Zee-Invesco case: Rejection of requisition for EGM malafide, NCLT told

The decision of the Board of Directors of Zee Entertainment to reject the requisition by Invesco Developing Markets Fund to hold an Extraordinary General Meeting (EGM) was malafide and done to toe the line of Managing Director, Punit Goenka, the National Company Law Tribunal (NCLT) Mumbai was told on Monday..Arguments for Invesco, the largest shareholder in Zee Entertainment, were made by Senior Advocates Mukul Rohatgi and Janak Dwarkadas before a Bench headed by Acting President Bhaskar Pantula..Rohatgi noted that the in the last hearing, he had raised apprehensions that Zee would not hold the EGM as required by law. These apprehensions have been proved true, he argued. Zee had circulated a letter a day after the Tribunal’s September 30 order rejecting the requisition for an EGM, Rohatgi pointed out..He reiterated that Zee was obliged to hold an EGM once a requisition was made by a shareholder holding more than 10% shares. Reliance was placed on Sections 100 and 98 of the Companies Act, 2013..In this case, Invesco holds 17.8% shares, he highlighted. However, by an letter dated October 1, it was informed that the requisition was rejected citing various “legal infirmities” with the notice of requisition, the NCLT was told.“It is our case then and our case now that Section 100 read with 98 do not require any other formality to be fulfilled before the EGM is called. There is no discretion in the Board to call or not to call...If a requisition is moved by more than 10 per cent, and it is duly received by the company, the company is bound to call the meeting," the senior lawyer contended..He added that no one, including the Tribunal, can sit in appeal over the reason for calling the EGM. Rohatgi registered objection to the October 1 letter insofar as it sat in appeal over the proposed removal of directors and the addition of new directors..It may be noted that the EGM was sought to be called as Invesco wanted three directors of Zee, including MD Punit Goenka, to step down. Two of the directors referred to had resigned after the requisition was made, while Goenka remained. Invesco has sought to add six new independent directors to the Board. All of this, however, is beyond the pale of judicial scrutiny, Rohatgi asserted.“What will happen in the meeting, what is debated, whether it is passed, or it fails, we are not concerned with that at this stage at all. We are only concerned with whether the meeting will be called at all…It is out of the pale of judicial scrutiny of any court as to the purpose and object of the meeting. Whether I want to remove, whether the reason is good or bad - I don’t have to give the reason. If I had moved with 10% (shareholding), then I can jolly well ask for removal of anyone”, he said..Zee had committed an error in not calling the EGM at all, Rohatgi argued. He asserted that he does not view this error as an innocent one, but rather termed it completely misconceived and malafide.“I don’t given them benefit of an innocent error. It is malafide decision of the Managing Director (Goenka) with 3.9 percent (shareholding), who wants to be retained. The independent directors currently on board have not shown independence. They are toeing line of MD.".With Zee not calling the EGM, Invesco has a right to call the meeting itself, as per the law, Rohatgi added. However, he reiterated that it was practically impossible for Invesco to issue notice to 90 percent of the shareholders, since these comprise over 2 lakh public shareholders.“I don’t have the name and addresses. The company is uncooperative. Therefore, it is not possible, practically and reasonably (for Invesco to give notice for the EGM to shareholders). It is impractical for me though law empowers me to do it myself. If I can do it myself, I can take the assistance of the court,” he said..Dwarkadas supported Rohatgi’s contentions. He added that the October 1 meeting to reject the requisition was only a “formality” and that the Board of Directors had already made their decision..In this regard, he pointed out that the NCLT had passed its last order calling for Zee to consider the requisition on the evening of September 30, whereas the letter rejecting the requisition was circulated the following day..Pertinently, the October 1 letter also stated that it had “earlier” obtained legal advice from the company’s counsel, eminent judges of the Supreme Court and senior corporate counsel, stating that there were legal infirmities with the notice of requisition. It was based on this advice as well that it was unanimously decided to reject the requisition, the letter stated.“In that sense, the October 1, 2021 meeting of the board was a mere formality. They had already obtained this advice,” Dwarakdass pointed out.He also alleged that there is a serious and disturbing attempt being made by Zee to forum shop..Senior Advocate Navroz Seervai, appearing for Zee, asserted that there were fundamental issues concerning whether the Tribunal had jurisdiction to entertain Invesco's application, and questioned the maintainability of the same. The Tribunal decided that it would hear the applicant first before hearing arguments by Seervai..The hearing, however, came to an abrupt close on Monday while Dwarkadas was arguing. The Bench lost power and got cut off from the hearing. .The matter will be heard on Tuesday afternoon as the first item, the counsel were informed..On September 11, 2021, Invesco had put a requisition to the Zee Board of Directors to hold an EGM on the ground that it felt that the company was not running as smoothly as desired. It was suggested that certain new directors come on the board in order to safeguard its interests..INVESCO approaches NCLT Mumbai for directions to Zee Entertainment to hold EGM