New Delhi, April 7 The National Company Law Appellate Tribunal (NCLAT) on Monday dismissed IDBI Bank’s petition to start insolvency proceedings against Zee Entertainment Enterprises Limited (ZEEL).
The appellate tribunal agreed with the earlier decision of the National Company Law Tribunal (NCLT), Mumbai, which had rejected IDBI Bank’s plea.
The case relates to a loan of Rs 150 crore taken by Siti Networks from IDBI Bank as a working capital facility.
Zee Entertainment had acted as a corporate guarantor for this loan. As per the agreement, Siti Networks was required to maintain a Debt Service Reserve Account (DSRA) with a credit balance equal to two quarters of interest.
However, Siti Networks failed to do so, leading to a default. On March 5, 2021, IDBI Bank invoked the guarantee from Zee Entertainment and demanded Rs 61.97 crore, with interest from February 18, 2021.
The bank claimed that the total amount in default stood at Rs 149.60 crore. Despite this, both the NCLT and NCLAT ruled that the default happened during a period protected under a special provision of the Insolvency & Bankruptcy Code (IBC), specifically Section 10A.
This section was introduced by the government to protect companies from insolvency action during the Covid-19 pandemic, covering defaults that occurred between March 25, 2020, and March 25, 2021.
The NCLAT stated that since the default happened within the timeline specified under Section 10A, the bank's plea could not be accepted.
However, it allowed IDBI Bank the liberty to file a fresh application if the default is found to have occurred outside the protected period.
Earlier, IndusInd Bank had filed an insolvency case against Zee Entertainment, which the NCLT admitted on February 22.
However, in March, the NCLAT gave relief to Zee by putting a hold on the NCLT order. Zee later reached a settlement with IndusInd Bank.
Zee had opposed the claims made by both IndusInd Bank and IDBI Bank, mainly arguing that the guarantee was invoked during the Covid-19 pandemic.
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