The emergency arbitrator of the Singapore International Arbitration Centre (SIAC) has rejected Sony Pictures’ application for emergency interim relief in its dispute with Zee Entertainment Enterprises. Sony sought to prevent Zee from seeking legal remedies from the National Company Law Tribunal (NCLT) and other forums. However, the arbitrator stated that it had no jurisdiction to prevent Zee from approaching the NCLT for the merger, as those matters fell within the statutory system and were under the NCLT’s purview.
The conflict between Sony and Zee arose when Sony terminated its $10 billion merger with Zee on January 22, alleging that Zee had failed to fulfill the conditions precedent. The termination letter from Sony cited purported violations of the terms of the merger agreement, and Sony’s subsidiary, Culver Max Entertainment, sought a termination fee of $90 million from Zee. Zee disputed the termination, claiming that Culver Max and BEPL, both subsidiaries of Sony Pictures Entertainment, were not entitled to terminate the agreement. Zee argued that the $90 million termination fee claim had no basis and was legally untenable.
Following the termination, Sony initiated emergency arbitration proceedings before the SIAC, leading to the recent rejection of its application for emergency interim relief. The SIAC arbitrator determined that Zee had the right to approach the NCLT for the merger, and the arbitrator lacked authority in such statutory matters.
Zee, in response to the termination, called on Culver Max and BEPL to withdraw the termination and fulfill their obligations to implement the merger scheme approved by the National Company Law Tribunal. Zee reserved its rights and announced its intention to commence legal proceedings against Sony at both the NCLT and the SIAC.
In its petition before the NCLT, Zee alleged that Sony’s decision to terminate the merger was pre-determined. Zee claimed that during a 30-day discussion period, it proposed a six-month extension to complete the transaction in good faith. The dispute adds a layer of complexity to the already challenging merger process that had received regulatory approval but faced obstacles due to actions taken by the Securities and Exchange Board of India (SEBI) against Subhash Chandra and Punit Goenka, key figures in the merger. SEBI’s action was later set aside by the Securities Appellate Tribunal, allowing Goenka to become the CEO and managing director of the merged entity.
The rejection of Sony’s application by the SIAC emergency arbitrator underscores the legal intricacies surrounding the termination of major business deals and the subsequent disputes that may arise. As the conflict moves to the NCLT and SIAC, it remains to be seen how the legal proceedings will unfold and whether the original merger agreement will be reinstated or if a new resolution will be reached. The outcome will likely have implications for the companies involved and may set precedents for similar cases in the future.
