Legal Aspects of Zee-Sony Merger

1. Could there be any argumentative scope for Zee Limited to counter

Sony’s announcement terminating the proposed $10 billion merger puts the
onus of blame upon ZEEL. The Japan-based company cited multiple
disagreements and non-compliance to the terms of the contract as primary
reasons for not moving forward with the deal. Some of the red flags raised by
Sony were related to four Russian subsidiaries of the Indian media
conglomerate that held assets worth $1.4 billion. Another bone of contention for
both parties was Zee's deal with Disney Star which the former signed in 2022.
As part of their agreement, Disney Star had agreed to license a portion of its
ICC rights from 2024-2027 to ZEEL, a deal which the company decided to
dishonor just days after its setback with Sony.
Prima facie, the odds may appear to be stacked against ZEEL but all is not lost
for the Indian media mogul. The legal strategy adopted by them is to blame
Sony for making up reasons to get out of the merger. It aims to paint the claims
made by the company blaming MD Punit Goenka and other performance issues
as mere pretext to weasel out of the contract.
In addition to this, Zee has incurred a cost of 700 crore INR towards divesting
its businesses, settling frivolous claims, settling guarantees, and fulfilling other
conditions as per the initial terms of their agreement. This comes after Sony is
claiming $90 million in damages from Zee over alleged breaches.
ZEEL’s legal strategy moving forward is to prove that there was no wrongdoing
on its part but it was owing to a lack of good faith on Sony’s part that their
merger did not go through. It intends to do so in the following ways:
A. Zee will show that there were plenty of discussions that were conducted
with Sony wherein the former revealed its business plan moving forward
in addition to the structural composition of the merged entity.
B. From a legal perspective, this move would favor Zee as it would show
that the company has been transparent in its functioning and has abided
by the terms of the agreement.
 C. The documents showing costs incurred for due diligence and following
the mutually agreed upon instructions of the agreement will be part of the
Indian media house’s legal response. Some of the moves made by Zee in
furtherance of the agreement had long-term repercussions and were
irreversible in nature, a fact which they had informed Sony about. If
proved, this would induce the notion that Sony was not acting in good
faith by waiting until the last moment to call the merger off.
D. The one argument that ZEEL has going in its favor is the timing of
Sony’s announcement. The information was made public on the 22 nd of
January when Sony issued a termination letter. This was nearly two years
after both companies signed the merger agreement and a month after the
estimated two-year deadline for the completion of the merger lapsed.
The question will be why did Sony wait until after the deadline to
complete the merger had passed to issue a termination notice? If the issue
was indeed disagreements on who will head the new entity, should Sony
not have called off the merger at an earlier stage?
ZEEL is likely to make this the focal point of their legal counter-offense.
By raising these questions, the company will establish that Sony never
intended to let the merger happen and was pre-determined to renege upon
the initially agreed-upon terms.
2. What would be the position if contradictory orders are passed by the
NCLT and SIAC and how would it impact the issues raised in the
respective forums?
The Singapore International Arbitration Centre has rejected Sony’s plea to
admit the matter and direct ZEEL to pay the necessary fines for failing to fulfill
its obligations as part of the agreement.
There was an initial concern regarding how things would pan out if the NCLT
and the arbitral body passed contradictory orders but SIAC itself has referred
the parties to resolve their dispute by approaching the NCLT.
Sony approached SIAC praying that the arbitral body direct ZEEL to not
approach the NCLT, however, in its ruling, SIAC has said it lacks the necessary
jurisdiction and authority to block an entity from approaching the tribunal. In
this case, since mergers & amalgamations come under the NCLT’s purview, it
will be the only authority that has jurisdiction over the matter at hand.
Sony issued a statement after the fact stating it intends to continue pursuing the
matter in front of a full SIAC tribunal. Even if the matter is taken up by the
arbitral body, it will not have any impact on the NCLT proceedings because the
issues are different.
The issues in front of SIAC are as follows:
a. To prevent ZEEL from pursuing a case with the NCLT in India against
Sony.
b. To direct ZEEL to pay the $90 million termination fees.
The issue in front of the NCLT is as follows:
a. To enforce the now-terminated merger between the two entities.
Thereby, the issues are different and there is no scope for contradicting rulings
by the arbitral body and the NCLT.
3. Does the NCLT have the power to enforce a merger/amalgamation
scheme against the will of one of the parties to a merger?

The answer to this question is not simple, it depends upon the terms of the
Merger Cooperation agreement between the two parties. The primary role of the
NCLT is to ensure the interests of all stakeholders are protected and that the
process is done fairly and transparently. With that being said, the NCLT can
prevent two companies from merging/amalgamating when such a move strips
the shareholders of either company of their rights and powers.
The NCLT's approval is required for all kinds of mergers except for fast-track
mergers as per Section 233 of the Companies Act, 2013. While the tribunal will
attempt to explore the possibility of getting ZEE & Sony to move forward with
the initial agreement, there is also a chance that the tribunal could exercise its
discretionary powers under Sections 230 & 232 of the Companies Act and
instruct Sony to hold up its end of the bargain citing shareholders interest.
In State Bank of India & Anr V. Visa Infrastructure Ltd, the New Delhi bench of
the NCLAT held that an approved scheme of amalgamation/merger had a
statutory force and was binding on all stakeholders. Could the same be binding
in this instance as well?
The NCLT can technically enforce this merger since it is the body that approved
the proposal, it has the jurisdiction to govern the implementation of the same.
As of now, the NCLT has set the date for the next hearing on the 12 th of March
and has directed Sony to file its response to ZEEL's plea.
It will be interesting to see how the case pans out as the tribunal's decision in
this instance will shed more light on its powers of enforceability with respect to
mergers/amalgamations.