Zee-Sony Merger: SAT Scheduled to Review Case on June 26

The Securities Appellate Tribunal (SAT) announced that the next hearing in the Zee merger case is scheduled for June 26, according to reports from ET Now.

Last Friday, SAT denied interim relief to Essel Group chairman Subash Chandra and his son Punit Goenka after the market regulator prohibited them from holding positions as directors or key managerial personnel in any listed company due to allegations of funds misappropriation in ZEEL. In response, they appealed the decision to SAT.

The Securities and Exchange Board of India (Sebi) stated that the misuse of funds appears to be a well-coordinated scheme, involving the use of 13 entities as pass-through entities within a brief period of two days. This order was issued following Sebi’s investigation after the resignation of two independent directors from ZEEL, Sunil Kumar and Neharika Vohra, in November 2019.

Let’s take a look at the recent timeline of events:

• June 12: Sebi bars Chandra Goenka from serving as directors or KMP in any listed company
• June 14: Chandra and Goenka appeal to the Securities Appellate Tribunal (SAT) against Sebi’s order
• June 15: Zee promoters express concerns to SAT about the impact of Sebi’s order on the Sony-Zee merger hearing before NCLT
• June 16: SAT grants Sebi 48 hours to respond to the plea filed by ZEE promoters challenging the regulator’s interim order
• June 18: Sebi informs SAT that Chandra and Goenka diverted public funds to private entities and calls for urgent action
• June 18: Zee writes to Sebi, expressing concerns about the potential impact of ongoing investigations on the merger with Sony

In a letter to Sebi, Zee argues that continuous investigations on the same matter create prejudice for the company and shareholders, potentially impacting the merger process. They highlight that the merger is in an advanced stage with approvals from various regulators and overwhelming support from ZEEL’s equity shareholders. Zee also notes that they have already provided a detailed explanation of the transactions in question to the stock exchanges and Sebi.

The company questions why the current matter is being reinvestigated when it dates back to 2019.

According to news agency IANS, Sony’s board of directors is reportedly unhappy with these developments and considering invoking force majeure and material adverse clauses in the shareholder agreement for the proposed merger with Zee Entertainment in India.

Sebi has granted a No Objection Certificate (NOC) for the Composite Scheme of Merger between ZEEL and Sony Pictures Networks India Pvt. Ltd. (Sony). This merger is one of the largest integrations in the media industry, with an incoming foreign direct investment of approximately $1.7 billion into India.

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