NCLAT Rejects IDBI Bank’s ₹150 Crore Insolvency Petition Against Zee Entertainment

NCLAT Dismisses IDBI Bank’s ₹150 Crore Insolvency Appeal Against Zee Entertainment

In a significant relief for Zee Entertainment Enterprises Ltd (ZEEL), the National Company Law Appellate Tribunal (NCLAT) on Monday dismissed an appeal filed by IDBI Bank, which challenged the rejection of its ₹150 crore insolvency plea by the National Company Law Tribunal (NCLT).

The case stems from a corporate guarantee extended by ZEEL in 2012 on behalf of Siti Networks Ltd. The guarantee was intended to support a debt service reserve account (DSRA) for working capital facilities provided by IDBI Bank. While Siti Networks' loan account turned into a non-performing asset (NPA) in December 2019, IDBI Bank invoked the corporate guarantee only in March 2021, demanding ₹61.97 crore from ZEEL.

However, NCLAT upheld the NCLT Mumbai bench’s earlier ruling, which found that the insolvency plea was not maintainable as the alleged default occurred during the COVID-19 moratorium period protected under Section 10A of the Insolvency and Bankruptcy Code (IBC), 2016. The tribunal clarified that defaults within this window cannot be grounds for initiating insolvency proceedings.

Limited Liability and Legal Interpretation

The appellate tribunal also supported the NCLT’s interpretation of ZEEL’s contractual obligations. It reaffirmed that ZEEL’s liability was confined to maintaining two quarters’ interest on the original ₹50 crore facility, and not on any enhanced or revised loan amounts. The ₹149.60 crore claim made by IDBI Bank, based on the total outstanding dues of Siti Networks, was found to be inconsistent with the terms of the guarantee.

NCLAT, however, granted IDBI Bank the liberty to pursue fresh proceedings for any defaults that fall outside the Section 10A moratorium period.

Legal and Financial Repercussions

The dismissal of the insolvency petition marks a crucial legal victory for ZEEL, which has been navigating multiple financial and operational challenges, including delays in its proposed merger with Sony. The ruling not only spares ZEEL from immediate insolvency proceedings but also reinforces the legal protection extended under Section 10A of the IBC during the pandemic.

With this judgment, ZEEL can continue its restructuring efforts without the shadow of insolvency litigation, while IDBI Bank will need to reassess its legal approach in recovering dues.