More trouble for Zee: SC upholds HC ruling to send Siti Networks' loan default case to arbitration

Zee-Sony merger: The Supreme Court on Tuesday upheld the Delhi High Court's ruling to refer the Rs 150 crore dispute between Aditya Birla Finance and Siti Networks to arbitration. The high court had appointed former Supreme Court judge Justice LN Rao as the sole arbitrator.

Aditya Birla Finance had alleged that Siti has not settled outstanding payments to the tune of Rs 134 crore, along with interest. It has looped in Zee in the matter as it had agreed to guarantee, a report in CNBC TV18 said.

In 2020, Siti Broadband had availed of a loan of Rs 5 crore from Aditya Birla Finance, to be repaid in 19 quarterly instalments after a moratorium of five quarters from the first disbursement. According to Aditya Birla Finance, Siti Broadband has been defaulting on payments since November 2021.

On Tuesday, the Supreme Court cited its recent judgment where it held that even non-signatories to an arbitration agreement can be subject to it under the 'Group of Companies' Doctrine.

The top court had in its December 6 judgment held that the arbitrator will have the freedom to decide if a non-signatory to an arbitration agreement can also be bound.

Therefore, the apex court directed Zee to raise its concerns before the arbitrator.

Aditya Birla Finance had earlier stated that the interest rate on the loan was reduced from 16% per annum to 13% on the condition that Siti would reduce the outstanding loan to Rs 75 crore before 2018 and Zee would stand as a guarantor for the loan.

Zee, meanwhil, said that it was the corporate guarantor, not the principal debtor in Siti’s loan.

In November 2023, NCLT admitted Siti Broadband Services into the corporate insolvency resolution process following a plea by Aditya Birla Finance.

The NCLT designated Harvinder Singh as the interim resolution professional (IRP) for the company. Aditya Birla Finance approached the NCLT after Siti Broadband failed to make a payment of Rs 4.38 crore.

In its order dated October 31, the NCLT declared that the promoters, management, and personnel of Siti Broadband are legally obligated to provide full assistance and cooperation to the IRP in handling the company's daily operations.

Siti Broadband responded by stating that Aditya Birla Finance had issued a loan recall notice on May 24, 2022, just seven days before a scheduled installment payment. The notice was issued due to Siti Networks' default on other loans.

Earlier, the NCLT initiated an insolvency process against Siti Broadband's parent company, Siti Networks, and Zee Entertainment Enterprises Limited following a plea by IndusInd Bank.

However, the National Company Law Appellate Tribunal (NCLAT) stayed the corporate dispute redressal body's insolvency order against Siti. The NCLAT had also disposed of IndusInd's insolvency plea against Zee after the two parties arrived at a settlement.

Zee Sony merger

The Zee-Sony merger has been in the news for many reasons Mainly because both companies are yet to finalise the deal. Recently, it was reported that Sony was planning to call off the mega $10 billion merger with Zee Entertainment Enterprises due to apparent insistence by Punit Goenka that he should head the company as per the original terms of the deal. With an ongoing SEBI probe against Zee promoters, Sony is reportedly asking for a change in the merger agreement as to who should head the company.

But on January 9, Zee denied the media reports and said the company is committed to the merger with Sony and is continuing to work towards a successful closure of the proposed merger.

The proposed merger, which was first announced in September 2021, has already received regulatory approvals from the Competition Commission of India (CCI), bourses NSE and BSE, shareholders and creditors of the company.

The merged entity will have over 70 TV channels, two video streaming services (ZEE5 and Sony LIV) and two film studios (Zee Studios and Sony Pictures Films India).

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