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NEW DELHI (Reuters) – An Indian tribunal on Friday put on hold insolvency proceedings against Zee Entertainment Enterprises, a major relief for the Indian media company that warned the legal battle could delay its merger with a local unit of Japan’s Sony (NYSE:SONY).
The bankruptcy proceedings were initiated after IndusInd Bank Ltd filed a petition against Zee Entertainment over a default of 830.80 million rupees ($10.04 million).
The tribunal has put on hold the insolvency proceedings for the time being, saying the matter required detailed deliberations and will be next heard on March 29.
During the hearing, Zee counsel Mukul Rohatgi warned its merger with Sony is “going to get stuck” if the insolvency proceedings continue.
Zee, a household TV name in India that was set up in 1992, had a network share of 16.2% as of December. It competes with Disney’s Star India and Reliance Industries Viacom18, and its planned merger with Sony’s India unit will create a $10 billion behemoth.
Zee shares rose as much as 3.1% on the news and were last up 1.2%.
“Our focus continues to be on the timely completion of the proposed merger,” Punit Goenka, Zee’s chief executive said after the decision.
Zee had acted as a guarantor for loans availed by a sister company, and India’s IndusInd invoked the guarantee alleging default on payment, exchange filings show.
Zee on Friday disputed its liability in the tribunal saying, according to them the liability did not meet the threshold for initiating insolvency proceedings. IndusInd denied that.
IndusInd did not immediately respond to Reuters’ request for comment.
($1 = 82.7750 Indian rupees)
