Zee-Sony Merger: NCLAT Reverses NCLT's Decision, Case Remanded For Reconsideration

India's bankruptcy appeal body knocked aside an order by the National Company Law body (NCLT) on may26, ordering bourses NSE and BSE to examine their approval of the media firm's merger with Sony. After hearing both sides, the National Company Law Appellate Tribunal (NCLAT) remitted the case to the National Company Law Tribunal (NCLT) to settle the issue.

The National Company Law Appellate Tribunal (NCLAT) ruled that, under the principles of "natural justice," Zed should have been heard by the NCLT before the NSE and BSE were asked to revise their no objection certificate (NOC) for the Zee-Sony merger.

The NCLAT stated that Zed had no opportunity to react to the objections presented. The appellate tribunal ruled that the NCLT order should be overturned because it violated natural justice principles.

The appellate panel was considering ZEEL's appeal against the judgement issued on May 11, 2023 by the Mumbai bench of the National Company Law panel (NCLT).

The NCLT had instructed the NSE and BSE to examine their prior approvals of ZEEL and Culver Max Entertainment's merger. It has also requested that the bourses reconsider the non-compete charge imposed by the merger provision.

The stated order was challenged before the appeal tribunal by ZEEL, who claimed that the NCLT did not provide it with a proper opportunity to present its case and that it did not follow natural justice standards.

Furthermore, it claimed that the NCLT lacks jurisdiction over non-compete disputes.

Sony will indirectly own 50.86 percent of the combined company under the terms of the agreement. The founder of Zed will possess approximately 4% of the company, with the remaining shares held by ZEEL's other owners.

In addition, Sony Group will pay the Essel Group promoters a non-compete fee of Rs 1,100 crore.
Sony Pictures Networks India and ZEEL agreed to 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 (Zed Studios and Sony Pictures Films India).

Shareholders of ZEEL supported the merger last October, only weeks after the Competition Commission of India issued its conditional approval with minor amendments.