# In the matter of Zee Entertainment Enterprises Limited IA-581-2023 in CP (IB) No. 107-MB-IV-2023

> NCLT judgment dated 2023-05-19. Citation: TCN-2023-NCLT-03248. IDBI Bank Limited, the Financial Creditor, filed an application CP(IB) No. 107/MB-IV/2023 under…

- **Court:** NCLT
- **Order date:** 19 May 2023
- **Citation:** TCN-2023-NCLT-03248
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-division-bench-court-i-chenn/zee-entertainment-enterprises-limited-ia-581-2023-in-cp-ib-no-107-mb-iv-2023-026eb3ca

## Summary

### Background

IDBI Bank Limited, the Financial Creditor, filed an application CP(IB) No. 107/MB-IV/2023 under Section 7 of the Insolvency & Bankruptcy Code, 2016 (I&B Code) to initiate Corporate Insolvency Resolution Process (CIRP) against Zee Entertainment Enterprises Limited, the Corporate Debtor. The financial creditor claimed a default of Rs. 149,60,69,763.39 as of December 8, 2022, stemming from a working capital facility extended to Siti Networks Ltd. (Principal Borrower), guaranteed by Zee Entertainment. The Corporate Debtor argued that its liability was limited to the Debt Service Reserve Account (DSRA) guarantee for Rs. 50 Crores and that the invocation of the guarantee was invalid due to the recall of the entire facility and the bar under Section 10A of the IBC.

## Facts

IDBI Bank Limited (Financial Creditor) filed CP(IB) No. 107/MB-IV/2023 against Zee Entertainment Enterprises Limited (Corporate Debtor) under Section 7 of the IBC, claiming a default of Rs. 149,60,69,763.39 as of 08.12.2022. The default stems from a guarantee agreement provided by Zee Entertainment for credit facilities extended to Siti Networks Ltd. (Principal Borrower). The Financial Creditor originally sanctioned INR 150 Crores to the Principal Borrower, later enhanced to INR 100 Crore and INR 200 Crore. The facilities were secured by assets of the Principal Borrower and a guarantee from the Corporate Debtor. The Corporate Debtor's guarantee was related to maintaining a Debt Service Reserve Account (DSRA). The Principal Borrower defaulted on its obligations under

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## Issues and analysis

### Issue 1: Whether the obligation to pay the DSRA shortfall arises only upon issuance of the notice or mere …

**Ratio:** The debt and default are two distinct propositions. Mere existence of debt, which

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**Reasoning:** The NCLT reasoned that the first demand notice was addressed to the Corporate Debtor on

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**Interpretation:** The court interpreted that the default by the Corporate Debtor occurred when

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**Application:** Since the demand notice was served on 05.03.2021, the default falls within the

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## Parties

- **Judges:** Prabhat…; KISHORE VEMULAPALL…
- **Appellants:** IDBI Bank L…
- **Respondents:** ZEE Entertainment…
- **Advocates:** Ashish S.…; Zal Andhy…; +1 more

## Timeline

- **2019-09-30 — Principal Borrower…**: The Borrower defaulted in payment of its…
- **2019-12-29 — Account Classified as…**: The account of the Borrower was…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 7 — Initiation of corporate insolvency resolution…](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-7)

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