Merger usually works on the basis of the famous English proverb “beacon of hope” meaning something that holds the promise of hope for the companies which are at the edge of losing their value. Its tremendous example has been discussed in the merger of Air India and Indian Airlines to save the public aviation sector.

Currently, Zee Entertainment continues to struggle for funds. Merger of Zee with Sony paved the way to overcome the problem of Capital.  Sony Pictures will contribute much-needed funds to the joint venture. As a result, Sony Pictures will own 50.86% of the merged firm. Zee Entertainment will hold the remaining 49.14% stake. Since, Zee Entertainment will cease to exist as an independent corporation, its shareholders will be awarded proportionate shares of the amalgamated entity.The founder of Zee will own around 4 per cent and the rest will be with the other shareholders of ZEE. Sony Pictures will have a majority stake in the amalgamated company.

Thus, in order to finalise the deal Sony Pictures Networks India and ZEE signed a non-binding term sheet in September 2021 to merge their linear networks, digital assets, production operations, and programming libraries.

The combined organisation will be the largest entertainment network in India, with over 70 TV channels, two video streaming services (ZEE5 and Sony LIV), and two film studios (Zee Studios and Sony Pictures Films India).

In October 2022, Competition Commission of India and Zee shareholders had given their approval to the merger. However, the NSE and BSE expressed new concerns about the merger scheme and referred the latest SEBI order dated April 25, 2023, on Shirpur Gold Refinery to the NCLT, Mumbai Bench, where the Zee Promoters’ names appear in the context of fund diversion.

Order against Shirpur Gold Refinery Ltd. was sanctioned by the Securities and Exchange Board of India on April 25 and was brought before the tribunal on the direction of the market regulator in order to bring to the court’s attention the operations of enterprises operated by the Essel Group. There is a family link between CEO of ZEE and marketing companies of Shirpur.

The Hon’ble NCLT, Mumbai vide order dated 11th May, 2023, directed NSE and BSE to reconsider their approval for the Zee-Sony merger.The NCLT had instructed the BSE and NSE to examine their previous permission for the Zee-Sony merger scheme and furnish new NOCs for the same before the next hearing date.

ZEE filed an appeal against the order dated 11th May, 2023, claiming that the NCLT did not provide it with a proper opportunity to present its case. It further claimed that the NCLT lacks jurisdiction over non-compete issues.

However, the order dated 11th May, 2023 was challenged by ZEE before the appellate tribunal, contending that it was not granted adequate opportunity by the NCLT to present its side. It also contended that the NCLT doesn’t have jurisdiction over non-compete issues.

On May 26, 2023, the National Company Law Appellate Tribunal (NCLAT) overturned the NCLT order, providing relief to Zee Entertainment. The order issued by the Mumbai bench of the National Company Law Tribunal (NCLT) violated the “principle of natural justice” because it did not provide Zee Entertainment with an opportunity to respond to the issue of Shirpur Gold Refinery, a Subhash Chandra-led Essel Group firm, according to a two-member NCLAT bench. The appeal panel remanded the case to the NCLT for a new decision and ordered the same after hearing both parties.

Author – Karishma Jaiswal (Senior Associate)   

Co-Author – Sarim Fazli (intern)