Zee Entertainment Enterprises Ltd won a major battle after the Bombay High Court on Tuesday temporarily restrained Invesco from calling an extraordinary general meeting (EGM) to move a resolution seeking to remove Zee Entertainment Enterprises Ltd MD & CEO Punit Goenka and appoint six of its nominees on the company’s board.

“There will be an injunction...restraining defendants nos 1 and 2 (Invesco Developing Markets Fund and OFI Global China Fund)... from... holding an EGM under Section 100(4) of the Companies Act, 2013,’’ Justice G.S. Patel said in a 44-page order. Invesco can appeal against the order before the Supreme Court.

The reprieve for Zee came on a day that the media giant decided to cancel its board meeting on Wednesday to consider the second quarter results for the period ended September 30 because of a lack of quorum. The company said it would issue a fresh notice setting the date for its board meeting.

A quorum requires at least three of the seven members of the board to be present at the meeting, sources said. Zee must hold the meeting within 45 days from the end of the second quarter.

Justice Patel, who agreed with all the points made by Zee’s senior counsel Gopal Subaramaniam, went on to say “sometimes, it happens that a company must be saved from its own shareholders, however well-intentioned’’.

Zee had argued that the Invesco bid to move resolutions at an EGM to remove Goenka and induct six new independent directors on the board were “all misbegotten — illicit in conception, illegal in form and iniquitous in result”.

The judge said that Invesco’s demand for an EGM had a “fundamental flaw” in as much as it was premised on the belief that “an EGM requisitioned by shareholders are somehow more special or sacrosanct than resolutions proposed by the Board itself.”.

Zee had argued that Invesco’s demand was illegal and invalid as it violated provisions of the Companies Act, Sebi’s listing regulations and the guidelines of the ministry of information and broadcasting in so far as these related to media companies.

The court upheld Zee’s contention that resolutions to remove Goenka and introduce a new slate of independent directors could “bypass or jettison” mandatory provisions that required approvals from the Nomination and Remuneration Committee (NRC) and the approval of the Board.

Invesco and OFI Global together hold 17.88 per cent in Zee. A shareholder with more than 10 per cent can call an EGM.

On Invesco’s demand to remove Punit Goenka, the single judge said that Section 203 of the Companies Act requires every firm to have an MD or CEO or manager, and failing any of these, a whole-time director.

“The requisition demands his ouster — but without proposing a replacement. This puts Zee into a statutory black hole, for it would then be totally in violation of Section 203(1); and its directors, would have to face the liabilities, including fines, set out in Section 203(5). No shareholder can be permitted to drive his company into a state of non-compliance and penalty,’’ Justice Patel said.

Invesco counsel Janak Dwarkadas said shareholders have an unfettered right to propose a resolution they choose at an EGM.

“If a shareholder resolution is bound to cause a corporate enterprise to run aground on the always treacherous shoals of statutory compliance, there is no conceivable or logical reason to allow such a resolution even to be considered. Shareholder primacy or dominion does not extend to permitting shareholder-driven illegality. A perfectly legal resolution, if carried, may well result in the diminution of the company’s profits or business. That is not a court’s concern. But the resolution must be legal,” Justice Patel observed.

Justice Patel in his interim order also chose to “ignore’’ the proposed merger transaction between Zee and Sony.

“This has no relevance to the discussion at hand and I have chosen to ignore it entirely. Both sides may have quite a lot to say about it; I do not see the need to hear any of it.”

“If the Board itself proposes an EGM to consider these very resolutions, or ones equally vulnerable, it is entirely possible for anyone with sufficient legal standing, even a shareholder in a derivative action, to ask of a court precisely that which Zee does today.”

“The decision taken by the court is a huge win for all the stakeholders of the company,’’ a spokesperson for Zee said.

Speaking to The Telegraph, Shriram Subramanian, founder & MD, InGovern Research Services, a proxy advisory firm, said that while the interim injunction is positive for Zee, it remains to be seen if Invesco will appeal in a higher court against the order or in a win-win step, back the proposed merger of Zee with Sony.