This article has been written by Pradhumn Harit pursuing a Diploma in M&A, Institutional Finance and Investment Laws (PE and VC transactions) course from LawSikho.

This article has been edited and published by Shashwat Kaushik.


The merger of Zee Entertainment and Sony Pictures Network India (through its entity Culver Max Entertainment Private Limited), which the National Company Law Tribunal Mumbai recently approved, has brought considerable attention to the evolving landscape of the entertainment and OTT industries. The merger would result in a combined linear networks, digital assets, production operations and programme libraries of both entertainment giants and would provide a commanding 26%  market share.

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However, some remarkable challenges on the road to actualization have been caused by the complicated legal issues that resulted in protracted delays. Considering this, we will explore the details of the two primary causes leading to this delay while analysing Corporate Insolvency Resolution Process (CIRP) proceedings against Zee by NCLT Delhi, creditors’ objections and finally the SEBI ban on Punit Goenka, Managing Director of Zee.

Background of the Zee-Sony merger

In December 2021, the cornerstone of this merger was laid. In a tactical merger, both entities came together to fill the gaps in their respective portfolios. Zee’s aim is to strengthen its presence in the world of sports, an area that SPNI has already dominated. On the other hand, SPNI has not ventured into the regional TV market, an area in which Zee is a major player as one of the leaders in broadcasting through regional languages.

As per the terms of the agreement, the Sony Group will have a controlling stake of approximately 51%. Meanwhile, the promoters of Zee would retain 3.99% of the combined shares and the remaining 45.51% of the equity would be held by  Zee’s public shareholders.

This merger is a vital strategic crossroads that will provide many benefits to the newly formed conglomerate. With the help of their combined strengths, these companies want to strengthen their position in the market. Shareholders also stand to gain, since the merger is expected to bring about an increase in the value of their shares. At the same time, beneficiaries will be those consumers of content who have the opportunity to benefit from a rich and diverse package that offers something for everyone. Sadly, this major achievement is now burdened with formidable judicial barriers that have brought a number of serious worries.

Zee, known for its dominance in regional TV broadcasting, sought to bolster its presence in the world of sports, a domain that SPNI had already conquered. SPNI, on the other hand, had not yet ventured into the regional TV market, where Zee enjoyed a strong foothold as one of the leading broadcasters in regional languages. This merger presented an opportunity for both entities to leverage their unique strengths and create a formidable media conglomerate.

The merger laid the cornerstone for a new era of collaboration and growth in the Indian media industry. It brought together a diverse portfolio of channels, content, and platforms, creating a powerhouse that could cater to a wide range of audiences and advertisers. The combined entity would have a significant presence across genres, including general entertainment, sports, news, and regional content.

The merger also had significant implications for the media landscape in India. It created a formidable competitor to the likes of Star India, Viacom 18, and Discovery Communications, which had been the dominant players in the market. The combined entity would have the scale and resources to challenge these established players and potentially reshape the competitive dynamics of the industry.

However, the merger was not without its challenges. The integration of two large organisations with distinct cultures and processes could be a complex and time-consuming endeavour. Additionally, the rapidly evolving media landscape, with the rise of digital platforms and changing consumer preferences, presented its own set of challenges.

Despite these challenges, the merger held the promise of transforming the Indian media industry and creating a new era of growth and innovation. It marked a significant milestone in the consolidation of the media sector and set the stage for a more competitive and dynamic media landscape in India.

Legal challenges of the Zee-Sony merger

Zee Entertainment and Sony Group faced numerous legal challenges on the way to the merger, which added difficulties that brought further complications in this corporate environment. These issues included objections raised by different creditors, the disqualification of prominent directors through SEBI and the commencement of CIRP proceedings against Zee Entertainment by Indusland Bank. Each aspect was part of a multilayered legal carpet that added complexities and uncertainties to the merger. 

Objections by the creditor

Various creditors of the Zee group, including Axis Finance Limited, IDBI Trusteeship Services Limited, IMAX Corporation, IDBI Bank Limited and JC Flowers Asset Recons, raised objections to the scheme of the merger. They contended that Essel Mauritius, a Zee Group entity, was receiving a non-compete fee exceeding INR 1,100 crore from SPE Mauritius Investment Limited, a Sony Group entity. The objectors argued that such non-compete payment “is bogus and a disguised mechanism to cheat lenders & public shareholders of ZEE. In their quest for honour, the creditors tried to make a channel through which the non-compete fund could act as a means of lugging out debts owed to them.

The NCLT Order held that none of the objectors in question were direct creditors to Zee, nor did they have any contractual privity with Zee. Additionally, the NCLT concluded that the amounts owed to objecting creditors were payable by different entities of Essel Group and there was no contractual agreement between them and Zee. In  addition, the NCLT held that, in a way, the creditors were trying to exploit the Zee- Sony merger as part of their recovery effort. The provision on raising an objection to a settlement under Section 230(4) of the Companies Act, 2013 allows any shareholder holding at least ten percent or having outstanding loans amounting to five percent and above. Therefore, the NCLT held that none of the creditors fulfilled the minimum eligibility criteria as per the section to possess any locus standi in proceedings.

