As ZEEL on Tuesday withdrew its plea seeking implementation of the merger with Sony, nearly three months after knocking on the door of the National Company Law Tribunal (NCLT), experts believe that the Punit Goenka-led company took the step to find a new strategic partner.

After the $10 billion Zee-Sony merger failed the test of the storm, Zee Entertainment Enterprises Ltd (ZEEL) on January 24 moved the tribunal seeking implementation of the Composite Scheme of Arrangement with Culver Max Entertainment Pvt Ltd (Sony) and Bangla Entertainment Pvt Ltd.

While releasing a press note about withdrawing the plea, the company said it has done so on the advice of its Board and legal experts and that it will enable ZEEL to continue to aggressively pursue all its claims against Sony in the ongoing arbitration proceedings at the Singapore International Arbitration Centre (SIAC) and in other forums.

Experts believe that instead of approaching NCLT, ZEEL should have continued to contest in the SIAC, where Sony has sought damages from it for non-fulfilment of crucial merger conditions even after two years.

“Zee in the first place should have agitated their claim before the SIAC rather than filing for implementation. The parties are bound by the contract and they should avoid forum shopping.

“The present case is a classic case of forum shopping. The NCLT could not have adjudicated the matter, let alone permitting claims or damages,” Alay Razvi, Partner, Accord Juris LLP, said.

He further said that now the only impact of this withdrawal of plea from NCLT would be that “the act of Zee would show poorly before the arbitrator (SIAC) while adjudicating the proceedings.”

SIAC had earlier rejected Sony’s plea to restrain ZEEL from approaching the NCLT for the implementation of the merger saying it had no jurisdiction to do the same.

As ZEEL withdrew the plea from NCLT now, it will reflect poorly on the company before the proceedings in SIAC, said experts.

According to Karan Taurani, Senior VP, Elara Capital, ZEEL’s move to withdraw the plea from NCLT was to move beyond Sony and focus on getting a new partner and become profitable.

“They did it so that they can move beyond Sony now and find a new financial or strategic partner. Focus on profitability through cost cutting remains to be future plans. This move may pave the way for a new strategic partner in the company as this plea would have obstructed talks of any new potential partner,” said Taurani.

Another expert said that with withdrawal of the plea, it is one less litigation for ZEEL which might help the company in the long run.

However, there are other pending litigations in which Zee is still embroiled, apart from the one before SIAC, including the SEBI investigation in the fund diversion matter.

Announcing the withdrawal decision on Tuesday, ZEEL Chairman R Gopalan said, “The immediate priority for the Company is to focus on performance and achieve its targeted goals for the future. We have reviewed the key steps taken by the management over the last few months that are result-oriented, and we believe that the Company is well poised to chart a stronger growth trajectory.

“Hence, after seeking an independent legal opinion, the Board has advised the management of the Company to withdraw the implementation application filed before the Hon’ble NCLT. The Board remains focused towards maximizing shareholder value, strengthening the Company’s claims in arbitration and enabling the Company to explore strategic opportunities.”