Supreme Court notice to Essel Group companies on IDBI appeal, challenging NCLAT decision

On December 11, the Supreme Court issued a notice to Essel group firms, Cyquator Media Services and Direct Media Distribution Ventures, in response to an appeal by IDBI Trusteeship Services. The appeal challenges a National Company Law Appellate (NCLAT) order that dismissed its insolvency plea against the two companies.

Cyquator Media Services, affiliated with Zee Entertainment Enterprises Ltd (ZEEL), is among the companies under scrutiny.

Chief Justice of India (CJI) DY Chandrachud-led bench has granted the firms a four-week period to provide their responses to the notice.

In September, the NCLAT dismissed IDBI Trusteeship Service's appeal, citing that the default occurred in June 2020, falling within the period protected by Section 10A of the Insolvency and Bankruptcy Code, 2016.

Section 10A prohibits the filing of applications under Sections 7, 9, and 10 for defaults committed between March 25, 2020, and March 25, 2021.

Essel Infra Projects, another Essel group company, had proposed the private placement of 425 non-convertible debentures worth Rs 425 crore in 2015. In response to Essel's request, IDBI agreed to serve as the debenture trustee.

In 2015, a debenture trust deed was established between IDBI Trusteeship and the Essel group, with Cyquator and Direct Media acting as corporate guarantors. IDBI Trusteeship was responsible for managing 425 debentures, totalling Rs 425 crore, issued by Essel Infraprojects Limited (EIL).

The debt, disbursed in two instalments — Rs 200 crore in May 2015 and Rs 225 crore the following month — led to IDBI Trusteeship Services activating the corporate guarantee clause. A payment notice was sent to Cyquator in June 2020. Subsequently, in 2022, IDBI Trusteeship filed an insolvency petition against Cyquator, citing a default on Rs 591 crore.

However, the National Company Law Tribunal (NCLT) dismissed IDBI's insolvency plea in June 2023.