NCLT allows Withdrawal of Zee Entertainment’s Merger with Sony Groups
The withdrawal was permitted on the termination of the merger agreement by Culver Max and Bangla Entertainment due to an alleged breach of the merger cooperation agreement (MCA)
NCLT – NCLT Mumbai – Sony – Sony Groups – Zee entertainments – National Company – TAXSCAN
NCLT – NCLT Mumbai – Sony – Sony Groups – Zee entertainments – National Company – TAXSCAN
The Mumbai bench of the National Company Law Tribunal ( NCLT ) has granted permission to withdraw the application seeking implementation of a merger with Zee Entertainment Enterprises Limited ( ZEEL ) and Sony Group Corp-owned Culver Max Entertainment and Bangla Entertainment. The merger agreement by Culver Max and Bangla Entertainment was terminated due to an alleged breach of the merger cooperation agreement ( MCA ).
ZEEL, Culver Max, and Bangla Entertainment entered into a merger cooperation agreement (MCA) on December 22, 2021. The MCA stated that the merger would be effective only upon fulfilling specific conditions as outlined in the agreement. Both parties filed necessary applications for approval of the scheme before the NCLT, and conditional sanction orders were issued in August 2023.
It was alleged that ZEEL failed to fulfil the required conditions to the satisfaction of Culver Max and Bangla Entertainment before the stipulated 'End Date'. The initial merger agreement between ZEEL and Sony was signed on December 21, 2021 which was to consolidate their businesses in a significant multi-billion-dollar deal. However, the termination of the agreement halted the process. ZEEL's application sought to implement the composite scheme of arrangement between the involved companies, but this was challenged by Culver Max and Bangla Entertainment on grounds of validity.
Culver Max and Bangla Entertainment initiated arbitration proceedings against ZEEL at the Singapore International Arbitration Centre ( SIAC ) and sought $90 million in termination fees due to alleged breaches of the MCA. Following this, ZEEL decided to withdraw its application to focus on pursuing its claims and exploring strategic opportunities to enhance shareholder value.
ZEEL filed an application in NCLT for implementation of the scheme. In response, Culver Max and Bangla Entertainment filed applications challenging the maintainability of ZEEL's application and argued that the NCTL lacked jurisdiction due to the ongoing arbitration. ZEEL subsequently applied for withdrawal of its implementation application.
The NCLT bench found the complexity and multiplicity of litigation arising from the ongoing disputes and allowed ZEEL to withdraw its application. The NCLT Tribunal held that there is a need to avoid parallel legal proceedings in both the NCLT and SIAC.
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