To alleviate Zee Entertainment Enterprises Ltd, the National Court of Legal Appeals (NCLAT) rejected ₹15 billion.
The Supreme Bankruptcy Court upheld an earlier order from the National Companies Tribunal of Mumbai (NCLT), which ruled that the claims of IDBI Bank were covered under Section 10A of Section 10A of Section 10A of the Bankruptcy and Insolvency Act (IBC), 2016.
Article 10A of IBC prevents bankruptcy proceedings from default proceedings that occurred during Covid-19 from March 25, 2020 to March 25, 2021.
NCLAT allows IDBI banks to file new bankruptcy cases to address the default situation that occurs outside the time period covered by Article 10A.
The dispute comes from a 2012 warranty agreement, and Zee agrees to maintain the Debt Reserve Account (DSRA) for IDBI BANK’s working capital loans. Although the borrower’s account became a non-performance asset in December 2019, IDBI Bank cited the media company’s guarantees in March 2021 only. ₹619,700 million.
Zee believes that its liability is limited to the original interest payment ₹500 million loans, no restrictions on increase or principal amounts are covered. It also claimed that the facility was recalled in February 2021, ending its DSRA obligations.
Idbi Bank then filed a bankruptcy request against Zee in NCLT.
In May 2023, NCLT Mumbai rejected IDBI Bank’s bankruptcy request against Zee, ruling that the alleged default falls within the IBC Article 10A Covid-19-19 moratorium. The court held that Zee’s liability was limited to maintaining the original interest payment ₹500 million loans have not been expanded to the entire ₹14.96 billion claims.
It determined that Zee’s default only occurs when IDBI Bank issued a demand notice on March 5, 2021, which is in the protected period.
The NCLT also ruled that the guarantor’s liability arises only under appropriate demand, rejecting Idbi Bank’s argument that the default should be linked to the borrower’s NPA classification.
Earlier, Indusind Bank filed a bankruptcy case against Zee, which was accepted by the NCLT on February 22. Later, NCLAT granted Zee the NCLT order relief in March, and the company later reached a settlement with Indusind Bank.
Both Indusind Bank and Idbi Bank’s claims were challenged by Zee, mainly based on the grounds for invoking guarantees during the pandemic.
