The board of Zee Entertainment Enterprises Ltd on Friday rejected Invesco’s demand to hold an extraordinary general meeting, setting the stage for a legal battle between them.

The National Company Law Tribunal (NCLT) on Thursday had directed Zee to call a board meet to decide on Invesco’s demand for the EGM that sought to oust MD and CEO Punit Goenka and appoint six new directors.

After a meeting on Friday, Zee said that its board “arrived at a conclusion that the requisition is invalid and illegal; and has accordingly conveyed its inability to convene the EGM to Invesco Developing Markets Funds and OFI Global China Fund, LLC”.

Invesco has the option to convene the EGM at the company’s expense which has to be held within three months.

In a regulatory filing, the company said that its board sought the opinion of independent counsel, legal experts including senior retired Supreme Court judges and evaluated the matter in a fair and transparent manner.

“The Board has arrived at this decision by referring to various non-compliances under multiple laws, including the Securities and Exchange Board of India (Sebi) guidelines, Ministry of Information and Broadcasting (MIB) guidelines and key clauses under the Companies Act & Competition Act, and after taking into account the interests of all the shareholders and stakeholders of the company,” Zee said.

In a detailed submission to the stock exchanges, the company dwelt on the multiple legal infirmities with regard to the requisition notice.

It cited I&B ministry guidelines to say prior permission from them is mandatory to effect any change in the CEO or the board of directors. Paragraph 5.10 of the ministry’s guidelines for the uplinking of TV channels from India framed on December 5, 2011 say “it will be obligatory on the part of the company to take prior permission from the MIB before effecting any change in the CEO/ Board of Directors’’.

Invesco had said in its notice that the resolutions proposed for the appointment of directors contemplate them to be subject to approval from MIB, while the resolution on Goenka is not contingent upon any prior approval from MIB.

Sebi rules

The board cited violation of Sebi takeover rules of it accepted the Invesco proposal.

The non-compliance is on the count of the fund proposing the appointment of one half of the board without the approval of the nomination and remuneration committee of Zee and the board.

Zee claimed that the Invesco proposals also does not follow the process laid down under Companies Act and Sebi’s listing regulations for the appointment of independent directors.

According to Zee, Invesco’s proposal would result in effecting a change in control of the company without making an open offer.

It said regulation 17 of the Sebi listing rules mandates that a board shall have an optimum combination of executive and non-executive directors and that not less than 50 per cent of the board of directors shall comprise of non-executive directors.

However, if Invesco’s proposals are effected, the company’s board will comprise of all non-executive directors. Therefore, it will be in contravention of the market regulator’s listing regulations.

Additionally, Section 203 of the Companies Act obligates the Company to have a managing director, or CEO, or manager and in their absence, a whole-time director.