NCLAT rejects IDBI Bank's insolvency plea against Zee over Rs 150 cr dues

Section 10A of the IBC temporarily suspended the initiation of the insolvency process for defaults from March 25, 2020 to March 25, 2021 (a year) to provide relief to borrowers during COVID-19

The National Company Law Appellate Tribunal (NCLAT) on Monday dismissed the insolvency plea filed by IDBI Bank against Zee Entertainment Enterprises Limited over unpaid dues of around Rs 150 crore. The appellate tribunal upheld an earlier order of the National Company Law Tribunal (NCLT), Mumbai, which said that IDBI Bank’s claims were covered under Section 10A of the Insolvency and Bankruptcy Code (IBC), 2016.

 

Section 10A of the IBC temporarily suspended the initiation of the insolvency process for defaults from March 25, 2020 to March 25, 2021 (a year) to provide relief to borrowers during the COVID-19 pandemic.

 

A bench of Justice (retd) Ashok Bhushan and technical member Barun Mitra said IDBI Bank is at liberty to file an insolvency plea for defaults occurring outside the time period mentioned in Section 10A of the IBC. This special provision was inserted in the IBC by the government to help borrowing companies after economic activities had resumed following the COVID-19 lockdown.

 

 

IDBI Bank had challenged the NCLT order passed on May 19, 2023, in which the tribunal had set aside its plea.

 

In its order, the NCLT had said that ZEEL, which was the corporate guarantor for the loan availed by Siti Networks, the principal borrower from IDBI Bank, had defaulted on paying the loan. But this was during the period exempted by Section 10A of the IBC.

 

Siti Networks had taken a loan of Rs 150 crore as a working capital facility, and as per the agreement, it was required to maintain a Debt Service Reserve Account (DSRA). In the DSRA, a credit balance equal to two quarters of interest on the working capital was to be maintained by Siti Networks at all times until repayment. However, there was a default.

 

On March 5, 2021, IDBI Bank invoked the guarantee provided by ZEEL and demanded payment of Rs 61.97 crore with further interest from February 18, 2021. It claimed a total amount of Rs 149.60 crore in default.