For once Doordarshan has decided to act tough. It has decided to encash the bank guarantee worth Rs 67.5 crores submitted by Buddha Films, a subsidiary of Zee Telefilms Ltd, for failing to honour its commitment to pay the public broadcaster Rs 100 crores as license fee for marketing cricket events in the country.
The decision to encash the bank guarantee was taken, after Buddha Films failed to honour its commitment even after getting more time from Doordarshan to pay up its dues.
Buddha Films was appointed the marketing agents for Doordarshan after bidding process in February 2000. As per the contract, the Zee subsidiary was to market cricket fixtures organised by the Board of Control for Cricket in India (BCCI), for which Doordarshan holds exclusive rights till 2004.
The company had to pay Rs 450 crores to Doordarshan for marketing rights. Five per cent of the amount was paid at the time the contract was awarded and as per the agreement, Rs 101.25 crores were to be paid in September each year as advance for the next year’s fixtures. In addition, a bank guarantee of Rs 67.5 crores was to be kept during the tenure of the contract.
Buddha Films defaulted on its obligations in September, and later obtained a stay from Delhi High Court on encashment of the bank guarantee.
The stay was vacated on November 28, and subsequently, the company asked for three weeks to pay up and also promised to keep the bank guarantee alive for the entire period of the contract.
When the company failed to clear its dues even after the extension, Doordarshan decided to encash the bank guarantee.