$50 million loan spat: YES Bank plans to appeal against Essel order

The country’s fourth-largest lender, YES Bank, is considering legal options against Essel Group after it was denied interim relief on Tuesday by the Bombay High Court in a matter related to a loan the former made to the latter.

YES Bank might move the divisional Bench of the Bombay High Court in the coming days, executives briefed on the matter said, to prevent the promoters of Essel Group from selling shares in Zee Entertainment (ZEEL). 

The officials also added that the steps were necessitated to recover all dues from the group. The current dispute pertains to a $50 million (or Rs 350 crore) loan. Overall, YES Bank has Rs 8,000-crore exposure to Essel Group. 

A single judge Bench on Tuesday had not accepted YES Bank’s contention in the matter, saying a letter of comfort dated May 31, 2016, given by the promoters to avail of loans from the lender, could not be construed as a letter of guarantee.

YES Bank had lent the amount to Essel Group promoters in 2016 to buy shares in its own unit Veria International. One of the promoter family members, Punit Goenka, who is ZEEL's managing director and chief executive officer, had provided a letter of comfort as a guarantee against the loan, the lender said in its petition to the Bombay High Court.

“Neither ZEEL nor its subsidiary have borrowed funds from YES Bank for an alleged $50 million loan. The loan was availed by a promoter group entity and there are delays in the said loan due to liquidity stress, which have further precipitated due to the pandemic,” a company spokesperson said.

YES Bank loans, including those given to Essel Group, are being investigated by the Enforcement Directorate (ED), officials said. In March, Essel Group promoter Subhash Chandra had appeared before the ED.