Zee Gets Relief as NCLAT Upholds Rejection of IDBI’s Insolvency Plea

The National Company Law Appellate Tribunal (NCLAT) on Monday upheld a 2023 order that had dismissed IDBI Bank’s insolvency plea against Zee Entertainment Enterprises Ltd. over a ₹1.50-billion unpaid guarantee.

The case centres around a guarantee Zee gave on a loan to Essel Group’s Siti Networks. IDBI Bank accused Zee of failing to meet its obligations as guarantor.

Back in May 2023, the Mumbai bench of the National Company Law Tribunal (NCLT) had thrown out IDBI’s application, stating the alleged default fell under the protection of Section 10A of the Insolvency and Bankruptcy Code, 2016. That section bars insolvency pleas for defaults that happened between Mar. 25, 2020 and Mar. 25, 2021 — a provision introduced during the pandemic.

On appeal, the NCLAT agreed with the tribunal’s reasoning. However, it added that IDBI can file a fresh insolvency application if Zee defaults outside the Section 10A window.

IDBI had argued that Zee and the borrower defaulted on debt service reserve account requirements even before the Mar. 5, 2021 invocation date, which the NCLT had relied on to reject the plea. But the tribunal found Zee’s default occurred during the protected period and said the application also didn’t align with the intent of the Code.