Delhi High Court Allows IDBI Trusteeship To Sell Pledged Zee Enterprises Shares
Subhash Chandra, former Chairman, Essel Group and Zee Media.

Delhi High Court Allows IDBI Trusteeship To Sell Pledged Zee Enterprises Shares

A division bench of the Delhi High Court has declined to restrain IDBI Trusteeship from selling shares of Zee Entertainment Enterprises Ltd. and Dish TV India Ltd. pledged by the promoters.

The Essel Group had pledged shares of the two companies with IDBI Trusteeship as a collateral against non-convertible debentures issued by Essel Infraprojects Ltd.

IDBI Trusteeship, the debenture trustee, sent the invocation notice and sought to sell the pledged shares to recover dues worth Rs 616 crore after the debentures matured in May. The three Essel firms approached the high court seeking to stop the sale but their plea was dismissed by a single bench on May 3. The promoters of Zee group companies challenged the order in the division bench.

The division bench comprising Justice Rajiv Sahai Endlaw and Justice Asha Menon found nothing wrong with the order of the single judge.

The single-judge order had held that the law grants absolute right to IDBI Trusteeship to sell the pledged shares and the court cannot interfere.

The Essel firms argued that any attempts to sell the shares in the time of the Covid-19 pandemic will be prejudicial to the shareholders. The pandemic led to a collapse in the equity market and caused the share price to slump, the companies said.

The single-judge bench, however, rejected the arguments on the impact of the Covid-19 by saying that the regulatory authorities (SEBI and RBI) have not restricted the sale of pledged shares during the pandemic and the court cannot read that into the contract.

In its appeal, the Essel firms argued that the single-judge order did not consider the extraordinary situation prevailing due to the pandemic and failed to factor in the consequent difficulties of liquidity that companies were facing.

The counsel for the Essel Group sought time from the court so that they can work out a plan to meet their financial obligations and assured a minimum payment of Rs 110 crore to IDBI trusteeship but the high court rejected the request.

There is an upward movement in the shares of Zee Entertainment and Dish TV and if IDBI Trusteeship rushed to dispose of the pledged shares it would prejudice the appellants who are attempting to fetch the maximum value for the pledged shares to reduce their debt liability, the Essel firms argued.

The division bench did not agree and said that by no measure does the decision of the single judge can be said to be against law.

‘’The learned single judge rightly concluded that the court has no power to introduce a clause akin to a force majeure clause into the various contracts entered into by the parties,” the high court said while rejecting arguments citing the pandemic.

The order closes avenues of appeal for the Essel Group in the high court. The group can now file an appeal in the Supreme Court.

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