In a relief to Zee Entertainment, the National Company Law Appellate Tribunal (NCLAT) on Friday set aside the NCLT order, which directed leading bourses NSE and BSE to reconsider their approval for the Zee-Sony merger.
A two-member NCLAT bench observed that the order passed by the Mumbai bench of the National Company Law Tribunal (NCLT) was against the “principle of natural justice” as it did not grant any opportunity to Zee Entertainment to respond over the issue of Shirpur Gold Refinery, a Subhash Chandra-led Essel Group firm.
The appellate tribunal has sent the matter back to the NCLT to decide afresh and pass an order after hearing both parties.
“We are of the opinion that the impugned order is required to be set aside primarily on the ground of non-compliance with the principle of natural justice. Accordingly, the impugned order is set aside and the matter is remitted to the NCLT to examine the same and pass appropriate order after hearing both the parties without being influenced by this order,” said the NCLAT bench comprising Justice Rakesh Kumar and Alok Srivastava.
Earlier on May 11, the NCLT had directed BSE and NSE “to review their earlier approval for Zee-Sony merger scheme and provide their fresh NOCs for the same before the next hearing date”.
The NCLT’s direction came after counsels of NSE and BSE raised some fresh points relating to the scheme of merger and placed the recent SEBIi order dated April 25, 2023, on Shirpur Gold Refinery for the Bench’s cognizance, where the Zee Promoters’ names appear in the context of diversion of funds.
“The exchanges should also review and confirm that the non-compete clause of the scheme has been reviewed and approved by them and SEBI, and the manner of payment of non-compete fee from one Mauritius Entity to another is in compliance with the SEBI policies in this regard,” the NCLT had said on May 11.
This was challenged by Zee Entertainment Enterprise Ltd. (ZEEL) before the NCLAT, contending that it was not granted an adequate opportunity by the NCLT to present its side and it didn’t follow the principles of natural justice.
Senior advocate Mukul Rohtagi representing ZEEL noted that the said Sebi order was not even supplied to them. It was directly produced before the NCLT without providing a copy.
He further contended that at least before passing such an order, it was required on the part of the NCLT to grant the opportunity to the appellant herein to respond in such a situation.
The NCLAT also agreed with this and set aside the NCLT order, and directed to hear the matter again.
As per the scheme of the arrangement, Sony will indirectly hold 50.86 per cent of the combined company. The founder of Zee will own around 4 per cent and the rest will be with the other shareholders of ZEEL.
Moreover, Sony Group will also pay a non-compete fee of ₹1,100 crore to the Essel Group promoters.
Earlier this month, Japanese conglomerate Sony Group Corporation Chairman and CEO Kenichiro Yoshida said he expects the merger to be complete within the first half of this fiscal.
In September 2021, Sony Pictures Networks India and ZEEL entered into a non-binding term sheet to bring together their linear networks, digital assets, production operations and programme libraries.
The combined entity will own over 70 TV channels, two video streaming services (ZEE5 and Sony LIV) and two film studios (Zee Studios and Sony Pictures Films India), making it the largest entertainment network in India.
Shareholders of ZEEL had given their ascent to the merger last year in October weeks after the fair trade regulator Competition Commission of India gave its conditional nod with some modifications.
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