After IDBI Bank, Axis Finance became the second lender to challenge the National Company Law Tribunal’s (NCLT’s) nod to Zee Entertainment’s (ZEEL) merger with Culver Max Entertainment, formerly known as Sony Pictures. On Thursday, Axis Finance approached the National Company Law Appelate Tribunal (NCLAT) in Delhi. Last week, IDBI Bank had approached the tribunal.
In a stock exchange filing, ZEEL said: “The Company has been served with an appeal on behalf of Axis Finance Limited against the Company before the NCLAT, Delhi, challenging the order dated August 10, 2023 passed by NCLT.”
The proposed merger, which would create the largest media entity in the country, got the approval on August 10 after it was announced nearly two years ago in December 2021.
Post-merger the shareholders would get 85 shares of the merged entity for every 100 shares held in ZEEL. The stock of ZEEL will get delisted and relisted as merged company after exchange procedure.
ZEEL shares closed down by 1.09% at Rs 272.90 on Thursday.
At the same time, the Securities Appellate Tribunal (SAT), which is hearing an appeal filed by ZEEL’s former MD & CEO Punit Goenka against the August 14 confirmatory order by the Securities and Exchange Board of India (Sebi), barring him from taking key managerial positions in Zee group companies as well as the merged entity with Sony, adjourned the matter to September 27.
This came after arguments were presented by counsels of Sebi and Goenka in front of a single-judge bench led by Justice Tarun Agarwala. SAT questioned Sebi on whether it will be able to finish the investigation within 8 months. SAT further remarked that Sebi has on a lot of occasions sought for extension of time to investigate allegations from either the Supreme Court or SAT.
Senior counsel Darius Khambata, who appeared for Sebi, informed the tribunal that while the investigation was likely to be completed in eight months, he would take further instructions and apprise the court of the same.
SAT also termed that Sebi’s investigation ‘appears to be a witch hunt’ as according to it, the regulator has launched its investigation in various directions which may not be relevant. However, Khambata countered SAT’s apprehension by arguing that an exhaustive investigation was required to reach an accurate conclusion.
Sebi’s August 14 confirmatory order had revised directions given to ZEEL’s former directors Subash Chandra and Goenka, asking its investigating officials to complete the enquiry in eight months. It barred the two from holding key managerial positions till the conclusion of the investigation.
Goenka’s lawyer, Abhishek Manu Singhvi, argued that Sebi had prepared an exhaustive order, but had not proven culpability. “The question is there money gained by Punit Goenka. The answer is no, ” he said.
“Sony has come to the merger deal because they have seen Punit lead the company (ZEEL) for so many years. It is evident that he is important for the merger,” Singhvi said, adding there was no urgency to bar Goenka for holding directorships in Zee group or the merged entity.
Sebi is investigating alleged sham transactions undertaken by Chandra and Goenka to divert funds from ZEEL. The key issue, in particular, is on a letter of credit (LoC) issued by Chandra towards a Rs 200 crore fixed deposit in Yes Bank. Goenka’s lawyers have argued in court that he was not aware of the LoC issued, adding that it should not be given importance in the matter.
Chandra, who is the father of Goenka, has not appealed against the Sebi order in SAT.