The Supreme Court on Tuesday upheld the Delhi High Court’s order in the Aditya Birla Finance-Siti Networks Ltd asking the dispute to be referred to arbitration.
The top court clarified that all the parties in the dispute should raise their appropriate defences before the sole arbitrator appointed by the Delhi High Court in a case related to the Rs 150 crore loan dispute involving Essel Group of Companies, Zee Entertainment Enterprises, Siti Networks Ltd and Aditya Birla Finance.
Further, the Chief Justice of India DY Chandrachud dropped Siti Network from the array of parties in the arbitration proceedings as it has already gone into insolvency.
Senior counsel Ritin Rai appeared for Zee while senior counsel S Murlidhar appeared for the other side.
Earlier in March 2023, the Delhi HC referred the matter to arbitration and appointed former SC judge Justice LN Rao as the sole arbitrator.
The dispute between Aditya Birla Finance and Siti Networks Ltd along with Zee Entertainment arises from a Rs 150 crore loan default. In 2017, the lender extended a term loan of Rs 150 crore to Siti Networks under a credit arrangement letter wherein Zee stood guarantor. Under the agreement, the interest rate was reduced to 13 per cent per annum from 16 per cent on the condition that the outstanding loan would be reduced to Rs 75 crore before 2018 and Zee, a group company of the cable operator, would stand as a guarantor.
Aditya Birla Finance alleges that Siti failed to prepay the term loan and did not reduce the outstanding amount, as agreed, either. The lender claimed that Siti and Zee failed to pay the dues. It further argued that since Siti, Zee and their parent Essel Group had a single economic identity, all of them should be referred to arbitration. Zee and Essel opposed this on the grounds that they were non-signatory to the arbitration clause in the agreement.
Zee’s stand was rejected by the HC on the grounds that even a non-signatory or a third party could be subjected to arbitration without their prior consent in exceptional cases.
