Zee moves National Company Law Tribunal against Sony, contests $90 million claim before Singapore court

MUMBAI: The Punit Goenka-helmed Zee Entertainment has called upon Sony to “immediately” withdraw its merger termination notice and honour its obligations to implement the deal between the two entities. It has also asked the National Company Law Tribunal (NCLT-Mumbai) to order Sony to close the $10-billion merger that the Japanese giant scrapped after more than two years of negotiations.
The Indian company also contested Sony’s claims that it breached its obligations in the merger pact before the Singapore International Arbitration Centre. Sony had moved the Singapore tribunal seeking $90 million as termination fees for Zee’s failure to fulfill the merger conditions.
In a regulatory filing, Zee denied that Sony is entitled to terminate the merger agreement and said that its demand for a termination fee is legally untenable. It asserted that Sony is in default of its obligations to give effect to and implement the merger, which was approved by the NCLT. It has approached the NCLT “seeking directions to implement the merger”. “This action does not come as a surprise, but there are no substantive reasons for the NCLT to rule in favour of Zee and force a merger,” InGovern Research Services’ founder Shriram Subramanian was quoted as saying to Reuters.

Sources said Zee and Sony individually as well as jointly didn’t fulfill 22 merger conditions. Both, however, differed on who will run the merged entity. Sony didn’t want Geonka to helm the combined company after he became the subject of a regulatory probe by Sebi.
Goenka’s father and founder of Zee Subhash Chandra accused the market regulator for trying to scuttle the merger. In a letter to finance minister Nirmala Sitharaman, sent six days before Sony called off the merger, Chandra wrote: “While Zee and the people have been cooperating with Sebi on its investigation related to alleged fund diversion by promoters, the timing of a new notice issued by the regulator to former directors, matching with the deadline of the merger, raises concern.”
He pointed out that the notice does not even contain any new points. “I’m not suggesting that Sebi should not investigate if they have doubts of any kind… issuing a notice at this stage appears to be an exercise to sensationalise the matter.” Chandra further said: “If the mentioned parties continue to influence the investigations, especially by Sebi, it will lead to a huge financial loss for the company’s minority shareholders.”
Separately, Sony, in an internal email to employees, said on Wednesday that it will continue to pursue opportunities, including M&As, to strengthen its presence in India.