In a relief for Zee Entertainment Enterprises Ltd, the National Company Law Appellate Tribunal (NCLAT) has dismissed the insolvency plea filed by IDBI Bank against the media company over unpaid dues of around ₹150 crore.
The top insolvency court upheld an earlier order by the National Company Law Tribunal (NCLT), Mumbai, which ruled that IDBI Bank’s claims were covered under Section 10A of the Insolvency and Bankruptcy Code (IBC), 2016.
Section 10A of IBC blocks insolvency proceedings for defaults that happened during the covid-19 period, from 25 March, 2020, to 25 March, 2021. Zee argued that its guarantee was limited and did not cover the entire debt.
NCLAT allowed IDBI Bank to file a fresh insolvency case for defaults that happened outside the time period covered by Section 10A.
The dispute arose from a 2012 guarantee agreement in which Zee agreed to maintain a debt service reserve account (DSRA) for IDBI Bank’s working capital loan to Siti Networks. Although the borrower’s account became a non-performing asset in December 2019, IDBI Bank invoked the media company’s guarantee only in March 2021, demanding ₹61.97 crore.
Zee argued that its liability was limited to interest payments on the original ₹50 crore loan and did not cover increased limits or the principal amount. It also claimed that the facility was recalled in February 2021, ending its DSRA obligations.
IDBI Bank then filed an insolvency plea against Zee in the NCLT.
In May 2023, NCLT Mumbai dismissed IDBI Bank’s insolvency plea against Zee, ruling that the alleged default fell within the covid-19 moratorium period under Section 10A of the IBC. The tribunal held that Zee’s liability was limited to maintaining interest payments on the original ₹50 crore loan and did not extend to the entire ₹149.60 crore claim.
It determined that Zee’s default occurred only when IDBI Bank issued a demand notice on 5 March, 2021, which fell within the protected period.
The NCLT also ruled that a guarantor’s liability arises only upon proper demand, rejecting IDBI Bank’s argument that the default should be linked to the borrower’s NPA classification.
Earlier, IndusInd Bank had filed an insolvency case against Zee, which was accepted by the NCLT on 22 February. Later, the NCLAT granted relief against the NCLT order to Zee in March, and the company later reached a settlement with IndusInd Bank.
The claims of both IndusInd Bank and IDBI Bank were contested by Zee, primarily on the grounds that the guarantee was invoked during the pandemic.
