Punit Goenka-run Zee Entertainment Enterprises Ltd (ZEEL) is digging its heels in for a bruising legal battle with institutional shareholder Invesco.
On Friday, ZEEL stuck to its guns and maintained that Invesco’s requisition for an extraordinary general meeting (EGM) of shareholders was illegal and invalid, effectively spurning the Bombay High Court’s directive yesterday to call a shareholders’ meeting.
Invesco plans to move a resolution seeking to oust CEO and MD Goenka and induct six new independent directors — a move that the Subhash Chandra family, the founders of Zee, believe is a ploy to push for a takeover of the media house by the Reliance group.
Zee has already struck a non-binding agreement with Sony India for a merger of the two entities that it hopes to close by the end of December.
Goenka had informed the Zee board about 10 days ago that Invesco had been trying to bring in the Reliance group as a strategic partner and made its first overture in February.
The Bombay High Court has reserved its order on Zee’s petition till Tuesday.
ZEEL has argued that Invesco’s demand for an EGM is not compliant with rules and regulations governing media companies made by the Ministry of Information and Broadcasting (MIB), Securities and Exchange Board of India (SEBI) and also some clauses of the Companies Act.
On Thursday, Justice GS Patel of the Bombay High court had asked the board of Zee to look into the requisition notice made by Invesco Developing Markets Fund and OFI Global China Fund.
Zee’s senior counsel Gopal Subramanium had said that he would seek instructions from the company and inform the court about the date of the EGM on Friday morning.
At the hearing on Friday, Subramanium reiterated the Zee board’s concerns, indicating that the company was not prepared to call the EGM.
Subramanium said prior permission must be taken from the I&B ministry before trying to effect any changes to Zee’s board.
Counsel for Zee said a certain procedure needs to be followed when it comes to the appointment of independent directors. While the nomination and remuneration committee proposes the names of independent directors to the Board, the latter then takes a view on whether or not they should be appointed.
He averred that the proposal to induct six new independent directors into the board tantamounts to a change in control and, if this happens, then a open offer has to be made. He further observed that a board of a company should have a optimum mix of executive and non-executive directors.
Kapil Sibal, who appeared for Punit Goenka, said Invesco was seeking the appointment of six independent directors and the removal of Goenka. However, a listed company cannot have a board without a managing director and the CEO.
Janak Dwarkadas, who appeared on behalf of Invesco, said the shareholders have the right to seek an EGM as they hold more than 10 per cent in the company. He also did not agree with the view that the Invesco move would lead to a change in control since this is a proposal that may or may not be accepted by the shareholders.
Early this month, Zee had claimed that it had sought legal opinion from a wide range of legal eagles, including retired Supreme Court judges who endorsed the view that Invesco’s notice seeking the convening of an EGM was illegal and invalid.
