According to the petition filed by Axis Finance, which was accessed by BQ Prime, the NCLT failed to consider only a key part of the plan, which was appointing Punit Goenka as Managing Director and Chief Executive Officer of the merged entity , could “not be approved because the Securities and Exchange Board of India disqualified it. The project should not have been approved without resolving this issue. This went against SEBI’s decision, Axis said Finance.
The NCLT failed to realize that once a project is approved, you cannot change a crucial part of it, the petition said.
The NCLT does not provide any reason for rejecting its application and hence it can be set aside, it said. According to the loan agreement and bank statements, Goenka Companies borrowed money from the appellant, the non-bank lender said.
She also submitted that from the letters addressed to the Goenka Companies, it is evident that they have not repaid the said loans. Cyquator owes over Rs 61 crore, and Primat owes over Rs 82 crore to Axis Finance.
Other allegations mentioned in the filing are that the group created multiple tiers of companies to avoid repaying the loan and protect itself from Cyquator’s actions, and that the approved merger plan is designed to deceive lenders and public shareholders.
Axis Finance said shareholders of Zee Entertainment Enterprises Ltd. would own 48% of the new entity, thus reducing their stake compared to that they hold in ZEEL. The promoter group should also experience a drop in its stake from 4% to 2%. The promoters, however, wish to retain their 4% stake in the new entity. To achieve this, they used a “non-compete” payment mechanism, Axis explained.
Besides Axis Finance, IDBI Bank Ltd. also filed an appeal against the merger approved by the NCLT.
The NCLT approved the Zee-Sony merger in August this year, rejecting all objections. The court had been hearing the case since July 10.
The merger deal between Zee and Sony was concluded in December 2021. After getting approval from various regulators like NSE, BSE, SEBI and Competition Commission of India, the companies sought approval final of the court.
However, the merger was delayed due to objections from Essel Group creditors including Axis Finance Ltd., JC Flowers Asset Reconstruction Co., IDBI Bank Ltd., IDBI Trusteeship Ltd. and Imax Corp.
The main issue in this dispute was a non-competition clause contained in the project. He said Essel Mauritius, an Essel group company, would receive Rs 1,100 crore as non-competition fee from SPE Mauritius, a Sony group company, in return for Subhash Chandra’s commitment to not compete with the resulting entity.