Zee Entertainment Enterprises Ltd (ZEEL) has been directed to convene an extraordinary general meeting to consider resolutions seeking to remove Punit Goenka as CEO and MD of the media giant and induct six new independent directors.
The EGM has been sought by the company’s largest shareholder Invesco which holds roughly 18 per cent of the company’s equity — a move that sparked a raging legal battle with the Subhash Chandra family, the founders of Zee.
Invesco has insisted that its move was motivated by weak corporate governance at Zee and plummeting shareholder returns.
Last week, Punit Goenka — who has negotiated a non-binding merger agreement with Sony India that he hopes to close by the end of December — created a stir when he claimed that Invesco had been trying to negotiate a takeover of the company by the Reliance group without authorisation from the Zee board.
On Thursday, a single judge bench of the Bombay high court asked the warring parties to suggest a neutral chairperson who would conduct the EGM and gave them the freedom to pick a retired judge, senior lawyer or anyone from the corporate world.
At the hearing on Thursday, Gopal Subramanium, senior counsel for Zee, said he would seek instructions from the company and will inform the court on Friday morning about the date for the EGM.
Earlier this month, Zee had moved the Bombay high court praying that the demand for an EGM made by Invesco Developing Markets Fund and OFI Global China Fund be declared “illegal and invalid”.
Under company law, any shareholder holding more than 10 per cent of the equity can requisition an EGM.
The judge said that if Invesco was denied the right to call an EGM, it would set a “ferocious precedent” that would spark a flurry of petitions in courts seeking to assert the democratic rights of the shareholder.
The court observed that it was premature to presume that the resolutions would be passed. Even if they were, the judge said he would direct that the result would not be enforced for a week, giving the company time to file an appeal in the courts.
“The order that Zee seeks is in the teeth of a statutory provision (of the Companies Act, 2013). I can’t see ... why I should presume that it (the resolution seeking to oust Goenka) will be passed,” Justice GS Patel said.
He also suggested that even as the EGM is held, Zee’s right to contest the validity of the resolution after the meeting can be reserved.
The two sides have also locked in battle before the National Company Law Tribunal (NCLT). Recently, the tribunal had given Zee time till October 22 (Friday) to reply to Invesco’s plea to hold the EGM.
This order was issued after the National Company Law Appellate Tribunal (NCLAT) directed NCLT Mumbai to give the company reasonable opportunity to reply to Invesco’s petition insisting on an EGM.
The NCLAT had observed that the tribunal had committed an error by failing to grant reasonable and sufficient time to Zee to file its reply. It added that this was in complete violation of Rule 37 of NCLT Rules, 2016 and the principles of natural justice.
Invesco had submitted on September 11 its demand for an EGM which was rejected by the Zee board. It then sent out an open letter to Zee shareholders in which it argued that “weak governance and a permissive board” had perpetuated a situation where the affairs of Zee had become entangled with the “the financial distress of the founding family”.
