NCLAT dismisses IDBI Bank's insolvency plea against Zee Entertainment

IANS April 7, 2025 171 views

The National Company Law Appellate Tribunal (NCLAT) has dismissed IDBI Bank's insolvency petition against Zee Entertainment, citing protection under the Covid-19 moratorium. The case involved a loan guarantee for Siti Networks, where the bank claimed a default of Rs 61.97 crore. NCLAT ruled that the default occurred during the pandemic period covered by IBC Section 10A, thus protecting Zee Entertainment from immediate insolvency proceedings. The tribunal, however, left open the possibility for IDBI Bank to file a fresh application if the default can be proven outside the protected timeline.

"The default happened within the timeline specified under Section 10A" - NCLAT Ruling
New Delhi, April 7: The National Company Law Appellate Tribunal (NCLAT) on Monday dismissed IDBI Bank’s petition to start insolvency proceedings against Zee Entertainment Enterprises Limited (ZEEL).

Key Points

1

NCLAT upholds NCLT decision protecting Zee Entertainment from insolvency

2

Covid-19 moratorium shields company from loan default action

3

Bank's Rs 61.97 crore claim rejected under pandemic provisions

4

Tribunal allows future application if default proven outside protected period

The appellate tribunal agreed with the earlier decision of the National Company Law Tribunal (NCLT), Mumbai, which had rejected IDBI Bank’s plea.

The case relates to a loan of Rs 150 crore taken by Siti Networks from IDBI Bank as a working capital facility.

Zee Entertainment had acted as a corporate guarantor for this loan. As per the agreement, Siti Networks was required to maintain a Debt Service Reserve Account (DSRA) with a credit balance equal to two quarters of interest.

However, Siti Networks failed to do so, leading to a default. On March 5, 2021, IDBI Bank invoked the guarantee from Zee Entertainment and demanded Rs 61.97 crore, with interest from February 18, 2021.

The bank claimed that the total amount in default stood at Rs 149.60 crore. Despite this, both the NCLT and NCLAT ruled that the default happened during a period protected under a special provision of the Insolvency & Bankruptcy Code (IBC), specifically Section 10A.

This section was introduced by the government to protect companies from insolvency action during the Covid-19 pandemic, covering defaults that occurred between March 25, 2020, and March 25, 2021.

The NCLAT stated that since the default happened within the timeline specified under Section 10A, the bank's plea could not be accepted.

However, it allowed IDBI Bank the liberty to file a fresh application if the default is found to have occurred outside the protected period.

Earlier, IndusInd Bank had filed an insolvency case against Zee Entertainment, which the NCLT admitted on February 22.

However, in March, the NCLAT gave relief to Zee by putting a hold on the NCLT order. Zee later reached a settlement with IndusInd Bank.

Zee had opposed the claims made by both IndusInd Bank and IDBI Bank, mainly arguing that the guarantee was invoked during the Covid-19 pandemic.

Reader Comments

R
Rahul K.
This seems like a fair decision given the extraordinary circumstances of the pandemic. Section 10A was specifically created to protect businesses during COVID. Banks should have been more understanding during that period. 🤔
P
Priya M.
Interesting case! I wonder how many other companies benefited from Section 10A protections. The pandemic really changed so many business dynamics.
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Amit S.
While I understand the legal reasoning, I'm concerned about the precedent this sets. Banks need to recover their money too - this could make them more hesitant to lend during future crises.
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Sunita R.
Zee seems to be having multiple banking issues lately. First IndusInd, now IDBI. Hope they sort out their financial situation soon! 🎬
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Vikram J.
The legal system working as it should. Clear timeline, clear rules - the tribunal made the right call based on the facts presented. More faith in our judiciary after reading this!
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Neha P.
I think the bank should have been more careful about the dates. 150 crore is a big amount to write off because of a technicality. Their legal team needs to be more thorough next time.

We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.

Tags:
NCLAT Zee Entertainment IDBI Bank Insolvency Covid-19 IBC Section 10A Corporate Guarantee
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