MUMBAI: The Mumbai bench of the National Company Law Tribunal (NCLT) on Thursday directed Zee Entertainment to consider positively the requisition for an extraordinary general meeting (EGM) made by shareholder Invesco under the Companies Act. It also directed Zee to “comply with section 100 of the Companies Act” and posted Invesco’s application for compliance on October 4.
Invesco Developing Markets Fund and OFI Global China Fund LLC, two US-based foreign funds, had on Wednesday approached the NCLT against Zee for failing to announce a date for the EGM. They had requisitioned the meeting on September 11 to remove Zee’s MD Punit Goenka and reconstitute the board by bringing in six more independent directors.
Senior counsel Gopal Subramanium with solicitor Nitesh Jain of Trilegal made a statement on behalf of Zee that its board would be holding a meeting on Thursday or Friday to decide on the requisition and will communicate such a decision to Invesco on Friday, well within the 21-day deadline under the law once such requisition is made. “It still has three days to decide,” he said, and the NCLT recorded his statement that the board meeting will be held.
The NCLT bench of acting president B P Mohan and member C B Singh, which was hearing the matter, asked senior counsel Sudipto Sarkar appearing for Goenka of Zee, “Their (Invesco’s) right to call a board meeting — can you deny that?” Sarkar said, “That will depend on the requisition, whether it is valid or not.”
Former attorney general for India Mukul Rohatgi and Janak Dwarkadas, as counsel for Invesco, said they were almost 18% shareholders out of 96% public shareholding of Zee, which has over 2.5 lakh public shareholders and only 3.99% shareholding is by Goenka. Rohatgi said the company’s board has no discretion in deciding “one way or the other” once a requisition is made by shareholders who qualify with the necessary 10% shareholding threshold. They have to call for the EGM and, if they do not as the apprehension is, the NCLT should direct them to call for it.Rohatgi started the online hearing before the NCLT’s Mumbai bench by saying, “We wanted three people to go. One was the MD Goenka and two others…Of the three, two resigned on September 13. We also want six new independent directors to come in.” He said, “We read in the newspapers that Zee is contemplating a merger and Goenka to continue as MD in the new proposed entity.” He said Invesco’s investment in Zee is over Rs 5,000 crore. “We are worried our investment will go down the drain,” he said, adding “Goenka doesn’t want to lose his saddle.”
Both Rohatgi and Dwarkadas with solicitor Dhruve Liladhar for Invesco said it has an “inalienable right” under the law to call for the EGM. Dwarkadas added, “We never said we are against a merger. We are saying the merger must go through a board we agree with, and our apprehension is that they will stall calling for an EGM by raising frivolous objections.”
Senior counsel Arun Kathpalia for independent directors said they were a responsible lot and NCLT does not have to direct compliance of section 100 of Companies Act. Section 100 (3) of the Companies Act states that on receipt of requisition, the board of directors shall proceed to call EGM within 21 days from the date of the deposit of requisition, on a date which shall not be later than 45 days of the date of deposit of requisition. The board shall be said to have failed in calling the meeting if it does not call it within 21 days or convenes it for part demands or posts it after 45 days.
Subramanium said it is not yet a merger, it is only a document of “disclosure” to the stock exchanges as is required of a public listed company under regulation 30 of the Sebi listing obligations. It says that at its meeting on September 22, Zee has agreed for “execution of a non-binding term sheet with Sony Pictures Networks India in relation to a potential transaction involving a composite scheme of arrangement for a merger of the company and Sony India…The proposed transaction is subject to completion of satisfactory due diligence by the company and Sony India.” At this juncture it is a “non-binding term sheet”. Later, after due diligence, will they go to the shareholders, Subramanium said, when NCLT asked why did the company have to go public with the information?A Zee spokesperson said after the NCLT hearing, “The board of the company is scheduled to meet as per the statutory time allotted, in relation to the matter. The company will continue to take all the actions needed in the interest of the shareholders and as per law.”