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Mumbai: In a setback for the Zee group, a division bench of the Bombay high court on Tuesday struck down a single-judge bench’s order that restrained two shareholders of the Zee Entertainment Enterprises Limited (ZEEL) from proceeding further with their requisition for an Extraordinary General Meeting (EGM) to consider proposals for removing the company’s MD and CEO Punit Goenka and appointing six new independent directors on its board.
The division bench of justice SJ Kathawalla and justice Milind Jadhav has, however, continued the restraint for three weeks to enable Zee Entertainment Enterprises to move the Supreme Court.
Acting on the appeal filed by the investors, the division bench on Tuesday struck down the single-judge bench’s ruling. It held that in view of the clear embargo under section 430 of the Companies Act, 2013, the single judge bench – being a civil court – had no jurisdiction to entertain the dispute and could not have issued an injunction.
The division bench also held that the Board of a Company had no discretion or power to sit in judgment over any matter for consideration of which a meeting is requisitioned.
“On a plain reading, the Board of a Company is mandatorily obliged to requisition a meeting, if the requirements specified in sub-sections (2) and (3) of Section 100 (of the Companies Act) are satisfied,” said the appellate court.
“Needless to state, whether or not the proposed requisition should be given effect to, is to be decided by the shareholders at the general meeting,” it added.
The division bench also made it clear that under the law prevailing in India the Board of a Company is not entitled to refuse a requisition calling for an EGM if the requisition satisfies the requirements set out in Section 100.
Invesco Developing Markets Fund and OFI Global China Fund LLC, both of whom collectively hold 17.88 percent paid-up share capital in the company, had on September 11, 2021, sent a requisition to the company in terms of Section 100(2)(a) of the Companies Act, 2013 for calling an Extraordinary General Meeting (EGM).
The US-based investors intended to move two proposals in the EGM for the removal of three directors of the company — Ashok Kurien, Manish Chokhani and Punit Goenka — and the appointment of six independent directors on its board. Two days later Kurien and Chokhani resigned.
After the company failed to respond to the requisition, the investors moved the National Company Law Tribunal (NCLT). The next day, the tribunal directed the company to consider the requisition and posted the matter for further hearing on October 4, 2021.
The same day, the company’s board concluded that the requisition was invalid/illegal and accordingly, recorded its inability to convene the EGM and on October 1, 2021, rejected the requisition citing multiple legal infirmities.
On October 1 itself, the company also moved high court with a suit for declaration that the requisition was illegal and cannot be implemented, and injunction against the two investors from proceeding ahead with the requisition, including they calling and holding the EGM.
Upholding the company’s claim that the requisition was illegal in as much as it violated several statutory provisions and regulations governing removal and appointment of directors, the single judge bench had on October 26 allowed their plea and issued an injunction against the investors from proceeding ahead with their requisition.
(With agency inputs)
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