Why in News?

• Providing major relief to Zee Entertainment Enterprises Ltd (ZEEL), the NCLAT set aside the NCLT order that had directed the NSE and BSE to reconsider their approval for the Zee-Sony merger.

What’s in Today’s Article?

• The Process of Merger in India
• Reasons behind Mergers
• The Merger Proposal
• The NCLT and the NCLAT
• News Summary Regarding Zee-Sony Merger

The Process of Merger in India:

• A ‘Merger’ essentially means an arrangement whereby one or more existing companies merge their identity into another to form a new and different entity.
• It is a corporate strategy to enhance the financial and operational strengths of both organisations and has been carried out in accordance with the Companies Act 2013.

 Reasons behind Mergers:

The Merger Proposal:

• It must be approved by the boards of directors of both companies and they must pass a special resolution authorising their Key Management Personnel to carry out the process.
• Then, an application is filed with the respective jurisdiction’s High Court.
• Under the Companies Act 2013, the National Company Law Tribunal (NCLT) is entrusted with the powers of merger, de-merger.
• The merger plan approved by the NCLT can be challenged in the National Company Law Appellate Tribunal (NCLAT) by the dissenting parties (if any).

The NCLT and the NCLAT:

• NCLT is a quasi-judicial body established (2016) under the Companies Act 2013 to adjudicate issues relating to Indian companies.
  • It is based on the recommendation of the V. Balakrishna Eradi committee on law relating to the insolvency and the winding up of companies.
  • Its bench is chaired by a Judicial member who is supposed to be a retired or a serving HC Judge and a Technical member who must be from the Indian Corporate Law Service.
  • It is the adjudicating authority for the insolvency resolution process of companies and limited liability partnerships under the Insolvency and Bankruptcy Code, 2016.
• NCLAT is a tribunal formed under the Companies Act 2013 as a body with an appellate jurisdiction on the decisions made by the NCLT.
• No criminal court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which the Tribunal or the Appellate Tribunal is empowered to determine by or under this Act.

News Summary Regarding Zee-Sony Merger:

• Background:
  • In 2021, Sony Pictures Networks India and ZEEL entered into a non-binding term sheet to bring together their linear networks, digital assets, production operations, etc.
  • As per the scheme of the arrangement, Sony will indirectly hold 50.86% of the combined company.
  • The founder of Zee will own around 4% and the rest will be with the other shareholders of ZEEL.
  • Apart from the BSE and NSE approval and the Competition Commission of India’s nod, the shareholders of Zee had already given their assent to the merger.
• The NCLT order and challenge:
  • The NCLT had directed NSE and BSE to reconsider their prior approvals for the merger of ZEEL and Culver Max Entertainment.
  • The NCLT order was challenged by ZEEL before the appellate tribunal, contending that it was not granted adequate opportunity by the NCLT to present its side.
    • It also contended that the NCLT doesn’t have jurisdiction over non-compete issues.
  • The NCLAT order came on hearing the appeal filed by ZEEL against the order passed by the Mumbai bench of the NCLT.