Invesco asks NCLT to make ‘mandatory order’ directing Zee to call for EGM

Invesco Developing Markets Fund, which moved the National Company Law Tribunal (NCLT) against Zee Entertainment Enterprises for delay in holding an extraordinary general meeting (EGM), asked the tribunal on Monday to pass a “mandatory order” directing Zee to call for an EGM as requisitioned by it. Invesco also sought the appointment of a retired high court judge, under who chairmanship the EGM can be held. NCLT hearing in Zee Entertainment-Invesco matter has been pushed to Tuesday at 2:30 pm due to power failure.

On the other hand, Zee Entertainment Enterprises opposed the application moved by Invesco Developing Markets Fund and OFI Global China Fund LLC in the NCLT on jurisdiction grounds saying that the application moved by the two funds is not maintainable. Also, Zee have alleged that the tribunal has no jurisdiction to hear the matter.

When the matter was last heard by the Mumbai bench of the NCLT, the tribunal had passed an order asking the Zee Entertainment Enterprises board to consider the requisition of the Invesco Developing Markets Fund and OFI Global China Fund LLC to hold an extraordinary general meeting (EGM) of the company.

Following that, the Zee board met and decided to reject Invesco Funds’ demand to hold an EGM saying that the requisition by the two global funds is invalid and illegal. Zee said its board arrived at the decision by referring to various non-compliances under multiple laws, including the Securities and Exchange Board of India (Sebi) guidelines, Ministry of Information and Broadcasting guidelines, and key clauses under the Companies Act & Competition Act, and after taking into account the interests of all the shareholders and stakeholders of the company.

Objecting to the argument that the requisition for holding an EGM was invalid or illegal, senior counsel Mukul Rohatgi representing Invesco Developing Markets Fund said, the validity of the requisition only depends on whether the shareholder has 10 per cent shareholding or not. He further said that it is mandatory for the board of the company to honour the requisition request of the shareholder if the threshold of 10 per cent shareholding is met.

He also argued that the purpose or the objective of the EGM is beyond the pale of judicial scrutiny.

Hence, the refusal to hold the EGM is a malafide decision of the Zee board, which, he alleged, is being controlled by the MD&CEO, Puneet Goenka. It is important to note that both the global funds are looking to oust Puneet Goenka as the MD&CEO of the company and want to appoint new independent directors to the company’s board because they feel the company was not running as smoothly as it should have. The independent directors are toeing the line of the MD and have not shown any independence, Rohatgi said.

He also said that they are not concerned about the outcome of the EGM but about the EGM being called.

Janak Dwarkadas, appearing for one of the foreign funds said, the company (Zee) is engaging in forum shopping. The board of the company met on October 1 and rejected the requisition request of the company after seeking the advice of lawyers, retired supreme court judges. Hence, the company had already sought legal advice on the matter, and the meeting was just a formality.

The matter will now be heard on October 5 as a power failure disrupted the hearing of the tribunal and lawyers representing Zee could not put forth their arguments in the matter.

Meanwhile, Zee Entertainment Enterprises moved the Bombay High Court asking the court to declare that the shareholders’ meeting requisition notice sent by Invesco is “illegal and invalid, a day after it rejected the request of Invesco Developing Markets Fund and OFI Global China Fund LLC to hold an EGM.

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