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New Delhi, June 18 – Sony’s board of directors is said to be unhappy with developments and is looking at invoking force majeure and material adverse clause in the shareholder agreement in the proposed merger with Zee Entertainment in India.
The lawyers on both sides, Shardul Shroff representing Sony Pictures Entertainment India and Economic Law Practice for Zee will be busy in the next few days as the unravelling of one of the expected biggest entertainment media mergers takes place.
Whether this will lead to Damages for Reps and Warranties Breaches remains a matter of conjecture?
In its reply to the Securities Appellate Tribunal (SAT), the Securities and Exchange Board of India (Sebi) said urgent action was warranted against the promoters of Zee Entertainment Enterprises Limited (ZEEL) in the alleged fund diversion case to safeguard the management and protect investors and other stakeholders.
It termed the applications made by Essel Group Chairman Subhash Chandra and ZEEL Managing Director (MD) and Chief Executive Officer (CEO) Punit Goenka as “completely false and misleading” in its response submitted to SAT on June 17.
“We have a situation before us where the chairman emeritus and the MD and CEO of this large listed company are involved in a myriad of different schemes and transactions through which vast amounts of public money belonging to listed companies are diverted to private entities owned and controlled by these persons. The appellant’s conduct is telling in this regard. Not only have there been violations but also the issuance of multiple false disclosures and submission of statements to cover up such wrongdoings,” Sebi said in a 197-page affidavit to SAT.
Zee Entertainment Enterprises has written to SEBI that “continuous and repetitive” investigations on the same cause of action creates prejudice for the Company and Shareholders and can potentially impact the merger process.
SEBI has given a No Objection Certificate (NOC) to the Composite Scheme of Merger in the matter of ZEEL and Sony Pictures Networks India Pvt. Ltd. (Sony), which is one of the largest integrations of industry majors in the media industry and entails an incoming foreign direct investment of $1.7 billion (approx.) into India.
In a letter to SEBI, Zee said, “please note that the said merger is at an advanced stage post receipt approvals from various regulators (including SEBI, Stock Exchanges and CCI etc.) and the scheme is also approved by 99.9 percent of the equity shareholders of ZEEL”.
Zee said it may also be noted that the transactions in the present matter pertain to the year 2019 and a detailed explanation has already been provided to Stock Exchanges and SEBI.
“It is beyond our comprehension as to why the present matter is being re-investigating/re-examining, when the cause of action pertaining to the matter is around 4 years old,” the company said.