Bombay High Court reserves verdict in appeal by Invesco challenging interim injunction in favour of Zee

A Division Bench of the Bombay High Court on Friday reserved its verdict in the appeal filed by Invesco Developing Markets Fund, which is the largest shareholder of Zee Entertainment Enterprises Limited (Zee), against a single-judge order granting interim injunction in favour of Zee in the ongoing dispute between the two entities..The genesis of the dispute was a requisition put out by Invesco on September 11, 2021 to the Zee Board of Directors to hold an extraordinary general meeting (EGM) on the grounds that it felt that the company was not running as smoothly as desired. It required certain new directors to come on the board in order to safeguard its interests. Invesco wanted to remove three directors from the Board, including Managing Director and Chief Executive Officer, Punit Goenka.When Zee refused to respond to the requisition, Invesco moved an application before the NCLT in Mumbai, which directed Zee to consider the requisition in accordance with law.The order under challenge was passed in October 2021 by a single-judge of the High Court, in the suit seeking a declaration that the requisition notice by Invesco seeking an EGM for replacing Goenka was illegal and invalid.Invesco challenged this order in appeal which was heard extensively by the Division Bench of Justices SJ Kathawalla and Milind Jadhav.Senior Advocate Janak Dwarkadas raised the following contentions on behalf of Invesco:That as per Section 100 of the Companies Act, it was mandatory for the board to call for a shareholders meeting;That the High Court had no jurisdiction to entertain a suit as Section 430 of the Companies Act ousted civil court jurisdiction for matters within the domain of the National Company Law Tribunal (NCLT);That the Board of Directors could not sit in judgement over any matter in consideration for which the meeting is requisitioned;That the Board is supposed to leave things to the wisdom of the shareholders at a general meeting;Zee’s suit was premature, they could have challenged the resolutions passed in the meeting;Shareholders holding 10% or more of the paid-up share capital are entitled to requisition for an EGM as a matter of right in corporate democracy..Senior Advocate Aspi Chinoy submitted the following on behalf of Zee:That the order under challenge was in accordance with law;That a requisition under Section 100 of the Companies Act did not confer any special powers upon NCLT; matters pertaining to the illegality or ultra vires of any action could be challenged before any civil courts, which implied challenging the NCLT order was not barred;That if one could challenge resolutions, the requisition leading to meetings could also be challenged in civil suits;That obtaining valid permission/ approval from the Ministry of Information & Broadcasting (MIB) was crucial before moving a requisition to hold an EGM to remove a director, which was not done in the present case;Not obtaining a prior approval from the MIB to remove the present Managing Director Punit Goenka could lead to the broadcaster loosing its license;That an independent director could not be appointed by the shareholders directly;That for appointment of independent directors, the Board of Directors was first required to accept the recommendations of the Nomination & Recommendation Committee, followed by the shareholders’ approval;That having an executive director was crucial for such approval; after removing Goenka, executive director would not be left on the board which is against statutory requirement..Chinoy appeared alongside Senior Advocates Navroz Seervai, Pesi Modi and Birendra Saraf, and advocates Prateek Seksaria, Nitesh Jain, Nisha Uberoi, Gautam Chawla, Atul Jain, Adrish Majumder, Vatsala Kumar, Ritika Ajitsaria, Brihad Ralhan,Hitesh Saini and Radhika Seth from Trilegal appeared for Zee.Senior Advocate Janak Dwarkadas alongside Senior Advocates Ravi Kadam and Sharan Jagtiani with team from Dhruve Liladhar & Co including advocates Gaurav Mehta, Rishika Harish, Kingshuk Banerjee, Bhavik Mehta, Zacarias Joseph, Sonali Aggarwal, Ritvik Kulkarni and Prakruti Joshi appeared for Invesco.