Zee Entertainment can breathe easy for now as it has won an injunction from the Bombay High Court restraining Invesco from calling for an extraordinary general meeting (EGM). To discuss the developments, Hetal Dalal, President, and COO of IiAS spoke to CNBC-TV18.

Zee had approached the high court earlier this month seeking an injunction or restraining order against Invesco from taking any steps following its notice to the media firm calling for an EGM.

Invesco's calls for a shakeup at Zee over corporate governance come at a time when the company is planning a merger with the local unit of Japan's Sony Group.

That move is set to create India's biggest broadcaster but Invesco has raised concerns about options given to Zee's founding family, which includes its CEO Punit Goenka, to raise their stake in the merged company to 20 percent. The founding family of Zee currently owns 4 percent of its shares.

Dalal said, “If there is an investor, and this is again leaving aside the Zee- Invesco sort of factual information, but if there is an investor who is really arguing that the board is weak and needs better governance, or that there is essentially a hostile takeover, the shareholder wants to control the board, this becomes a bit of a challenge. To that extent, you would argue that maybe regulation has to provide for something like this.”

However, the fact is that the regulations have been untested until now. This is the first instance of this kind of argument going to court. She suspects this will go all the way to the Supreme Court and a verdict will finally settle the entire matter.

Dalal cited the Fortis example, where two shareholders got together holding about 12 percent and removed the existing directors and appointed a set of independent directors.

“So, there is a precedent to say that this has happened in the past. But in Fortis, the difference was that the board didn’t contest it and the EGM was held and therefore the independent directors were appointed by shareholders, and that sort of went through,” she explained.

The challenges of the regulation in terms of the fine lines, which have been written and how one reads the regulation vis-a-vis what is actually happening, is effectively being tested, she said.

She added that this is the first instance where the courts have taken a view saying that an independent directors appointment has to go through NRC. “But I think the whole issue rests on the fact that Invesco was attempting to appoint independent directors, and the question of independence came into play and therefore, the regulation on how independent directors are getting appointed. So, it is sort of fine-tuned, technicality, which I think the regulation now needs to provide for a larger scope in terms of appointment of independent directors by shareholders,” she said.

Also Read: Bombay HC temporarily bars Invesco from calling Zee EGM

(Edited by : Kanishka Sarkar)