Bombay HC bars Invesco from calling an EGM

Ayushi Kar Mumbai | Updated on October 27, 2021

Says Invesco’s proposals to remove MD, appoint additional directors are illegal and invalid

In a major win for the promoters of Zee group, the Bombay High Court on Tuesday granted an injunction against Invesco’s requisition to hold an extraordinary general meeting for removal of promoter and MD, Punit Goenka from the company’s board.

The court categorically came to the conclusion that Invesco’s proposals to remove Goenka and appoint six additional directors are illegal and invalid in which case they will not be implemented should shareholders vote in their favour.

“Sometimes, it happens that a company must be saved from its own shareholders, however well-intentioned. 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,” the court said.

The Bombay High Court found the requisition made by Invesco to be “illegal, ultra vires, invalid, bad in law and incapable of implementation.”

Invesco’s argument

The crux of the argument from Invesco’s side was “The shareholders’ rights to call an EGM cannot be curtailed by the company or its board. If a resolution is ‘ineffective’, it will simply be ‘still-born’ and will not be put into effect. But that does not mean that the EGM should be interdicted.”

Shriram Subramanian, MD of InGovern Research Services, a corporate governance advisory firm, told BusinessLine, “The decision by the high court is a major win for Zee. Given that the Zee-Sony merger requires Punit Goenka to remain as the Managing Director- this is also good for shareholders who will see Zee's valuation increase on the back of the merger. It needs to be seen whether Invesco will appeal to higher courts as yet, or see this as a face-saving way to quietly withdraw from this wrangle and engage positively with the company to ensure that the Zee-Sony merger goes through.”

Set a precedent

Experts also believe that the order can set a major precedent, which might not be in favour of shareholder activism and minority shareholders, although that is yet to be seen, “Invesco did not seem to have proposed the EGM requisition with clean hands and left out the background and many facts. As the high court has decided the matter based on the infirmities in the requisition, it is indeed an order to be studied by all calling for EGMs. Even a simple matter of the Articles of Association of Zee restricting the Board size to 12 was not considered in the EGM requisition,” Subramanian said.

Published on October 26, 2021

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