Zee Entertainment Enterprises Ltd (ZEEL) on Wednesday informed BSE that it has moved the National Company Law Tribunal (NCLT) Mumbai and Singapore International Arbitration Centre (SIAC) against Sony’s decision to call off the $10-bn merger deal. In its communication to BSE, Zee has also denied that Culver Max Entertainment Ltd (formerly known as Sony Pictures Network India) and Bangla Entertainment Ltd (BEPL) are entitled to terminate the Merger Cooperation Agreement (MCA) and so the claim for termination fee is legally untenable and has no basis whatsoever.

ZEEL’s legal movecame days after Sony moved the Singapore International Arbitration Centre claiming the termination fee. While moving theNCLTseems like the obvious next step that Zee could have taken in the situation, e4m spoke to experts to understand what will it gain out of the litigation.

According to legal experts, the plea seeking withdrawal of merger termination by Sony is a last-ditch attempt by Zee to push for the merger, and if allowed, it could be a saving grace for the company. Experts say if ZEEL’s plea is allowed by NCLT, it would enhance the media giant’s standing in the business community.

It could also save ZEEL from paying the USD 90 million termination fee asked by Sony.

According to Rajesh Rai, Managing Partner, RR Legal Partners, the outcome of the litigation initiated by ZEEL will depend on various factors, including the strength of ZEEL’s legal arguments, evidence presented, and the interpretation of the merger agreement.

“If the NCLT determines that Sony's termination was unjustified or legally untenable, it could relieve ZEEL from the financial burden of the termination fee,” said Rai.

Rai further added that ZEEL's request for directions to implement the merger scheme could be granted if the NCLT concludes that Sony's termination was improper. This would mean that ZEEL could proceed with the merger as originally planned, subject to any additional conditions imposed by the tribunal.

This may also help the company to get legal validation, reinforcing its position that it has not breached the terms of the merger agreement. This could enhance Zee's standing in the business community and among its stakeholders.

“However, it's important to note that litigation outcomes can be uncertain, and the NCLT will carefully consider the facts and legal arguments presented by both parties. The final decision will have significant implications for both Zee and Sony, influencing their future strategic plans and financial positions,” said Rai.

Sharing a similar view, Shashank Agarwal, Advocate, Delhi High Court, said that ZEEL approaching NCLT is a “plausible” move.

“Going to the NCLT seems a plausible approach since the merger scheme was already approved. Section 231 of the Companies Act, 2013, provides powers of the tribunal (NCLT) to supervise the implementation of the arrangement and to enforce the compromise or arrangement (which includes a merger scheme),” Agarwal said.

He also said that section 231(2) also provides that if the NCLT is satisfied that the compromise or arrangement as sanctioned by it cannot be implemented satisfactorily, “then it may order winding-up of the company”. Therefore, from Zee’s perspective, it will be interesting to see how the situation unfolds.

Sharing another perspective, Agarwal said, if the dispute arises purely out of contractual terms, then NCLT may not enter into the domain of arbitrators and leave the dispute to be settled in the arbitration.

As earlier reported by exchange4media, ZEEL has called upon Culver Max BEPL to immediately withdraw the termination of the deal and confirm that they will perform their obligations to give effect to and implement the merger scheme sanctioned by the NCLT.

However, according to some other legal experts, NCLT is not the right forum for ZEEL to seek relief, but SIAC.

“Considering that Sony has already terminated the Merger Cooperation Agreement, NCLT is not the appropriate authority to seek the reverse of the termination of the merger scheme, as while passing the approval order, NCLT has only considered that whether the scheme of arrangement is fair and reasonable and is not violation of any provisions of law,” said Siddharth Joshi, Advocate, Delhi High Court.

According to Joshi, under the Composite Scheme of the Arrangement executed between ZEEL and Sony, the scheme may be withdrawn from the Tribunal by the parties upon occurrence of following events- by mutual consent of the parties, acting through their respective board of directors, and upon termination of the MCA.

“Sony has initiated arbitration against ZEEL before SIAC, therefore, the claim of ZEEL seeking reverse of the termination must be raised before the SIAC and not by way of a separate petition before NCLT,” said Joshi.