NCLT Mumbai Allows Zee Entertainment To Withdraw Merger Implementation Application

NCLT Mumbai Allows Zee Entertainment To Withdraw Merger Implementation Application

The NCLT Mumbai bench has granted Zee Entertainment Enterprises Limited (ZEEL) permission to withdraw its application seeking approval for the merger with Culver Max Entertainment and Bangla Entertainment, owned by Sony Group Corp. This decision comes after Culver Max and Bangla Entertainment terminated the merger agreement on January 22, 2024, citing an alleged breach of the Merger Cooperation Agreement (MCA).

Initially signed on December 21, 2021, the merger agreement aimed to consolidate businesses in a significant multi-billion-dollar deal between ZEEL and Sony. However, with the agreement terminated, ZEEL's application to implement the composite scheme of arrangement faced challenges from Culver Max and Bangla Entertainment on grounds of validity.

In response, Culver Max and Bangla Entertainment initiated arbitration proceedings against ZEEL at the Singapore International Arbitration Centre (SIAC), seeking $90 million in termination fees for the alleged breaches of the MCA. In light of these developments, ZEEL opted to withdraw its application to focus on pursuing its claims and exploring strategic opportunities to enhance shareholder value.

ZEEL, Culver Max, and Bangla Entertainment entered into a Merger Cooperation Agreement (MCA) on December 22, 2021, stipulating that the merger would only proceed upon fulfilling specific conditions outlined therein. Applications were filed by both parties for approval of the scheme before the NCLT, resulting in conditional sanction orders issued in August 2023.

However, the scheme's effectiveness hinged on meeting all the conditions specified in the MCA. ZEEL failed to satisfy these conditions to the satisfaction of Culver Max and Bangla Entertainment by the designated 'End Date'. Consequently, Culver Max and Bangla Entertainment terminated the MCA and initiated arbitration proceedings at SIAC.

ZEEL subsequently filed an application in the NCLT seeking implementation of the scheme. In response, Culver Max and Bangla Entertainment challenged the maintainability of ZEEL's application, arguing that the NCLT lacked jurisdiction due to the ongoing arbitration. ZEEL then sought to withdraw its implementation application.

Recognising the complexity and multiple legal actions arising from the disputes, the NCLT permitted ZEEL to withdraw its application. It emphasised the need to avoid parallel legal proceedings in both the NCLT and SIAC, stating that the parties are free to pursue their remedies through appropriate legal channels.