The National Company Law Appellate Tribunal on Monday dismissed the plea of IDBI Bank which sought to initiate insolvency proceedings against Zee Entertainment.
A two-member NCLAT bench upheld the order passed by the Mumbai bench of the National Company Law Tribunal, which had earlier rejected the private lender's plea to initiate insolvency proceedings against Zee Entertainment Enterprises Ltd.
However, the appellate tribunal granted liberty to IDBI Bank to move a fresh plea for default outside of the period mentioned in section 10A of the Insolvency & Bankruptcy Code.
Section 10A mandates that no application for initiation of the corporate insolvency resolution process can be filed against any debtor by any financial and operational creditor for any default arising on or after March 25, 2020, for a period of one year.
This special provision was inserted in the IBC by the government to help companies after economic activities had resumed post-lockdown in phases during the Covid pandemic.
IDBI Bank had challenged the NCLT order passed on May 19, 2023, in which the tribunal had set aside its plea, observing that it was barred under Section 10A of the Insolvency & Bankruptcy Code.
In its order, the NCLT bench had said that ZEEL, which was the corporate guarantor for the loan availed by Siti Networks -- the principal borrower of IDBI Bank -- has committed a default.
However, the default was committed during the timeline specified under section 10A of the IBC.
The NCLT said Section 10A bars absolutely and forever the filing of any application under Sections 7, 9 and 10 of the Code for defaults committed on or after March 25, 2020, up to March 25, 2021.
Siti Networks has taken a loan of Rs 150 crore for a working capital facility, and as per the agreement, it has to maintain a Debt Service Reserve Account.
In DSRA, a credit balance equal to two quarters of interest on working capital was required to be maintained by Siti Networks at all times till the repayment. However, there was a default.
On March 5, 2021, IDBI Bank invoked the guarantee provided by ZEEL and called to pay Rs 61.97 crore with further interest from Feb. 18, 2021. It claimed an amount of Rs 149.60 crore in default.
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