25 Feb 2023 5:30 AM GMT
The National Company Law Appellate Tribunal (“NCLAT”), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson) and Shri Barun Mitra (Technical Member), while adjudicating an appeal filed in Punit Goenka v Indusind Bank Ltd. & Anr., has stayed the NCLT order dated 22.02.2023, whereby Corporate Insolvency Resolution Process (“CIRP”) was initiated against...
The National Company Law Appellate Tribunal (“NCLAT”), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson) and Shri Barun Mitra (Technical Member), while adjudicating an appeal filed in Punit Goenka v Indusind Bank Ltd. & Anr., has stayed the NCLT order dated 22.02.2023, whereby Corporate Insolvency Resolution Process (“CIRP”) was initiated against Zee Entertainment Enterprises Ltd.
Zee Entertainment Enterprises Ltd. (formerly Zee Telefilms Ltd.) is an Indian media conglomerate owned by Essel Group, engaged in media and entertainment business. Zee had given India its first private satellite TV channel in 1992 and now also runs Over The Top (OTT) online streaming platform named Zee5.
Siti Networks Limited is also a part of Essel Group and was a 100% subsidiary of erstwhile Zee Telefilms Ltd. Siti Networks Ltd. had availed financial facility from IndusInd Bank Ltd. (“Financial Creditor”) for an amount of Rs. 150 Crores, which had a sublimit bank guarantee of Rs. 95,00,00,000/-. In view of the same, Siti Networks Ltd. entered into a Debt Service Reserve Agreement (“DSRA”) with Financial Creditor and Zee Entertainment Enterprises Ltd. became the Guarantor under the DSRA.
Proceedings Before NCLT
When Siti Networks Ltd. failed to fulfill its obligations under DSRA, the Financial Creditor filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 (“IBC”), seeking initiation of Corporate Insolvency Resolution Process (“CIRP”) against Zee Entertainment Enterprises Ltd. (“Corporate Debtor”). The amount in default is Rs. 92,74,25,742.00/-. Simultaneous proceedings under Section 7 of IBC have also been initiated against Siti Networks Ltd.
On 01.03.2022, the Adjudicating Authority granted the Corporate Debtor an opportunity to file Reply to Section 7 application, but the opportunity was not availed at that point of time.
Further, the Corporate Debtor filed an interim application (I.A. No. 594 of 2022) seeking dismissal of the Section 7 application. The Adjudicating Authority vide an order dated 11.07.2022 granted the Financial Creditor (Respondent in the concerned application) time to file Reply to the interim application within 2 weeks, failing which the opportunity would stand forfeited. Subsequently, the Bench dismissed the interim application filed by Corporate Debtor on 02.01.2023.
When the Section 7 petition was heard on 22.02.2023, the Adjudicating Authority mistakenly observed that the Corporate Debtor did not file any Reply and its opportunity stood closed in view of Order dated 11.07.2022.
On 22.02.2023, the Bench admitted the Corporate Debtor into CIRP and has appointed Mr. Sanjeev Kumar Jalan as the Interim Resolution Professional.
Proceedings Before NCLAT
Mr. Punit Goenka (“Appellant”) being the Suspended Management of the Corporate Debtor, filed an appeal against the Order dated 22.02.2023. The Appellant argued that the Adjudicating Authority incorrectly interpreted the Order dated 11.07.2022 and ought to have granted the Corporate Debtor an opportunity to file Reply.
The NCLAT Bench observed that it was the Financial Creditor who was granted an opportunity to file Reply vide order dated 11.07.2022 and not the Corporate Debtor.
“The said order has been read by the Adjudicating Authority as order forfeiting right of the Corporate Debtor to file a Reply and relying on the said Order, adjudicating authority proceeded to observe that corporate debtor did not chose to file a Reply and rather refuses to reply hence the Adjudicating Authority has no option and proceeded to admit the Section 7 Application……We are of the view that Order dated 11th July, 2022 has been wrongly interpreted and relied on by the Adjudicating Authority. The said Order never forfeited right to file Reply of the Corporate Debtor and in fact by the said order, time was granted to the Financial Creditor to file a reply to I.A. No. 594 of 2022 which cannot be treated any forfeiting the right of the corporate debtor to file a reply.”
The Bench held that the Adjudicating Authority wrongly interpreted the Order dated 11.07.2022. The Bench has issued notice in the Appeal and opportunity to file Reply has been given to the Respondents in the appeal. The Order dated 22.02.2023, whereby CIRP has been initiated against the Corporate Debtor, has been stayed by the NCLAT. The next date of hearing is 29.03.2023.
Case Title: Punit Goenka v Indusind Bank Ltd. & Anr.
Case No.: Company Appeal (AT) (Insolvency) No. 232/2023.
Counsel for Appellant: Mr. Mukul Rohtagi, Sr. Advocate with Mr. Arun Kathpalia, Sr. Advocate, Mr. Abhijeet Sinha, Ms. Bindi Dair, Mr. Aditya Shukla, Mr. Aman Raj Gandhi, Mr. Nikhil Rohatgi, Ms. Heena Kochar, Mr. Vaidaan Bajaj, Mr. Parth Bose, Mr. P. Tutija, Diksha Gupta, Advocates
Counsel For the Respondent: Mr. Rajiv Nayyar, Sr. Advocate, Mr. Diwakar Maheshwari, Ms. Pratiksha Mishra, Mr. Vishnu Shriram, Mr. Karun Mehta, Advocates for R-1 Mr. Sanjev Kumar, Mr. Anshul Sehgal, Mr. Divyanshu Jain, Advocates for R-2.
Click Here To Read/Download Order