The National Company Law Appellate Tribunal (NCLAT) on Friday quashed the National Company Law Tribunal’s (NCLT) order directing the National Stock Exchange (NSE) and BSE to review its Zee-Sony merger.

The appellate tribunal issued an order on Zee Entertainment Enterprises Ltd’s (ZEEL) appeal on May 11 against the NCLT Mumbai judge’s judgment.

The appellate tribunal set aside the NCLT order because it was “contrary to the principles of natural justice”.

NCLAT said Zee should be heard and the case was sent back to NCLT.

“We believe that the challenged order needed to be stayed primarily because it was inconsistent with the principles of natural justice. Accordingly, the challenged order was stayed and the matter was sent back to the NCLT for review and adoption of the appropriate order after hearing both parties and is not affected by the order,” said the NCLAT bench, comprising Justices Rakesh Kumar and Justices Alok Srivastava.

Now, NCLT will hear new arguments over the merger of Zee Entertainment and Culver Max Entertainment (formerly known as Sony Pictures Networks India).

NCLT had directed NSE and BSE on May 11 to review their clearance for the merger of Zee and Sony and to re-evaluate the non-compete clause of the merger approved by the Securities and Exchange Board of India (Sebi).

Zee, aggrieved, appealed the NCLT’s order, saying it had not been given a fair opportunity to present its case. It argued that the NCLT did not have jurisdiction over non-compete issues.

Counsel for Zee told the appellate court that NCLT passed the order without hearing its case, with the consequences of effectively invalidating all regulatory approvals it had obtained over the past year.

The lawyer also said that the two stock exchanges had only shared a copy of the Sebi order in April regarding another company in the Essel group (to which Zee belongs) but NCLT directed them to review it for approval.

Lawyers representing the stock exchange told NCLAT that they were directed to place Sebi’s order at NCLT rather than submit any submissions.

Sebi issued an interim order in April against Essel group company Shirpur Gold Refinery and its former chairman Amit Goenka, promoters Jayneer Infrapower and Multiventures, and five others, alleging they misappropriated funds from the company.

The ruling led to an NCLT order on May 11.

The proposed deal would give Sony Pictures an indirect 50.86% stake in the combined company, while Zee’s founders would own 3.99%. The remaining 45.15% will belong to other shareholders, including the public.

Sony will pay a non-compete fee of Rs 1,100 crore to promoters of Essel Group. Zee and Sony signed a definitive merger agreement in December 2021.

The proposal has been approved by BSE, NSE and Zee shareholders. It has also received revised approval from the Competition Commission of India.