Relief for Zee: HC restrains Invesco from calling EGM

On the requisition for the ouster of ZEE chief executive officer and managing director Punit Goenka, the court said Invesco has not proposed a replacement and this puts ZEE into a “statutory black hole”.

The Bombay High Court on Tuesday granted interim relief to Zee Entertainment Enterprises (ZEE) by restraining its single largest investor, Invesco Developing Markets Fund, from convening an extraordinary general meeting (EGM).

Invesco and its subsidiary OFI Global China Fund, which together hold a 17.88% stake in ZEE, were directed by the HC not to take any action in furtherance of their earlier requisition letter. This includes convening or holding shareholder meetings, the court said in its order.

A single judge bench of Justice GS Patel accepted ZEE’s counsel Gopal Subramanium’s argument that if the resolutions are passed, it would be potentially non-compliant and severely damaging.

The court also said there was a fundamental flaw in Invesco’s construct. “It assumes that resolutions at an EGM requisitioned by shareholders are somehow special or more sacrosanct than resolutions proposed by the board itself. There is no warrant for this”. It added: “If the board cannot propose resolutions that are infirm or ineffective, neither can shareholders.”

On the requisition for the ouster of ZEE chief executive officer and managing director Punit Goenka, the court said Invesco has not proposed a replacement and this puts ZEE into a “statutory black hole”.

“I do not see how Goenka can be removed at all, leaving a managerial void only to be possibly later filled. His removal causes an immediate vacancy and non-compliance. How this is to be done without prior permission of the ministry of information and broadcasting MIB is also unclear,” it said.

“I see no method of circumventing the nomination and remuneration committee or directly proposing named persons as independent directors,” the order copy said. The court also stated that it has jurisdiction in the issue and added that it is not correct to say that the board should rubber stamp every requisition.

“If a shareholder resolution is bound to cause a corporate enterprise to run aground on the always treacherous shoals of statutory compliance, there is no conceivable or logical reason to allow such a resolution even to be considered,” it added.

Earlier on September 11, Invesco had issued a requisition letter asking ZEE’s board to hold an EGM to evict certain directors, including Goenka. On its part, ZEE rejected the request citing “legal infirmities” and later on October 2 moved the Bombay High Court asking it to declare the requisition “illegal”.

On its part, Invesco was of the opinion that the Companies Act empowers shareholders holding at least 10% of voting rights to convene an EGM, in case the company is not willing to do so.

“The decision taken by the Bombay High Court is a huge win for all the stakeholders of the company,” a ZEE spokesperson said.