In a dramatic turn of events, Axis Finance Limited has lodged an appeal with the National Company Law Appellate Tribunal (NCLAT) against the recent green light given to the colossal merger between Zee Entertainment Enterprises Ltd. and Culver Max Entertainment (formerly Sony Pictures Networks India) by the National Company Law Tribunal (NCLT).
This unexpected move by Axis Finance has sent ripples through the financial and media sectors, creating a fresh wave of uncertainty surrounding the highly anticipated merger. The appeal challenges the NCLT's decision, which was rendered on August 10, 2023, in favor of the merger.
As news of the appeal broke, Zee Entertainment's BSE share experienced a dip of 1.6%, settling at approximately $3 by 1405 hours. This sharp reaction from the market underscores the significance of the impending decision by the NCLAT.
The NCLT's approval of the merger last month marked a significant milestone in the media industry. The Mumbai bench, presided over by H. V. Subba Rao and Madhu Sinha, set in motion the creation of India's largest media conglomerate, valued at an impressive $10 billion. This groundbreaking decision followed the merger of Sony Pictures and Zee Entertainment in December 2021.
However, the road to this merger has not been without its challenges. Certain creditors objected to a non-compete clause in the program, which caused the proceedings to temporarily halt. Additionally, some Essel Group creditors expressed concern over alleged financial transfers within affiliated companies.
Adding to the complexity of the situation, both the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) flagged two Essel Group cases involving purported fund transfers to connected entities. This prompted heightened scrutiny and led to further legal proceedings.
In a parallel development, the Securities Appellate Tribunal (SAT) took a decisive stance, affirming the Securities and Exchange Board of India's (SEBI) interim ruling. This ruling effectively barred Zee Entertainment promoters Subhash Chandra and Punit Goenka from serving on public company boards for a year due to allegations of fund diversion.
Creditors contesting the merger have underscored the direct impact of Punit Goenka's impending appointment as the managing director of the amalgamated entity. They argue that, given the recent SEBI ruling, Goenka should not be permitted to hold such a pivotal position within the merged company.
The NCLAT's forthcoming decision on Axis Finance's appeal will undoubtedly shape the trajectory of the Zee-Sony merger. As stakeholders hold their breath, the outcome of this legal battle is poised to have far-reaching implications for the Indian media landscape. With significant financial interests and reputations on the line, the industry watches with bated breath for the tribunal's final verdict.