Zee - Invesco: NCLT Grants Zee Time For Response Before Final Order On EGM
The National Company Law Tribunal on Tuesday granted time to Zee Entertainment Enterprises Ltd. till Oct. 7 to respond to Invesco Developing Markets Fund and OFI Global China Fund LLC‘’s plea seeking an extraordinary general meeting of the company.
Lawyers for Zee argued for almost an hour trying to convince the tribunal to grant them time at least till Friday to file a formal response.
The bench pointed out that the hearing has gone on for three days but Zee’s lawyer Navroz Seervai said they were under the impression that the hearing right now was only limited to the grant of interim relief.
The final relief sought by the foreign funds is that an EGM be held and Zee argued that the NCLT cannot pass such an order at an interim stage.
In the first half of the hearing, lawyers for Invesco and OFI Global concluded their arguments focused on convincing the court that Zee's board couldn't have exercised its discretion on whether to call the board meeting.
Zee Accused Of 'Forum Shopping'
On Friday, Zee’s board cited legal infirmities to reject the requisition sent by its two institutional investors seeking an EGM. Soon after, Zee also approached the Bombay High Court against the requisition notice sent by Invesco and OFI Global.
Senior Advocate Janak Dwarkadas argued on behalf of OFI Global and accused Zee of indulging in "forum shopping".
Dwarkadas said Zee's requests to the NCLT and the Bombay High Court have overlaps and that courts frown upon the practise of forum shopping.
"Is this not some sort of insurance being bought?" argued Dwarkadas.
'Invesco Focuses On Board's Role'
Dwarkadas also said the role of a board is limited when deciding on an EGM requisition.
Dwarkadas told the tribunal that two earlier decisions have already settled that the only examination a board can do is whether a requisition was procedurally and numerically valid.
Under the Companies Act, 2013, a shareholder with more than 10% voting rights of the company can requisition an EGM.
Given that together Invesco and OFI global own 17.88%, the requisition notice satisfies the numerical requirement. Yet, the company is fighting the requisition in two courts, said Dwarkadas.
Zee’s Lawyers Push For Time
The arguments for Zee Entertainment were led by Senior Advocate Navroz Seervai, who said Zee’s lawyers were under the impression that the court is hearing the case for granting an interim relief.
By seeking to oust the managing director and chief executive officer, Punit Goenka, and add 6 independent directors to the board, the two funds are seeking an alteration of the status quo and the Supreme Court has said that except in the most extraordinary and rare case, a court will not grant a mandatory interim injunction, said Seervai.
At this point, Dwarkadas interjected to say he had argued the case for grant of final relief, which was a court ordered and monitored extraordinary general meeting.
This was met with strong objection from Seervai and Senior Advocate Arun Kathpalia, who is representing some independent directors on the board of Zee Entertainment.
The lawyers argued that the final relief cannot be granted without giving them an adequate opportunity to respond.
The bench indicated that it can give the company a day to file the response to which Seervai sought time till Thursday and that the hearing resume on Friday.
"This is a matter which requires half a minute hearing and still we have taken it up on 29th, 30th, yesterday and today," the tribunal observed.
In the final order, the bench presided by Justice BP Mohan gave time to the company’s lawyers to file their response by Oct. 7.
Hearing in the case will continue on Oct. 7 from 2:30 p.m.
Also Read: Zee‘s Case In Bombay High Court
Invesco Vs Zee: The Story So Far
On Sept. 30, the National Company Law Tribunal in Mumbai had directed Zee’s board to “positively consider” the EGM requisition sent by the two foreign funds that collectively own 17.88% stake in the company.
Earlier in September, the two institutional investors wrote to the board of Zee seeking the ouster of Goenka and two other directors on the Zee board.
They further proposed the appointment of six new independent directors.
The two directors, Ashok Kurien and Manish Chokhani, stepped down the on Sept. 13, citing personal reasons.
But Goenka has stood firm against this investor pushback. Since then, he has initiated a merger with Sony India Pvt. and plans to lead the combined entity. Zee has said Goenka's leadership of the merged company is pivotal to the deal.
Invesco moved the NCLT seeking a court-ordered EGM. In its petition, Invesco said that not convening an EGM is a deliberate and oppressive act by Zee Entertainment. The matter was first heard by the NCLT on Sept. 30 where the tribunal observed that it'll be a “travesty of justice” if Invesco’s right to requisition an EGM is denied. The Tribunal asked the company's board to positively consider the EGM requisition.
Subsequently, Zee Entertainment's board rejected the EGM requisition, stating it suffered from several legal infirmities.
Soon after, the company moved the Bombay High Court, seeking to to declare that the requisition notice sent by the two institutional investors is “illegal and invalid”.
Meanwhile, the case continues at the NCLT.
⇾ Invesco, OFI Global Vs Zee Entertainment: NCLT Hearings So Far