SC agrees to examine IDBI Trusteeship’s plea against NCLAT refusal to initiate insolvency against Zee promoters

New Delhi : The Supreme Court has agreed to examine a plea filed by IDBI Trusteeship Services against National Company Law Appellate (NCLAT) orders refusing to initiate insolvency proceedings against two promoter companies of Zee Entertainment Enterprises Ltd (ZEEL).

On Monday, a bench headed by CJI D.Y. Chandrachud issued notice in the matter and sought responses of Direct Media Distribution Ventures and Cyquator Media Service within a period of four weeks.

In an order passed in September this year, the NCLAT dismissed IDBI Trusteeship Services Limited (ITSL) plea as barred under Section 10A of Insolvency and Bankruptcy Code (IBC), 2016.

Section 10A mandates that no application for initiation of corporate insolvency resolution process (CIRP) can be filed against any debtor by any financial and operational creditor for any default arising on or after March 25, 2020, for a period of one year.

“We are satisfied that liability of corporate guarantor to make the outstanding payment arose only when Corporate Guarantee was invoked vide Notice dated 12th June, 2020 as per the notice invoking the corporate guarantee. 16th June, 2020 was the date on which default was committed which is a date admittedly covered by Section 10A prohibition,” held by a bench presided over by NCLAT Chairman Justice Ashok Bhushan.

In 2015, ITSL agreed to act as Debenture Trustee on the request of Essel Infraprojects Limited. The Essel’s proposed to issue 425 non-convertible debentures (NCDs) in two series aggregating nominal value of Rs 425 crore on a private placement basis.

Under Debenture Trust Deed, Direct Media Distribution Venture and Cyquator stood as corporator guarantor.

Later, Essel failed and neglected to pay to the Debenture Holders the principal amount and the redemption premium thereon. In 2022, ITSL filed an application under Section 7 of IBC claiming that Cyquator failed to make payment of Rs 591 crore.

The National Company Law Tribunal in June this year rejected ITSL’s application saying that Corporate Guarantee has been invoked on June 12, 2020 when such application is barred by Section 10A.

The apex court is likely to take up the matter for further hearing in January next year.

Recently, IDBI Trusteeship Services Limited (ITSL) also moved an appeal at the NCLAT against Essel Group Chairperson Subhash Chandra, challenging the order of the National Company Law Tribunal Mumbai which gave a go-ahead to the ZEEL and Sony merger.

IDBI Trusteeship has objected to the merger on the ground that Chandra had executed a personal guarantee on June 25, 2019 in favour of IDBI Trusteeship (for the benefit of Franklin Templeton) guaranteeing the repayment obligations towards the debentures.

The trusteeship claimed Rs 535 crore from Chandra, saying he failed to comply with his obligations under the personal guarantee, and thus he is a creditor.