In a relief to Zee Entertainment, the National Company Law Appellate Tribunal (NCLAT) on Friday set aside the order of the NCLT, which had directed leading bourses NSE and BSE to reconsider their approval for Zee-Sony merger.
The two members of the 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 give any opportunity to Zee Entertainment to respond on the Shirpur Gold issue Refinery, an Essel Group company headed by Subhash Chandra.
The appellate tribunal remanded the matter to the NCLT to decide afresh and pass an order after hearing both sides.
“We are of the view that the impugned order has 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 thereafter hear both parties without being influenced by this order,” said the NCLAT bench comprising Justices Rakesh Kumar and Alok Srivastava.
Earlier on May 11, the NCLT had directed the BSE and NSE to “review their earlier approval for the Zee-Sony merger scheme and grant their fresh NOCs for the same before the next date of hearing.”
The NCLT direction came after the counsels of NSE and BSE raised several new points related to the merger scheme and placed the recent SEBIi order dated April 25, 2023, on Shirpur Gold Refinery for the information of Bench, where the names of Zee Promoters are seen in the context of transfer of funds.
“Exchanges should also check and confirm that the non-compete clause of the scheme has been reviewed and approved by them and SEBI, and the method of payment of the non-compete fee from one Mauritius Entity to another complies with the SEBI’s policy in this regard,” the NCLT said on May 11.
It was challenged by Zee Entertainment Enterprise Ltd. (ZEEL) before the NCLAT, alleging that the NCLT did not give it sufficient opportunity to present its side and that it did not follow the principles of natural justice.
Senior advocate Mukul Rohtagi representing ZEEL said that the said Sebi order was not even served on them. This was done directly before the NCLT without providing a copy.
He further asserted that before even passing such an order, it is necessary on the part of the NCLT to give an opportunity to the appellant here to respond in such a situation.
The NCLAT also agreed with this and set aside the order of the NCLT, and ordered the matter to be heard afresh.
According to the scheme of arrangement, Sony will indirectly hold 50.86 percent of the combined company. The Zee founder will own around 4 percent and the rest with other ZEEL shareholders.
In addition, Sony Group will also pay a non-compete fee of ₹1,100 crore to the promoters of Essel Group.
Earlier this month, Japanese conglomerate Sony Group Corporation Chairman and CEO Kenichiro Yoshida said he expects the merger to be completed within the first half of this fiscal.
In September 2021, Sony Pictures Networks India and ZEEL entered into a non-binding term sheet to merge their linear networks, digital assets, production operations, and program 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.
ZEEL shareholders gave their go-ahead to the merger last year in October weeks after fair trade regulator Competition Commission of India gave a conditional nod with some modifications.