The board of Zee Entertainment Enterprises Ltd will not hold an extraordinary general meeting (EGM) as demanded by shareholder Invesco Developing Market Funds, the company said in a regulatory filing on October 1.
The statement was issued a day after the National Company Law Tribunal (NCLT), while hearing a plea moved by Invesco, said the Zee board should consider the demand for an EGM as mandated by the law.
Zee, in the regulatory filing, said the board had convened a meeting on October 1 to discuss the demand raised by the shareholders for the extraordinary meeting.
"In the best interests of the company as a whole, including all its shareholders and stakeholders, we express our inability to convene the
EGM," it said.
The company claimed that it arrived at this conclusion after consulting legal experts including former judges of Supreme Court.
Zee pointed out that Invesco had called for the EGM to push for the ouster of directors Ashok Kurien and Manish Chokhani, apart from MD and CEO Punit Goenka. However, Kurien and Chokhani have already resigned from their posts, thereby, making the resolution moved by Invesco "infructuous", it said.
"The Board deliberated, and unanimously concluded that the Requisition Notice is not valid, as it suffers from multiples legal infirmities," the company said.
According to JN Gupta, founder of proxy advisory firm Stakeholders Empowerment Services, the rejection of EGM on technical grounds "does not amount to good governance".
"Zee should have raised an objection to EGM notice earlier if they felt it was untenable," Gupta told CNBC TV 18.
Notably, Invesco, which along with OFI Global China Fund LLC holds a 17.88 percent stake in Zee Entertainment, had demanded an EGM in a letter written to the company on September 11.
Apart from the ouster of three directors including MD Goenka, Invesco sought the appointment of six new directors - Surendra Singh Sirohi, Naina Krishna Murthy, Rohan Dhamija, Aruna Sharma, Srinivasa Rao Addepalli, and Gaurav Mehta.
On September 29, a week after Zee announced the mega merger with Sony Pictures Networks India (SPNI), Invesco moved the NCLT seeking an order from the tribunal for an EGM.
Before the tribunal, senior advocate Janak Dwarkadas, who was representing the investors, said their concern is that the Zee board may delay the calling of an EGM till the Zee-Sony merger comes into effect. "Our shareholding will be diluted post the merger," he added.
The tribunal, however, observed that the merger with Sony should not be a concern as it cannot go through without Invesco's approval.
The NCLT, while noting that any entity with at least 10 percent stake in a listed company has the right to call for an EGM, decided to hear the matter on October 4. The Zee board has "2-3 days time within which they can take the decision with regard to the requisition made by the petitioners", it said.
In a press statement issued after rejecting the EGM call, Zee said the board arrived at this decision after "referring to various non-compliances under multiple laws, including the Securities and Exchange Board of India Guidelines, Ministry of Information and Broadcasting Guidelines and key clauses under the Companies Act & Competition Act".
The company added that it cannot comment on any future actions since the "matter is sub-judice".
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