First you need to understand about this Standstill Agreement that mutual funds had signed with Zee Group. Zee promoters had borrowed from mutual funds through issue of bonds which were backed by shares of Zee Entertainment and Dish TV belonging to the promoters. However, when the stocks fell, the promoter had requested the mutual funds for a standstill agreement till September 30th during which period the funds would not sell the pledged shares. Most funds had agreed to that. However, by September 30th, it looks like only part of the loan will be repaid which was done through sale of shares by the promoters to the INVESCO Capital group. Promoters would need more time to sell the balance stake and have now requested for more time till March 31th 2020.

While some fund have agreed to extend the standstill agreement, a handful of funds like SBI and Kotak have refused and have already started selling the pledged sharers of the Zee promoters? While there is no official confirmation from the mutual funds, Subhash Chandra has announced that some funds have been willing to extend the standstill agreement date till March 31st. An official clarification on the subject is still awaited and will be crucial to any future action.

Regarding whether such a move is allowed by SEBI, the SEBI chairman Mr. Ashok Tyagi has already clarified that SEBI Mutual Fund regulations do not have any provisions for such a standstill agreement. However, mutual funds have the facility of signing an Inter Creditor Agreement (ICA) with other creditors based on which such an undertaking can be given. Such a decision has to be approved by the Board of the AMC and also ratified by the Board of Trustees of the fund. But SEBI is very clear that the SEBI regulations on the subject do not have any provisions for such an arrangement.