Zee-Invesco row: A look at what happens next after Bombay HC bars Invesco from calling EGM

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In a fresh turn of events, the Bombay High Court on Tuesday granted relief to Zee Entertainment by granting injunction against Invesco's call for extraordinary general meeting (EGM).

Invesco and OFI Global China Fund which together hold 17.88 percent stake in the media company had requested Zee to convene an EGM on September 11 seeking removal of MD and CEO, Punit Goenka and appointment of six new independent directors.

Zee had moved the court against Invesco’s call for an EGM and to declare it illegal and invalid.

While the Bombay HC has restrained Invesco from taking any action in furtherance of their requisition notice (to call an EGM), said Nirav Shah, a partner at law firm DSK Legal, the court has not declared the call for an EGM illegal or invalid.

"The immediate requirement was whether the meeting should be convened or not and the Bombay HC is saying that it cannot be convened until it decides whether the requisition notice is valid or not on the grounds raised by Zee," said Shah.

Counsel appearing for Zee, Gopal Subramanium in Bombay HC had argued that Invesco's requisition brings illegality because the shareholders have not taken prior approval of Ministry of Information and Broadcasting (MIB). He had also noted that the requisition is in violation of Securities and Exchange Board of India's (SEBI) listing rules and the Competition Commission of India (CCI).

Shoubhik Dasgupta, partner at Pioneer Legal, a law firm said that "the judge is of the opinion that if the resolutions requisitioned by the shareholders Invesco (and OFI Global) are passed they would not be implementable so what is the point of asking for a meeting to begin with."

Judge Gautam Patel, in the order said that "in the scheme of the Companies Act, shareholders do not get to choose individual independent directors. They may only demand that there be independent directors."

On Invesco seeking removal of Punit Goenka, Justice Patel in the order said that "the 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)."

A Zee spokesperson in a statement said, "“The decision taken by the Hon’ble Bombay High Court is a huge win for all the stakeholders of the Company."

Now, all eyes will be on the National Company Law Tribunal (NCLT), however, Shah said that the Bombay HC's order saying that they (Invesco) cannot call for a meeting will mean a stay on the proceedings of NCLT in the Zee-Invesco case.

"The purpose of NCLT proceeding was to convene a meeting," he added.

Invesco on September 29 had moved the NCLT against Zee for not announcing a date for an EGM sought to reconstitute the board of the media company and oust its CEO and MD.

The question that arises now is if Invesco can challenge the Bombay HC order.

"They (Invesco) will most likely go to a higher bench, a division bench, a two or three judge bench. And after that if required they can go to the Supreme Court," said Dasgupta.