Bankruptcy Court Denies Request to Proceed with Zee-Sony Merger

The Mumbai bench of the Bankruptcy court recently disposed of an application filed by Phantom Studio India (PSIPL), which sought to implement a merger scheme between Zee Entertainment Enterprises (ZEEL) and Sony Group companies Bangla Entertainment Private (BEPL) and Culver Max Entertainment (CMEPL). 

The National Company Law Tribunal bench ruled that the application from a minor shareholder, seeking to enforce the scheme lapsed after the companies’ boards approved the scheme’s withdrawal, despite his minor shareholding.

PSIPL, previously known as Mad Man Film Ventures, held approximately 1.3 million shares of Zee Entertainment, worth around ₹50 crore, at the time of the tribunal filing.

Previous months the tribunal officially withdrew its approval for the proposed $10 billion merger between ZEEL and Sony’s Indian media conglomerate, CMEPL and BEPL.

"During the course of the hearing, we were informed that the PSIPL had attended the meeting of shareholders and voted in favor of the scheme. As Section V para 10 permits the withdrawal by parties, the PSIPL cannot insist on the implementation of the scheme," said the division bench of judicial member Lakshmi Gurung and technical member Charanjeet Singh Gulati in its October 24 order.

PSIPL, represented by counsel Shyam Kapadia, contended that the essential terms of a scheme cannot be altered without shareholder approval. In contrast, Sony's representatives, senior counsel Darius Khambata and Meghna Rajadhyaksha from Shardul Amarchand Mangaldas & Co, argued that PSIPL lacked standing to file the application as it was a third party to the scheme. Nitesh Jain of Trilegal represented Zee Entertainment Enterprises in this matter. 

The companies also disputed that the tribunal did not have the authority to impose a scheme that had taken effect and that the scheme was approved with conditions. 

Ruchi Khatlawala Pandya, a partner at law firm Little & Co, said Shareholders rights are pivotal, especially when a collaboration scheme includes a withdrawal clause. “ the tribunal’s order sets a precedent for cases where parties reconsider implementation even after approval”, she said.

In August, ZEEL and Sony's Indian units reached a non-cash settlement to resolve disputes related to their failed merger. The companies agreed to withdraw their claims in the ongoing arbitration at the Singapore International Arbitration Centre and related proceedings in the NCLT. This settlement allows them to focus on independent growth after Sony terminated the merger in January due to unmet closing conditions and leadership disagreements, subsequently filing a $90 million arbitration claim against ZEEL.