NCLT Clears Zee-Sony deal

Context:

The National Company Law Tribunal approved the merger of Zee Entertainment Enterprises with Culver Max Entertainment (formerly Sony Pictures Networks India).

Relevance:

GS III: Indian Economy

Dimensions of the Article:

1. Sony-Zee Merger: Uniting Media Giants
2. National Company Law Appellate Tribunal (NCLAT)
3. National Company Law Tribunal (NCLT)

Sony-Zee Merger: Uniting Media Giants

Merger Initiation:

• In 2021, Sony Pictures Networks India and ZEEL embarked on a merger journey, targeting consolidation of linear networks, digital assets, and production operations.
• A non-binding term sheet was signed to pave the way for integration.

Ownership Structure:

• Under the arrangement scheme, Sony will hold an indirect 50.86% stake in the combined entity.
• Zee’s founder secures approximately 4% ownership, while the remaining shares belong to ZEEL’s other shareholders.
• Shareholder Assent and Regulatory Approvals:
• Shareholders of ZEEL greenlit the merger, supporting the move.
• Regulatory clearances from BSE, NSE, and Competition Commission of India were prerequisites for the merger.

NCLT Intervention and Challenge:

• The National Company Law Tribunal (NCLT) instructed NSE and BSE to reconsider their prior approvals for the merger of ZEEL and Culver Max Entertainment.
• ZEEL contested the NCLT order before the appellate tribunal (NCLAT), asserting insufficient opportunity to present its viewpoint.
• ZEEL argued that NCLT lacks jurisdiction over non-compete matters.

NCLAT’s Verdict:

• In May 2023, NCLAT overturned the NCLT’s order, nullifying the directive to NSE and BSE to reevaluate their approval for the Zee-Sony merger.

National Company Law Appellate Tribunal (NCLAT)

• NCLAT, established under the Companies Act, 2013, serves as a quasi-judicial entity in India.
• It hears appeals against rulings issued by the National Company Law Tribunal (NCLT).
• Founded in 2016, the NCLAT’s headquarters is located in New Delhi.
• It holds the status of the second-highest forum for company law disputes, following the Supreme Court.

Jurisdiction and Authority:

• NCLAT’s decisions are binding and conclusive, and its orders can only be contested in the Supreme Court.
• It possesses the authority to entertain appeals pertaining to insolvency, bankruptcy, mergers, acquisitions, and various company law matters.
• NCLAT assumes the role of an Appellate Tribunal for Competition Commission of India (CCI) orders and National
• Financial Reporting Authority matters.

Composition:

• NCLAT is led by a Chairperson and comprises judicial and technical members, all appointed by the Central Government.

National Company Law Tribunal (NCLT)

• NCLT operates as a quasi-judicial authority, mandated to address civil disputes under the Companies Act.
• The bench consists of a Judicial member, usually a retired or serving High Court Judge, and a Technical member from the Indian Corporate Law Service.

Primary Functions:

• NCLT adjudicates corporate law issues, encompassing disputes between companies and stakeholders, alongside handling insolvency and bankruptcy cases.

Diverse Responsibilities:

• Resolving proceedings linked to the Companies Act, such as arbitration, arrangements, compromise, reconstruction, and company winding-up.
• Serving as the Adjudicating Authority for insolvency proceedings as per the Insolvency and Bankruptcy Code, 2016.
• Handling cases pending before the Board for Industrial and Financial Reconstruction (BIFR) and under the Sick Industrial Companies (Special Provisions) Act, 1985.
• Assimilating cases from the Appellate Authority for Industrial and Financial Reconstruction.

-Source: Indian Express