The board of Zee Entertainment Enterprises Ltd (ZEEL) has to call an extraordinary general meeting (EGM), as sought by shareholder Invesco Developing Market Funds, in accordance to the law, the National Company Law Tribunal (NCLT) said on September 30.
Invesco, which along with OFI Global China Fund LLC holds a 17.88 percent stake in ZEEL, had moved the NCLT on September 29 -- around two weeks after it demanded an EGM to push for the ouster of company's three directors including MD and CEO Punit Goenka.
The NCLT, while hearing Invesco's plea, observed that it is the "mandate of the law" that Zee should call for the EGM. It is not a discretionary power of the board to call or not call for EGM, the tribunal added.
The board does not have any right to deny an EGM sought by shareholders having one-tenth of the total shareholding, it said.
As per Section 100 of Companies Act, 2013, listed companies are supposed to announce a date for an EGM within three weeks of receiving such a request from an investor holding at least 10 percent shares.
The NCLT, which said it would next take up the matter for hearing on October 4, said the board of ZEEL must "comply with Section 100 of the Companies Act". "No power vested with the board to deny EGM," it reiterated.
Senior advocate Mukul Rohatgi, who represented Invesco before the NCLT, noted that the shareholder was compelled to approach the tribunal within 21 days of seeking an EGM as the board of ZEEL was yet to acknowledge their demand.
"I am concerned about the day to day running of the company (ZEEL). We are worried that our investment will go down the drain. We have invested Rs 5,000 crore," Rohatgi said.
Pointing towards the mega merger deal that ZEEL announced with Sony Pictures Networks India (SPNI), the counsel for Invesco and OFI Global said they fear that the EGM call might by delayed till their shareholding gets diluted.
"Our concern is that they would not call for an EGM because they have told the stock exchanges that they have signed non-binding term sheet with Sony," said senior advocate Janak Dwarkadas, who is also representing the investors.
"Our shareholding will be diluted post the ZEEL-Sony merger," Dwarkadas added.
On September 22, barely 10 days after Invesco and OFI Global demanded an EGM for board rejig, ZEEL announced that its board has given in-principle approval for the merger with SPNI, in line with its strategy of achieving higher growth and profitability as a leading media and entertainment company across South Asia.
The share price of ZEEL touched a 52-week high of Rs 362.85 on September 23, indicating that the market welcomed the the company's decision to align with Sony.
The NCLT, however, observed that the merger with Sony should not be a concern as it cannot go through without Invesco's approval.
Rohatgi told the tribunal that Invesco would remain adamant on the call for EGM irrespective of the ZEEL-SPNI deal. "Merger or no merger, I want to call for the meeting (EGM). I have the right and this is why I have come to the court of law," he said.
The NCLT, after hearing the counsel, said the ZEEL board has "2-3 days time within which they can take the decision with regard to the requisition made by the petitioners".
The tribunal also noted that the board of ZEEL is meeting today as communicated by counsel Gopal Subramanium.
The company, in a statement, noted that the board will act in the interest of the shareholders as per the law.“The Board of the Company is scheduled to meet as per the statutory time allotted, in relation to the matter. The Company will continue to take all the actions needed in the interest of the shareholders and as per law," the ZEEL spokesperson said.