In a big relief for Zee, the National Company Law Appellate Tribunal (NCLAT) on February 24 stayed the order directing the initiation of insolvency proceedings against the media and entertainment firm.

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NCLAT has issued a notice to IndusInd Bank on the plea filed by by Zee MD Punit Goenka. The tribunal will next hear the issue on March 29.

Following the NCLAT order, Goenka said "We respect the decision taken by the Hon’ble National Company Law Appellate Tribunal (NCLAT) and remain committed towards protecting the interests of all stakeholders. Our focus continues to be on the timely completion of the proposed merger.”

The development comes after Zee's managing director and chief executive Goenka moved National Company Law Appellate Tribunal (NCLAT) to challenge an National Company Law Appellate Tribunal (NCLT) order directing intimation of insolvency proceedings against the media firm.

NCLT had appointed a Resolution Professional, placing Zee into the Corporate Insolvency Resolution Process.

This was after IndusInd Bank moved NCLT, India's bankruptcy court, citing unpaid dues of Rs. 83 crore. The matter pertains to the default by Zee Group's multisystem operator arm Siti Networks claimed by IndusInd Bank, for which ZEEL was a guarantor. The private lender claims that Zee had undertaken to meet any shortfalls in debt repayment by Siti Networks.

During today's hearing, Punit Goenka's Counsel told the appellate tribunal that Zee is corporate guarantor and not the principal debtor which is Siti as per the agreement. Zee gave a special guarantee not for Siti's debt, but only to maintain a shortfall in only one tranche of interest repayment account, the firm told the NCLAT.

Senior Advocate Mukul Rohatgi, appearing for Punit Goenka, said that insolvency proceeding is akin to civil death. He alleged that no arguments were heard by NCLT on initiation of insolvency proceedings against Zee.

Goenka's Counsel pointed out that Zee is undergoing amalgamation with Sony and the merger will get stuck because of this even as it has all the necessary approvals.

He argued that the entire amount of Siti debt is not recoverable from Zee and that demand on Zee can only be raised if Siti fails to keep one tranche of interest repayment. He said the demand of Rs 83 crore is the principal amount loaned to Siti and Zee never issued a guarantee for the loan.

Goenka added that Zee is not a fly by night operator, reiterating that Zee was not even heard of before the NCLT initiated insolvency proceedings.

However, IndusInd Bank told the tribunal that Zee was allowed sufficient opportunity to address the NCLT and the media firm did argue then against initiation of insolvency proceedings.

According to the bank, the Delhi High Court had held that Zee has guaranteed the entire loan amount of Siti and not just the interest dues under debt service reserve account. The court held that Zee will cover every default committee by Siti and guarantee shall remain operative and binding on Zee, it said.

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IndusInd Bank told the NCLAT that it is a public institution and over Rs 180 crore is now due and Zee cannot now argue that it wasn’t heard.

Following the bank’s arguments, the Zee Counsel said before the tribunal that such an insolvency order would be a death knell for the company and complete violation of natural justice as “Zee was not allowed to file arguments against insolvency.” It added that NCLT order directing insolvency can't survive due to violation of principles of natural justice.

The NCLAT hearing is all important as the completion date for the proposed Zee-Sony merger approved by the Competition Commission of India (CCI) and the stock exchanges is nearing.

Watch: Surabhi Upadhyay and Nimesh Shah discuss the bottom of the Zee potboiler as it gets relief from insolvency for now