The National Company Law Tribunal (NCLT) has granted a hearing to the plea of Mad Men Film, a Zee Entertainment Enterprises Limited shareholder seeking the execution of the terminated merger. The body has also asked Sony to provide a response to the petition within three weeks.
Reports have suggested that Zee’s failing financial parameters were the likely reason for the termination of the merger. However, Zee and Punit Goenka plan to argue before the NCLT that it was actually leadership disputes that were the major cause.
One of the terms in the merger agreement was the appointment of Punit Goenka as the managing director and CEO of the merged entity. This was agreed by both parties. However, when SEBI issued its order barring Goenka from holding any managerial positions in listed companies, Sony stepped back and used this as the main reason for walking away from the merger. The appeal was soon overturned by the Securities Appellate Tribunal (SAT). Though, Sony had begun demanding that NP Singh be the MD and CEO of the merged entity.
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Goenka’s citing of the approval of the shareholders allowing him to be the MD and CEO of the merged entity and SAT’s overturning of the appeal were both rejected by Sony. Finally, Goenka agreed to let go of his position as MD and CEO in the interest of shareholders and instead asked for a seat on the board. This too was rejected by Sony, as per NCLT reports.
Sony however, did not make any formal proposal to alter the terms of the merger, as per Zee and Goenka. Hence, Zee continued to proceed with to close the deal. Zee then obtained legal opinions that suggested that since the merger had already been approved by shareholders, SEBI, the Competition Commission of India (CCI) and the NCLT, Goenka’s appointment is an integral part of the merger.
During the NCLT hearings, Zee lawyers are likely to argue if Sony actually had any concerns when SEBI passed the interim order in June 2023. Sony did not reach out to the Zee board nor the NCLT at the time, seeking sanction.
According to Zee’s lawyers, Sony was entirely aware that any change to the agreed term of Goenka’s appointment would result in a modification to the merger scheme, resulting in a fresh set of NCLT approvals, shareholder approvals. However, Sony decided to move ahead irrespective with pre-determined mind to wait till January 22, 2024. Thus, terminating the agreement on unlawful grounds. Zee’s petition to NCLT stated.