Zee Entertainment Enterprises Limited (ZEEL) board has decided to not hold an extraordinary general meeting (EGM) sought by its shareholder Invesco, the company said on Friday.
“The Board deliberated, and unanimously concluded that the Requisition Notice is not valid, as it suffers from multiples legal infirmities,” the media firm told Invesco in a letter.
The letter comes a day after the National Company Law Tribunal (NCLT) directed Zee's board to consider Invesco Developing Market Fund and OFI Global China Fund’s requisition to hold an EGM.
Referring to the ‘multiples legal infirmities’ it has cited, Zee said the appointment of new independent directors, as proposed by Invesco in the requisition notice, is subject to prior approval from the Ministry of Information and Broadcasting.
On Invesco’s request to pass resolution for removal of Punit Goenka as Director of the company, Zee cited Paragraph 5.10 of the Policy Guidelines for Up linking of Television Channels from India (MIB Guidelines). The rule, the company said, states, "It will be obligatory on the part of the company to take prior permission from the Ministry of Information & Broadcasting before effecting any change in the CEO/ Board of Directors."
Moreover, Zee said, Invesco’s proposal of making fundamental changes to the board of directors and key managerial personnel by seeking removal of the executive director and appointment of six (6) new independent directors will result in noncompliance with the SEBI regulations.
The move comes against the backdrop of Invesco Developing Market Fund and OFI Global China Fund earlier calling for an EGM of shareholders seeking the removal of Managing Director Punit Goenka on September 11.
However, Zee failed to call the meeting and on September 22 announced the merger with Sony Pictures Networks India Private Limited. And, according to the proposed transaction, both entities plan to list the merged entity where Punit Goenka will continue as the managing director and chief executive officer.
Invesco had moved the NCLT for failing to announce a date for the EGM to reconstitute the company’s board.
Also Read: Zee EGM: Here’s why Invesco moved NCLT
On Thursday, the tribunal had observed that it is the "mandate of the law" that Zee should hold the EGM and clarified is not a discretionary power of the board to call or not call for EGM.
The media firm then told NCLT that Independent Directors were due to meet later in the day to discuss the issue and decide on the EGM date.
The NCLT will hear the matter again on October 4.
Reacting to Zee’s announcement, corporate lawyer HP Ranina said if the requisition has not been made, the company can refuse to have the EGM. Zee’s board will appear before NCLT on Monday and explain how the requisition notice is invalid, he said, and added, “The ball is in the NCLT’s court to decide whether this requisition was valid or invalid.”
Meanwhile, JN Gupta, former ED, SEBI and MD at Stakeholders Empowerment Services, is of the view that rejection on the technical ground may not be the good governance on Zee’s part.
“Zee is very well within its rights not to convene EGM because the law itself provides a remedy there. If I was in a position of Zee, I would have refused it on fact that I am not calling it, you are free to call the EGM but I would not say that the notice is bad in law because then I should have provided them what was bad in law in the notice. I don’t buy that argument because then they should have told that 20 days back,” he said.
According to Gupta, NCLT has a very limited scope of intervention in the issue because as per the construction of language in the law, the word that is used is ‘shall’. “‘Shall’ in general states that ‘it is a must’ but within that paragraph itself there is a provision that if there is a failure to call the meeting, the shareholders themselves can call the meeting. So, in my opinion, if there is any other interpretation of the law that has been taken by NCLT, it is a matter for NCLAT and then for Supreme Court to decide. NCLT has to interpret the law, it cannot overwrite the law.”
Disappointed with Zee’s handling of the issue, Hetal Dalal, President & COO, IIAS, said Invesco was right to preemptively approach NCLT because clearly the Zee board was dragging the issue and now it has found the new reason to not hold the EGM. According to the law, now the investors can hold the EGM and that is where the board was probably banking on, she said.
(Edited by : Abhishek Jha)
First Published: IST