NCLAT agrees to hear IDBI’s appeal against ZEEL at length; next hearing on Aug 31

IDBI Bank

The National Company Law Appellate Tribunal (NCLAT) on August 17 has  agreed to hear IDBI Bank's appeal against the National Company Law Tribunal (NCLT) order at length. The case is pertaining to the lender's insolvency plea against media major Zee Entertainment Enterprises Limited (ZEEL).

No notice has been issued to ZEEL and IDBI has now sought a week’s time to file additional documents. The next date of hearing is on August 31.

During the hearing, senior advocate Ramji Srinivasan, who appeared for IDBI argued that Siti Networks -the principal borrower for whom ZEEL stood as a corporate guarantor, had availed a term loan and a working capital loan. By the terms of the loan agreement, Siti was obligated to maintain a sum equivalent to two months of repayment of the loan and the guarantor was responsible for maintaining the balance. Since Siti failed to maintain such a balance, they were constrained to move against Zee Enterprises for this to be enforced.

Srinivasan also argued that the the repayment was not covered under Section 10A.

Senior advocates AM Singhvi and Arun Kathpalia who appeared for ZEEL argued that they were vehemently opposing the tribunal issuing notice in the case.

However, the tribunal noted that the case needs to be heard at length and due to paucity of time, they may not be able to do so today. The case was thus adjourned

In May 2023, the NCLT's Mumbai bench refused to entertain IDBI's plea noting that it was barred under Section 10A of the Insolvency and Bankruptcy Code (IBC).

Section 10A mandates that no application for initiation of corporate insolvency resolution process (CIRP) 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 was a special provision inserted by the government in the IBC to help companies when economic activities resumed after the Covid-induced lockdowns in phases. A two-member NCLT bench said that ZEEL, which was the corporate guarantor for the loan availed by Siti Networks -the principal borrower of IDBI Bank - committed a default. The default was committed during the time specified under Section 10A.