IDBI Bank’s insolvency appeal against ZEEL dismissed by NCLAT

 

The National Company Law Appellate Tribunal (NCLAT) has dismissed an appeal filed by IDBI Bank challenging the National Company Law Tribunal’s (NCLT) earlier decision to reject an insolvency petition against Zee Entertainment Enterprises Ltd (ZEEL), reported Bar & Bench.

In a ruling delivered by a bench comprising Chairperson Justice (Retd) Ashok Bhushan and Technical Member Barun Mitra, the appellate tribunal upheld the NCLT’s stance, and noted that the alleged default by ZEEL fell within the protected period under Section 10A of the Insolvency and Bankruptcy Code (IBC), 2016. The bench clarified, however, that IDBI Bank retains the liberty to file a fresh insolvency petition for defaults occurring outside the Section 10A protection window.

Section 10A was introduced in response to the COVID-19 pandemic. It provided a moratorium on insolvency proceedings for defaults occurring on or after March 25, 2020, for a period of one year, effectively helping companies from insolvency claims affected by pandemic-related financial stress.

Dispute History

The matter has been going on since August 3, 2012, wherein ZEEL agreed to maintain a Debt Service Reserve Account (DSRA) on behalf of Siti Networks Ltd who is the principal borrower, for working capital facilities extended by IDBI Bank.

Siti Networks was classified as a non-performing asset (NPA) in December 2019. However, IDBI Bank invoked ZEEL’s corporate guarantee in March 2021 and demanded payment of Rs 61.97 crore. ZEEL appealed against the claim, arguing that its liability was limited to maintaining two quarters of interest payments on the original sanctioned limit of Rs 50 crore, and not on the enhanced or principal amounts. ZEEL also pointed out that the entire facility was recalled in February 2021, which nullifies its obligations under the guarantee.

In May 2023, the NCLT Mumbai had dismissed IDBI Bank’s insolvency petition, stating that the default occurred on March 5, 2021, which was the date when ZEEL received a demand notice. This date fell within the COVID-related moratorium period from March 25, 2020 to March 25, 2021 when insolvency filings were barred.

IDBI Bank was represented by Additional Solicitor General N Venkataraman, along with Advocates Diwakar Maheshwari, Vishnu Sriram, Pratiksha Mishra, and Karan Bhootra.

ZEEL was represented by Senior Advocates Arun Kathpalia and Abhijeet Sinha, assisted by Aman Raj Gandhi, Vardaan Bajaj, and Ojasni Sharma.

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