The National Company Law Tribunal (NCLT) has asked Zee Entertainment Enterprises Ltd to file a reply by October 7 on the plea moved by Invesco Developing Market Funds, seeking a legal order for an extraordinary general meeting (EGM).
The direction was issued by the NCLT bench on October 5, after hearing the arguments of Zee and Invesco’s counsels.
During the hearing, the petitioners accused the board of Zee Entertainment of indulging in “forum shopping”.
The manner in which Zee rejected the call for an extraordinary general meeting (EGM), as sought by the largest shareholder Invesco, point towards a “classic case of forum shopping”, advocate Janak Dwarkadas said.
The NCLT had, on September 30, recommended the Zee board to consider the call for an EGM as mandated by the law.
The next day, the board of Zee announced that it has been advised by eminent legal experts including former judges that the call for EGM is no longer valid as two of the directors whose ouster was sought by Invesco – Ashok Kurien and Manish Chokhani – have already resigned from their posts.
“On September 30, the company pretends that it does not know what the board is going to do the next day. On October 1, the board resolution became a mere formality to say that the company is so advised by former judges of Supreme Court and corporate lawyers and legal counsels we have no choice to say that the requisition is not valid,” said Dwarakadas, who was representing OFI Global China Funds, which along with Invesco holds 17.88 percent stake in Zee Entertainment.
“I say forum shopping because October 1 was a Friday. NCLT completed the matter on Thursday, September 30. Assuming they held the meeting in the early part of working hour of October 1, in which case the opinions would have come on the previous day,” he said.
“On the same day, they lodge a plaint on October 1. It is impossible to believe that a plaint of this magnitude is finalised, typed and lodged on the same day. This plaint takes away the power of NCLT to decide on the requisition,” Dwarkadas added.
Notably, Invesco and OFI Global China had written to the Zee board on September 11, seeking an EGM for the appointment of six new independent directors, along with the removal of three directors including Kurien, Chokhani and MD and CEO Punit Goenka.
The two shareholders moved the NCLT on September 29, seeking a legal order for the EGM as demanded by them.
The counsel representing Invesco and OFI Global has reiterated before the NCLT that Zee cannot deny the EGM call as per the law. According to Section 100 of the Companies Act, an EGM can be sought by a shareholder with at least 10 percent stake in a listed entity.
“Validity does not mean legality of the resolutions to be voted upon. Valid only means procedural and numerical requirements. (We) need numerical requirement of one-tenth of equity share cap to call for EGM. We satisfy numerical, procedural requirement for seeking an EGM,” Dwarkadas said, pointing towards the 17.88 percent stake jointly held by Invesco and OFI Global.
“The board cannot sit in judgement on the legal validity,” he added.
Advocate Navroz Seervai, appearing for Zee, said the demand for an order to hold EGM cannot be issued considering the “facts of this case”.
“On two grounds, this application for ad-interim relief at the admission stage of this matter has to be dismissed. Ad interim relief is for calling of meeting. Final relief is the same. Final relief cannot be granted as ad-interim relief,” he said.
“Only in extra ordinary circumstances mandatory injunction can be granted altering status quo,” Seervai added.
A spokesperson of Zee, while reacting to the NCLT order seeking a reply by October 7, said, the “company has already moved to the Bombay High Court to declare that the requisition notice sent by Invesco Developing Markets Fund and OFI Global China Fund LLC is invalid.” Money Control