Zee Entertainment Enterprises Limited (ZEEL) won a major victory when the National Business Law Appellate Tribunal (NCLAT) denied an insolvency appeal that IDBI Bank had filed against the business. NCLAT maintained the National Company Law Tribunal’s (NCLT) ruling by dismissing IDBI’s plea.
The NCLAT has allowed IDBI Bank to enter a new plea if needed, according to the Bar and Bench.
On 19 May 2023, the NCLT’s Mumbai bench dismissed the bank’s bankruptcy case against media group Zee Entertainment, citing Section 10A of the Insolvency and Bankruptcy Code.
According to the NCLT bench’s order, ZEEL, the corporate guarantor for the loan taken out by Siti Networks, IDBI Bank’s primary borrower, has defaulted.
However, the default took place within the time range specified in IBC section 10A.
Section 10A states that no financial or operational creditor may file an application to initiate the corporate insolvency resolution process (CIRP) against any debtor for any default occurring on or after 25 March 2020 for a period of one year.
The government included this special clause in the IBC to support firms when the economy had gradually recovered from the lockdown.
The NCLT ruled that Section 10A forbids the filing of any application under Sections 7, 9, and 10 of the Code for defaults made on or after 25 March 2020 until 25 March 2021.
Siti Networks has secured a Rs 150 crore loan for operating capital, and the arrangement requires them to keep a Debt Service Reserve Account (DSRA).
Under DSRA, Siti Networks was required to maintain a credit balance equal to two-quarters of working capital interest until it was repaid. However, there was a default.
On 5 March 2021, IDBI Bank invoked ZEEL’s guarantee and demanded Rs 61.97 crore plus interest beginning 18 February 2021. It claimed Rs 149.60 crore for default.
ZEEL disputed this, arguing that its guarantee limits the guarantor’s liability and prevents them from being held accountable for the full amount owed in the event that the borrower defaults at Siti Bank.
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