IDBI Bank files insolvency application against Zee Ent

The lender has filed the petition under Section 7 that allows a financial creditor to file an application for initiating CIRP against a corporate debtor before the adjudicating authority, an exchange filing by Zee said.

IDBI Bank is one of the financial creditors of the company and said that it had filed an insolvency application claiming a default of ₹149 crore.

The bank’s purported claim arises under a debt service reserve agreement entered into by the bank and the company for the financial facility availed by Siti Networks, an Essel group entity.

“The company is vehemently disputing the bank’s claim in other proceedings filed by the bank against the company for recovery of its alleged dues,” Zee said in the filing.

In February, a similar petition was filed by IndusInd Bank before the NCLT under Section 7. The bank had claimed a default of ₹83.08 crore against the entertainment company. Zee Entertainment, however, filed an interlocutory application with the tribunal for the dismissal of the lenders’ petition.

A similar dispute between Zee and another private lender—the IndusInd Bank, was heard by the Delhi high court in September this year. A plea was filed by IndusInd seeking clarity on whether it could take Zee to the dedicated bankruptcy court for recovery of dues. Following this, on 13 September, the Delhi high court clarified that it had not restrained IndusInd Bank from taking Zee Entertainment to the insolvency court. This cleared the decks for the private lender to initiate insolvency proceedings against the media company to recover dues it says are owed by Siti Networks.

The matter pertains to a loan taken by Siti Networks. Zee was the guarantor to the loan availed by Siti Networks from IndusInd Bank in terms of the Debt Service Reserve Account Guarantee Agreement (DSRA) of 29 August 2018.

On 1 October 2020, IndusInd Bank issued a notice to Zee invoking the DSRA Guarantee Agreement and asked it to pay the amount of ₹83.70 crore.

Zee was aggrieved that the bank had made a demand for an accelerated amount which was the entire loan amount advanced by the bank to Siti on account of the shortfall in the DSRA Account.

Subsequently, Zee approached the court seeking interim relief that the bank is restrained from seeking recovery of any amount under the DSRA Guarantee Agreement in terms of the bank’s notice issued on 1 October.

The media company pleaded for a stay on the implementation of the demand raised by the bank through its October notice. It also asked the court to direct Siti to replenish the DSRA account with an amount equivalent to one quarter’s interest and direct the bank to accept the same.

Zee Learn and its subsidiary Digital Ventures are also being insolvent by various banks for defaulting more than ₹500 crore. At the same time, Zee Entertainment is undergoing a merger with Sony Pictures, which has been approved by the regulator and shareholders.

The NCLT, however, is yet to admit the insolvency petitions against Zee and its related entities.