NCLAT Rejects IDBI Bank's Insolvency Motion Against Zee Entertainment
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Synopsis
The NCLAT has dismissed IDBI Bank's request to initiate insolvency proceedings against Zee Entertainment, upholding an earlier NCLT ruling. The case revolves around a Rs 150 crore loan and the protections provided under the IBC during the pandemic.
Key Takeaways
- The NCLAT dismissed IDBI Bank's insolvency plea.
- The ruling aligns with NCLT's prior decision.
- The case involves a Rs 150 crore loan from IDBI Bank.
- Section 10A of the IBC played a crucial role in the decision.
- Zee Entertainment acted as a corporate guarantor.
New Delhi, April 7 (NationPress) The National Company Law Appellate Tribunal (NCLAT) on Monday dismissed IDBI Bank’s petition to initiate insolvency proceedings against Zee Entertainment Enterprises Limited (ZEEL).
The appellate tribunal concurred with the previous ruling of the National Company Law Tribunal (NCLT), Mumbai, which had rejected IDBI Bank’s request.
This case pertains to a loan amounting to Rs 150 crore that Siti Networks had acquired from IDBI Bank as a working capital facility.
Zee Entertainment served as a corporate guarantor for this loan. According to the agreement, Siti Networks was required to maintain a Debt Service Reserve Account (DSRA) with a credit balance sufficient for two quarters of interest.
Nonetheless, Siti Networks failed to meet this requirement, resulting in a default. On March 5, 2021, IDBI Bank invoked the guarantee from Zee Entertainment and sought Rs 61.97 crore, including interest from February 18, 2021.
The bank asserted that the total default amount was Rs 149.60 crore. Despite this, both the NCLT and NCLAT determined that the default occurred during a timeframe protected by a special provision of the Insolvency & Bankruptcy Code (IBC), specifically Section 10A.
This section was enacted by the government to shield companies from insolvency actions during the Covid-19 pandemic, covering defaults from March 25, 2020, to March 25, 2021.
The NCLAT indicated that since the default transpired within the timeframe outlined in Section 10A, the bank's petition could not be upheld.
However, it permitted IDBI Bank to submit a new application if the default is determined to have taken place outside the protected period.
Previously, IndusInd Bank had lodged an insolvency case against Zee Entertainment, which the NCLT accepted on February 22.
Nonetheless, in March, the NCLAT granted relief to Zee by suspending the NCLT order, leading to a settlement between Zee and IndusInd Bank.
Zee had contested the claims made by both IndusInd Bank and IDBI Bank, primarily arguing that the guarantee was invoked during the Covid-19 pandemic.
