Bombay High Court reserves verdict in Invesco's appeal

Bombay High Court reserves verdict in Invesco's appeal

The US investment firm and Zee Entertainment have been in a bitter legal battle over the removal of Punit Goenka due to governance issues

The Bombay High Court has reserved its verdict in the appeal filed by the US investment firm Invesco Developing Markets Fund, the largest shareholder of Zee Entertainment Enterprises Limited. Earlier, a single-judge bench had granted an interim injunction in favor of Zee in the ongoing dispute between the two entities.

Disagreements began in September 2021; when Invesco requisitioned that Zee's Board of Directors hold an extraordinary general meeting (EGM), as it felt that the company was not running smoothly as expected. Desiring certain new directors to come on board in order to safeguard its interests, Invesco also wanted to remove three directors, including Punit Goenka, the Managing Director and Chief Executive Officer of Zee.

On Zee's refusal to meet the demand, Invesco filed a plea before the National Company Law Tribunal (NCLT), Mumbai. The tribunal directed Zee to consider Invesco's demand in accordance with the law.

Zee approached the high court seeking a declaration that Invesco's requisition notice was illegal and invalid. In October 2021, a single judge of the high court Justice GS Patel passed the order, which was challenged by Invesco.

The division bench of Justice SJ Kathawalla and Justice Milind Jadhav has now reserved its verdict on the appeal.

On behalf of Invesco, senior advocate Janak Dwarkadas had raised the following contentions:

• As per the Companies Act, it was mandatory for the board to call for a shareholders' meeting;

• The High Court had no jurisdiction to entertain a suit as the Companies Act ousted civil court jurisdiction for matters within the domain of the NCLT;

• The Board of Directors could not sit in judgment over any matter for which the meeting was requisitioned.

• Zee's suit was premature and they could have challenged the resolutions passed in the meeting;

• Shareholders holding 10 percent or more of the paid-up share capital were entitled to requisition for an EGM as a matter of right in corporate democracy.

On behalf of Zee, senior advocate Aspi Chinoy submitted:

• The order under challenge was in accordance with the law;

• A requisition under 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;

• If one could challenge the resolutions, the requisition leading to the meetings could also be challenged in civil suits;

• Obtaining valid permission/approval from the Ministry of Information & Broadcasting was crucial before moving a requisition to hold an EGM to remove a director, which was not done in the present case;

• Not obtaining prior approval from the Ministry to remove the present Managing Director could lead to the broadcaster losing its license;

• An independent director could not be appointed by the shareholders directly;

• For the 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;

• Having an executive director was crucial for such approval; after removing Goenka, the executive director would not be left on the board, which was against the statutory requirement.

Chinoy appeared alongside senior advocates Navroz Seervai, Pesi Modi and Birendra Saraf. Also, advocates from Trilegal comprising Prateek Seksaria, Nitesh Jain, Nisha Uberoi, Gautam Chawla, Atul Jain, Adrish Majumder, Vatsala Kumar, Ritika Ajitsaria, Brihad Ralhan, Hitesh Saini and Radhika Seth appeared for Zee.

Senior advocate Janak Dwarkadas along with senior advocates Ravi Kadam and Sharan Jagtiani appeared for Invesco. The team from Dhruve Liladhar & Co included advocates Gaurav Mehta, Rishika Harish, Kingshuk Banerjee, Bhavik Mehta, Zacarias Joseph, Sonali Aggarwal, Ritvik Kulkarni and Prakruti Joshi.