The Bombay High Court denied interim relief to Yes Bank Ltd. The Court stated that Zee Entertainment Enterprise Ltd cannot be restrained from disposing or transferring its assets. The Bank approached the High Court arguing that a letter of comfort given by Zee Entertainment is in nature of guarantee – a claim the Court found no merit in it.
In 2016, Zee Entertainment had provided a letter of comfort to Yes Bank against a loan amount extended to one of its group entities. Additionally, Yes Bank was given an option on Zee Entertainment’s share in its subsidiary ATL Media Ltd. The lender is looking forward to take possession of the shares citing the guarantee that the promoters of the Media Company provided against loans taken by the promoters of the Company for other businesses.
The letter of comfort mentioned the following four conditions during the subsistence of the Loan-
1. That the group will support ATL Media by infusing the requisite equity or debt.
2. All overseas operations will be undertaken through ATL media or its subsidiaries.
3. A holding of at least 51% in ATL Media
4. In case of default in Payment, ATL’s obligations to Yes Bank will prevail over all other shareholder loans.
It further mentioned that after a default by the group entity, Yes Bank moved to High Court. The Counsel Veerendra Tulzapurkar argued that the commitment by Zee Enterprise to adhere to these 4 conditions until the full loan amount is paid to a guarantee. But the High Court didn’t see it that way. The Court noted that all the letters of comforts says is Zee Enterprise would adhere to the four clauses until all the advances due are repaid. It doesn’t prima facie, amount to any guarantee to repay dues of the group company.
The Court said that “the letter of comfort is the only document on which the entire suit is premised and it is not the plaintiff’s i.e. Yes Bank case that Defendant no1 i.e. Zee Enterprise has gone back of any of its four commitments made in it. Senior Counsel Aspi Chinoy on behalf of Zee entertainment argued. In a reply it was said that an Essel Group spokesperson said the said loans were available by a promoter group company and not Zee entertainment.
The High Court was presided over by two benches Judge observed that there was no prima facie case made out by Yes bank for allowing an interim relief in this case and thus the Court rejected the plea of any relief to Yes Bank. The loan was guarantee when Rana Kapoor was the CEO of the Yes Bank. His role in the bank is now under regulatory probe. These loans are among those being probe by the Enforcement Directorate (ED) in connection with a money laundering case against Kapoor.
The main contention is whether this letter was a guarantee or a letter of comfort. Though the Court considered it as a letter of comfort and declined the bank’s plea to freeze Zee’s accounts. It futher stated that no guarantee was issued by ZEE in favour of Yes Bank said by the spokesperson in a email reply to which email seeking comment was not given any reply by Yes Bank
