Zee-Sony Merger Legal Proceedings
- January 31, 2024
- Posted by: OptimizeIAS Team
- Category: DPN Topics
Zee-Sony Merger Legal Proceedings
Subject: Economy
Section: Capital Market
Two legal proceedings initiated regarding the failed Zee-Sony merger deal.
Zee Shareholder’s Case:
- Mad Men Ventures, a Zee shareholder, filed a case at the National Company Law Tribunal (NCLT).
- Seeks a merger between Zee and Sony.
- NCLT has asked for a response from Sony within three weeks.
Singapore Arbitration International Centre (SAIC):
- Dispute over the failed merger to be heard at SAIC in an emergency proceeding.
- Separate legal proceedings ongoing in SAIC.
Multiple Legal Fronts:
- Three separate legal proceedings underway.
- Zee plans to file cases at NCLT and SAIC, claiming default by Culver Max and Bangla Entertainment (Sony) in implementing the merger scheme sanctioned by NCLT.
- Zee alleges that Culver Max and Bangla Entertainment (Sony) failed in their obligation to give effect to the NCLT-sanctioned merger scheme.
Mad Men Ventures’ Intervention:
- Mad Men Ventures opens a third legal front, filing a case at NCLT.
- NCLT hearing set for March 12.
- Emergency proceeding at SAIC scheduled for Wednesday.
- The failed $10 billion merger has led to legal complexities and disputes.
Key Points on Sony-Zee Merger Deal Approval:
NCLT Approval:
- The National Company Law Tribunal (NCLT) approves the merger of Zee Entertainment Enterprises with Culver Max Entertainment (formerly Sony Pictures Networks India).
- Clearing the way for the creation of the country’s largest media company.
Background of Sony-Zee Merger:
- Merger initiated in 2021 between Sony Pictures Networks India and ZEEL.
- Scheme involves the combination of linear networks, digital assets, and production operations.
- Sony to indirectly hold 50.86% of the combined company.
NCLT Order Challenge:
- NCLT directed stock exchanges (NSE and BSE) to reconsider their prior approvals for the merger.
- ZEEL challenged the order, claiming insufficient opportunity to present its side and questioning NCLT’s jurisdiction over non-compete issues.
- NCLAT set aside the NCLT order in May 2023.
NCLT Decision Summary:
- NCLT clears Zee-Sony deal and dismisses objections.
- Marks a significant step toward the creation of a $10-billion entertainment giant.
Market Scenario Post-Merger:
- The merger creates the country’s largest media and entertainment company with standalone revenues of $2 billion.
- Combined entity owns over 70 TV channels, two video streaming services (Zee5 and SonyLiv), and two film studios (Zee Studios and Sony Pictures Films India).
- Emerges as the largest TV network company with a 26% market share.
- Analysts predict the merger to result in a $10-billion media gian
Arbitration:
- Arbitration is a form of alternative dispute resolution where parties submit their disputes to an impartial third party, the arbitrator, for a binding decision.
- Voluntary Process: Unlike court litigation, arbitration is usually voluntary and arises from an agreement between the parties.
- Arbitration Agreement: The parties include an arbitration clause in their contract, specifying the rules, seat, and other details of the arbitration process.
- Advantages: Arbitration offers a quicker, more private, and potentially less costly resolution compared to traditional court proceedings.
- Enforceability: Arbitral awards are generally enforceable internationally through conventions like the New York Convention.
Arbitration & Conciliation Act, 1996 (India):
- Overview: The Arbitration & Conciliation Act, 1996 is India’s primary legislation governing arbitration and conciliation proceedings.
- Purpose: It provides a legal framework for the fair and efficient resolution of disputes through arbitration and conciliation.
- Key Features:
- Recognizes and enforces arbitral awards.
- Provides guidelines for the conduct of arbitral proceedings.
- Governs the appointment and powers of arbitrators.
- Enables parties to seek interim measures from courts.
