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The National Company Law Tribunal (NCLT) has reserved its order on the merger of Zee Entertainment Enterprises and with Culver Max Entertainment (earlier known as Sony Pictures Networks India).

The Mumbai bench of NCLT, comprising H V Subba Rao and Madhu Sinha, reserved the order on Monday, after hearing arguments from creditors who objected to the scheme including Axis Finance, JC Flower Asset Reconstruction Co, IDBI Bank, Imax Corp and IDBI Trusteeship.

In December 2021, Zee Entertainment and Sony Pictures had agreed to merge their businesses.

Both media houses approached the tribunal for sanctioning of the merger after obtaining permissions from the National Stock Exchange, BSE, and other sectoral regulators such as the Competition Commission of India (CCI) and the Securities and Exchange Board of India (SEBI).

However, the process came to a halt following objections raised by several creditors of Essel Group against the non-compete clause added into the scheme.

The counsel representing Zee Entertainment Enterprises Limited (ZEEL), Janak Dwarkadas, said the scheme of arrangement between ZEEL, Sony has been approved by 99.97 per cent of shareholders of the company and regulatory bodies like the BSE, NSE, and CCI.

The total value of claims that is raised by creditors, who are objecting to the scheme of arrangement, is Rs 1,259 crore, he said, adding that they are holding the merger to ransom.

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The total public shareholding of ZEE is 96.01 per cent, of which 70% is held by public institutions. About 25.88% is held by public non-institutions, while the promoters hold only 3.99%, he said.

NSE and BSE informed the Mumbai bench of NCLT about the two orders of the Essel Group entities, where the promoters diverted funds from the listed entity for the benefit of their associate entities.

This also included the Securities Appellate Tribunal (SAT) order against Punit Goenka barring him from holding a directorial position in any listed company.

SAT upheld Sebi’s interim order which restrained both Zee Entertainment promoters Subhash Chandra and Punit Goenka from holding board positions in public listed companies for a year, on account of alleged fund diversion.

According to the creditors objecting to the merger, the order has a direct bearing as one of the integral parts of the scheme of merger is the appointment of Goenka as the Managing Director of the merged entity.

As there is a regulatory bar on Goenka holding such positions, the merger shouldn’t go through, they submitted.

However, Dwarkadas, said that these provisions in the scheme were never meant to overwrite any statutory disqualifications. If he is disqualified, the shareholders are free to choose another Managing Director, he said.