Local reports out of India say that Sony’s board of directors are increasingly unhappy with the planned merger between their Indian assets and those of Zee Entertainment.

One problem came from The Securities & Exchange Board of India (SEBI) which has ruled that ZEEL’s Subhash Chandra and Punit Goenka cannot have seats on the merged company’s board of directors. Chandra founded ZEEL and Goenka (his son) was destined to be MD on the merged business.

New reports say that Sony is looking at invoking penalty clauses in the agreement. Sony is reportedly examining citing its damages options.

ZEEL has responded to India’s Securities & Exchange Board, but Sony has reportedly termed the applications made by Essel Group Chairman Subhash Chandra and ZEEL MD/CVEO Punit Goenka as “completely false and misleading” in its response submitted to the Securities Appellate Tribunal on June 17th.

“We have a situation before us where the chairman emeritus and the MD and CEO of this large listed company are involved in a myriad of different schemes and transactions through which vast amounts of public money belonging to listed companies are diverted to private entities owned and controlled by these persons. The appellant’s conduct is telling in this regard. Not only have there been violations but also the issuance of multiple false disclosures and submission of statements to cover up such wrongdoings,” SEBI said in a 197-page affidavit to SAT.

In its letter to SEBI, Zee said: “please note that the said merger is at an advanced stage post receipt approvals from various regulators (including SEBI, Stock Exchanges and CCI, etc.) and the scheme is also approved by 99.9 per cent of the equity shareholders of ZEEL. It is beyond our comprehension as to why the present matter is being re-investigating/re-examining, when the cause of action pertaining to the matter is around 4 years old.”

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Tags: india, Sony, ZEE