SIAC (Singapore International Arbitration Centre):
- Establishment: SIAC is a not-for-profit international arbitration organization based in Singapore.
- Administration: It administers arbitrations under its own rules and the United Nations Commission on International Trade Law (UNCITRAL) Arbitration Rules.
- Reputation: SIAC is known for its efficiency, neutrality, and adherence to international standards in dispute resolution.
- Popular Seat: Singapore, where SIAC is based, is a preferred seat for international arbitration due to its reputation for rule of law.
Singapore as an Arbitration Hub:
- Foreign investors prefer Singapore for arbitration to avoid Indian court complexities.
- Singapore is viewed as a neutral ground for dispute resolution with a reputation for fairness and efficiency.
- The 2019 SIAC report notes India as the top user of its arbitration seat, reflecting confidence in Singapore’s arbitration process.
International Arbitration in India:
- India established its international arbitration center in Mumbai.
UNCITRAL (United Nations Commission on International Trade Law):
- Establishment: UNCITRAL is a core legal body of the United Nations system, established in 1966.
- Objective: It aims to promote international trade by harmonizing and modernizing international trade law.
- UNCITRAL Model Law: UNCITRAL developed the Model Law on International Commercial Arbitration, a guide for countries in developing their national arbitration legislation.
- Global Impact: UNCITRAL’s work has had a significant impact on the facilitation of international trade and commerce by promoting uniformity in legal frameworks.
National Company Law Appellate Tribunal (NCLAT):
- Establishment: NCLAT is a quasi-judicial body established under the Companies Act, 2013.
- Year: Established in 2016 with headquarters in New Delhi.
- Appellate Authority: Serves as an appellate authority hearing appeals against orders passed by the NCLT.
- Hierarchy: It is the second-highest forum for company law cases in India, following the Supreme Court.
- Final Decisions: Decisions of the NCLAT are final and binding on involved parties, with the option to challenge orders only in the Supreme Court.
- Functions: Empowered to hear appeals related to insolvency, bankruptcy, merger and acquisition, and company law matters. Also serves as the Appellate Tribunal for orders by the Competition Commission of India (CCI) and the National Financial Reporting Authority.
National Company Law Tribunal (NCLT):
- Nature: Quasi-judicial authority incorporated for handling corporate disputes of civil nature under the Companies Act.
- Composition: Led by a Judicial member (retired or serving HC Judge) and a Technical member from the Indian Corporate Law Service.
- Primary Functions:
- Disposal of proceedings under the Companies Act, including arbitration, arrangements, compromise, reconstruction, and winding up of companies.
- Adjudicating Authority for insolvency proceedings under the Insolvency and Bankruptcy Code, 2016.
- Authority to dispose of cases pending before the Board for Industrial and Financial Reconstruction (BIFR) and those under the Sick Industrial Companies (Special Provisions) Act, 1985.
- Can take up cases pending before the Appellate Authority for Industrial and Financial Reconstruction.
Board for Industrial and Financial Reconstruction (BIFR):
- Establishment: BIFR was a quasi-judicial body in India established under the Sick Industrial Companies (Special Provisions) Act, 1985.
- Objective: Its primary purpose was to address and rehabilitate sick industrial companies in the country. A “sick industrial company” is one that incurs losses for an extended period and is unable to repay debts, jeopardizing its viability.
- Repeal: In 2016, the Government of India repealed the Sick Industrial Companies (Special Provisions) Act, 1985, and dissolved BIFR.
- Transition: The responsibility for handling issues of sick companies was shifted to the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code, 2016.
Insolvency and Bankruptcy Code, 2016 (IBC):
- Enactment: IBC is a comprehensive legislation enacted by the Government of India to address and streamline the insolvency and bankruptcy process.
- Objective: Aims to provide a time-bound and efficient framework for the resolution of distressed companies and individuals unable to repay debts.
- Responsibility Shift: With the repeal of the Sick Industrial Companies Act, the IBC took over the role of addressing and resolving insolvency-related matters.