The lender seeks to take possession of the shares by invoking the guarantee that the promoters of the media company have provided against the loans taken out by the promoters of the company for other companies.
Yes Bank had lent $52.5 million to a subsidiary of Zee Living Entertainment Ltd (LEL) through its international financial center branch in Gift City near Ahmedabad in May 2016. One of the members of the family of Zee’s promoter, Punit Goenka, had provided a letter of comfort as collateral against a loan. Yes Bank had asked to enforce this guarantee and to prevent the promoters of Zee from selling more shares as the promoters raise funds to reduce the debt.
“The main argument is whether this letter was a guarantee or a letter of comfort. The court considered it a letter of comfort and prima facie rejected the banks’ request to freeze Zee’s accounts,” said one. person close to the file.
The High Court has yet to make its formal order after Tuesday’s video-linked hearing. The loans were granted when Rana Kapoor was CEO of the bank. His role in the bank is now under regulatory investigation.
These loans are among those being investigated by the Enforcement Directorate (ED) in connection with a money laundering case against Kapoor. In March, Zee promoter Subhash Chandra appeared before the ED in connection with the case.
On Tuesday, Virendra Tulzapurkar appeared for Yes Bank, while Zee and his promoters were represented by Aspi Chinoy and Janak Dwarkadas respectively.
In its response, a spokesperson for the Essel Group said that the said loans were used by a company of the promoter group and not by Zee.
“Neither ZEEL nor its subsidiary has borrowed funds from Yes Bank for an alleged loan of $50 million. The loan was used by an entity of the promoter group (not ZEEL) and there are delays in said loan due to liquidity issues, which further precipitated due to the ongoing pandemic.Considering the facts and merits of the case, Hon’ble High Court in its hearing on June 30, 2020 dismissed and dismissed the claim provisionally filed by Yes Bank and interpreted that no guarantee had been issued by ZEEL in favor of Yes Bank,” the spokesperson said in an emailed response.
Yes Bank did not respond to an email seeking comment.
“The total loans extended by the bank to Essel Group and its promoters during Kapoor’s tenure amount to Rs 8,500 crore. They are all surveyed. These loans of Rs 350 crore are among them. The bank’s opinion is that these are letters of comfort in the nature of bank guarantees and are enforceable under the law. The bank has other letters of this type which we will apply in the future as we intensify our collection efforts,” said another person closely involved in the case.
The promoters of the Essel group reduced their stake in ZEEL to less than 5% after multiple sales of shares to various financial investors.