy Code (IBC).

Siti Networks was the principal borrower of IDBI Bank, and Zee was the corporate guarantor for the loan. The NCLT order stated that Siti Networks committed a default, not Zee Ltd. However, the default was committed during the timeline specified under section 10A of the IBC.

Siti Networks has taken a loan of Rs 150 crore for a working capital facility. As per the agreement, it has to maintain a Debt Service Reserve Account (DSRA) wherein a credit balance equal to two-quarters of interest on working capital was required to be maintained by the company at all times till the repayment. However, there was a default.

Section 10A states that no application for initiation of corporate insolvency resolution process (CIRP) can be filed against any debtor by any financial and operational creditor for any default arising on or after March 25, 2020, for a period of one year. The government inserted This special provision in IBC to help the companies after the economic activities had resumed post-lockdown in phases.

On March 5, 2021, IDBI Bank invoked the guarantee provided by ZEEL and called to pay Rs 61.97 crore with further interest from February 18, 2021. It claimed an amount of Rs 149.60 crore in default.

Zee contended this by arguing that its guarantee provides for limited and restricted liability on the guarantor and cannot be held liable for the entire debt in case of default by the borrower at Siti Networks.

Both IDBI Bank and Zee Entertainment informed the exchanges in separate filings about the petition by the bank challenging the May 19 NCLT order.