IDBI Bank in its plea has challenged the order of the Mumbai bench of the National Company Law Tribunal (NCLT), which, on May 19, 2023, had set aside the insolvency plea against the media major, observing that it was barred under Section 10A of the Insolvency & Bankruptcy Code (IBC).
In its order, the NCLT bench had said that ZEEL, which was the corporate guarantor for the loan availed by Siti Networks — the principal borrower of IDBI Bank — has committed a default.
However, the default was committed during the timeline specified under section 10A of the IBC.
Section 10A mandates no application for initiation of a corporate insolvency resolution process (CIRP) can be filed against any debtor by any financial and operational creditor for any default arising on or after March 25, 2020, for a period of one year.
This was a special provision inserted by the government in IBC to help the companies after the economic activities had resumed post-lockdown in phases. The NCLT said Section 10A bars absolutely and forever, the filing of any application under Sections 7, 9 and 10 of the Code, for defaults committed on or after March 25, 2020, up to March 25, 2021. Siti Networks has taken a loan of Rs 150 crore for a working capital facility and as per the agreement, it has to maintain a Debt Service Reserve Account (DSRA).
In DSRA, a credit balance equal to two quarters of interest on working capital was required to be maintained by Siti Networks at all times till the repayment. However, there was a default.
On March 5, 2021, IDBI Bank invoked the guarantee provided by ZEEL and called to pay Rs 61.97 crore with further interest from February 18, 2021. It claimed an amount of Rs 149.60 crore in default.
ZEE is merging with Culver Max Entertainment (earlier known as Sony Pictures Networks India), for which it has been given a go ahead by a NCLT bench from Mumbai. This has also been challenged by IDBI Bank in a separate petition.