CIRP proceedings against Zee entertainment

When IndusInd Bank initiated Corporate Insolvency Resolution Proceedings (CIRP) against Zee Entertainment, a titanic shift took place in the corporate scenario. The first step was the application under Section 7 of IBC along with Rule 4 of the Insolvency & Bankruptcy (Application to Adjudication Authority) Rules 2016. Section 7 of the IBC provides the right to financial creditors to initiate corporate insolvency resolution before NCLT. On the other hand, Rule 4 of the Application to Adjudicating Authority Rules covers all procedural issues concerning such an application.

 With an overdue debt of financial giant IndusInd Bank running into 90 crores and above, a figure beyond the critical threshold for Zee Entertainment itself and its proposed merger with Sony Corporation of America (SCA), this is indeed one legal manoeuvre. This application’s filing caused a major impediment to the merger process, obscuring its schedule.

Though the legal dynamics twisted and turned, so did an unfolding narrative. The initiation order by NCLT Mumbai itself faced a temporary halt when an order from NCLAT Delhi effectively suspended it. Nonetheless, the situation was reversed when, ultimately, NCLAT Delhi (same judicial forum) revoked the CIRP order. A key event in the restoration of momentum was a settlement between two major players, Zee Entertainment and IndusInd Bank. In fact, this settlement has simplified the merger process.

Disqualification of director by SEBI

Another hurdle faced by the arrangement was the sweeping move by SEBI, which imposed bans on the Chairman of Essel Group, Subhash Chandra, and Zee’s CEO, Punit Goenka. This ban by the Order of SEBI was rooted in allegations of financial irregularities purportedly committed through entities within the Essel Group. This ban cast a shadow of uncertainty over the prospective role of Mr. Punit Goenka as the future CEO and Managing Director, a position originally designated for him upon the merger and formation of the new corporate entity. Moreover, it significantly impacted Zee’s stock price, causing a substantial decline in the share market. A probe was set in motion by SEBI for an 8-month timeline to investigate the intricacies of the situation in the complex narrative. The ban was challenged in the appeal before the Securities Appellate Tribunal, and in its ruling in late October, SAP  reversed the order of SEBI while stating that the continuation of Punit Goenka as the Managing Director in the merged entity would have no impact on the investigation and as even till date the probe has not established the foundational facts; therefore, the interim order would be harsh and unwarranted on the appellant.

NCLT approval of the Zee-Sony merger

Considering the long-term legal challenges encountered by Zee in a bid for a merger, the legality seems to be substantially clearer. The CIRP proceedings were set aside by both NCLT and SAT in their ruling, which revoked SEBI’s order that had granted relaxation from a ban on Punit Goenka for having been holding a position as director at the merged entity. While setting aside the objections by creditors, NCLT Mumbai granted a green signal on the application for merger filed under Section 230-232 of the Companies Act, 2013. Since the official closing deadline, which was due to expire by January 21, 2024, there would seem to be clarity on the horizon, with obstacles placed aside as every relevant stakeholder scrutinises attentively at what is expected of the merger.

With the CIRP annulment by NCLT and SAT’s order, we are proceeding to lift SEBI’s ban on Punit Goenka as the director of the merged entity. However, putting aside the arguments from the creditors. NCLT Mumbai sanctioned a green signal for the merger application filed under Section 230-232 of the Companies Act 2013. The expiring deadline for official closing on Jan 21 makes the merger susceptible to termination. As the negotiations between both parties over the leading role of the merged entity are still under scrutiny and discussion, no common ground has been reached by both parties, while Zee being rigid on the ground of appointing Punit Goenka as the person leading the merged entity has the potential to cause trouble over the closing of the merger.  


With numerous challenges faced by various stakeholders in the complicated process of uniting two media giants, the green light from NCLT is not only a great leap but also provides an environment that leads to immense market share and vast resources by both parties in the near future. Zee and Sony’s merger is an apt illustration of the challenging aspects guiding media consolidations to unravel some really intricate legal issues. Going on this trip, the intrinsic complications of such navigating mergers emerge and fatefully show how a visionary strategic capability to deliver interacts with compliance concerning bounds in which stakeholders are aligned. This stresses the importance of determining an optimal level between these components as a criterion for surmounting the intimidating regulatory hurdles specific to such radical changes. In other words, the approval from NCLT is more of a regulatory go-ahead as well as an indication that various strategies and stakeholder teams have worked towards delivering the deal. The merger gives a detailed description of how compliance with the regulatory framework and cooperation among stakeholders act like many already on an intricate but beautifully crafted tapestry to indicate just how important their interactions are in making sense of today’s dynamic business environment. 



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