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The Bombay High Court on Tuesday gave a breather to ZEE Entertainment on its boardroom brawl with the company's largest shareholder by granting an injunction against Invesco's call for an extraordinary general meeting (EGM).
Invesco Developing Market Funds and OFI Global China Fund have been seeking an EGM of ZEE Entertainment Enterprises Ltd (ZEEL) to oust the current board and place their own representatives. But the ZEEL board has rejected the overseas shareholders demand to convene the EGM, terming their requisition invalid and illegal and pushing the matter to litigation. Legal experts said that the Bombay HC on Tuesday restrained Invesco from taking any action in furtherance of their requisition notice calling for an EGM. What this means is that Invesco's EGM demand cannot be met by ZEEL or adjudicated by any other legal authority till the court decides on validity of their requisition on the grounds raised by ZEE. "The decision taken by the Hon'ble Bombay High Court is a huge win for all the stakeholders of the Company," a ZEEL spokesperson said. The court, in its order, said that there will be an injunction in terms of prayer clause (a) of the Interim Application, restraining Defendants Nos 1 and 2 (including their employees, agents and anyone acting by, through or under them) from taking any action or step in furtherance of the Requisition Notice dated September 11, 2021, including calling and holding an EGM under Section 100(4) of the Companies Act, 2013. It observed that directing Zee Entertainment to call an EGM would be potentially non-compliant, and that there is one 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. If the Board itself proposes an EGM to consider these very resolutions, or ones equally vulnerable, it is entirely possible for anyone with sufficient legal standing, even a shareholder in a derivative action, to ask of a Court precisely that which Zee does today," the court said. Zee had sought injunction against Invesco from taking any action as part of its requisition notice for holding an EGM. On October 22, the court reserved its order in the matter when Zee had argued that the call for an EGM by its largest shareholders Invesco and OFI Global was illegal and invalid. Invesco wanted to remove Zee Entertainment Managing Director and Chief Executive Officer Punit Goenka and appoint six independent directors on the board of the company. On the matter of Goenka, the court observed that Invesco's requisition demands his ouster but without proposing a replacement. This puts Zee into a statutory black hole, for it would then be totally in violation of Section 203(1); and it, and its directors, would have to face the liabilities, including fines, set out in Section 203(5). No shareholder can be permitted, to drive his company into a state of non-compliance and penalty, the court observed. ZEEL is engaged in a boardroom brawl with the company's two largest shareholders expressing non confidence with existing management and seeking an extraordinary general meeting to sack a few directors, including Goenka. In the meanwhile, ZEEL announced its merger with Sony Pictures that further irked the shareholders who moved the NCLT to get their demand for an EGM. --IANS sn/vd ( 573 Words) 2021-10-26-19:38:04 (IANS)
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