NCLT asks Zee to file reply to Invesco's plea for EGM by Oct 7

Zee argues that Invesco's plea should be dismissed as the petition is seeking ad-interim relief as its final relief

The Mumbai bench of the National Company Law Tribunal (NCLT) on Tuesday has given time till October 7 to Zee Entertainment Enterprises to file its reply to the top shareholder Invesco Developing Markets Fund's application seeking an EGM. Zee had argued that it should be given enough time to reply to the application because it was under the impression that the arguments put forth by Invesco were for an ad-interim relief and not for the final disposal of the matter. 

Zee Entertainment Enterprises, represented by Navroz Seervai, argued that the application moved by Invesco Developing Markets Fund and OFI Global China Fund LLC should be dismissed on the grounds that they are seeking a final relief in the matter in the garb of an ad-interim relief, which can’t be granted without the full hearing or at the interim stage. Also, he argued that the tribunal cannot grant a mandatory ad-interim injunction in the present case because that may result in an alteration of the status quo. 

This comes after Invesco on Monday asked the tribunal 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 whose chairmanship the EGM can be held.

The tribunal has said that all the respondents in the case -- Zee Entertainment Enterprises, Puneet Goenka, and the board of directors -- are aware of the arguments put forth by the applicants -- Invesco and OFI Global China Fund -- hence, only a simple counter is expected to be filed by the respondents. 

It is important to note that Zee has opposed the application of Invesco asking NCLT to direct the company to hold an extraordinary general meeting (EGM) on jurisdiction issues. It has also moved the Bombay High Court seeking relief on the grounds that the requisition notice of Invesco Developing Markets Fund and OFI Global China Fund LLC is invalid, unlawful, and cannot be legally carried and implemented. Further, it has said in its petition before the high court that the NCLT cannot decide on the validity of the requisition notice and only the high court can decide on the matter. 

Post-Tuesday’s hearing, a Zee Spokesperson said: “As per the decision taken by the board of the company, which was communicated on 1st October 2021, and as per their guidance, 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. The company will continue to take all the necessary steps that are in the best interest of all its shareholders and as per the applicable law.” 

Janak Dwarkadas, appearing for OFI Global China Fund LLC, argued that Zee Entertainment Enterprises is indulging in forum shopping as the company is fighting a battle in two courts and the tribunal should deal with this approach of the company with a heavy hand. He said, with Zee not deciding to hold an EGM, Section 98 of the Companies Act of 2013 automatically gets triggered as it is impracticable for the two funds to hold an EGM on their own and hence, the NCLT should direct them to call the EGM. 

Dwarkadas further argued that Zee held a board meeting on October 1 and on the same day they moved the Bombay High Court with an annexure of 420 pages. Also, the company sought legal opinion on the matter from eminent lawyers, retired judges before the board meeting was held implying the fact that they had predecided to reject the requisition request of the two global funds. 

Opposing the argument that the requisition request is invalid or illegal, Dwarkadas argued that the validity of the requisition notice can be judged on numerical and procedural grounds. Apart from that, the court cannot sit in judgment of the legality of the requisition notice. The validity of the requisition only depends on whether the shareholder has 10 per cent shareholding or not. And, the purpose or objective of the EGM is beyond the purview of judicial scrutiny.

The Zee board last week 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.