Zee Entertainment Enterprises Limited (ZEEL) board has decided to not hold an extraordinary general meeting (EGM) sought by its shareholder Invesco, the company said on Friday.

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“The Board deliberated, and unanimously concluded that the Requisition Notice is not valid, as it suffers from multiples legal infirmities,” the media firm told Invesco in a letter.

The letter comes a day after the National Company Law Tribunal (NCLT) directed Zee’s board to consider Invesco Developing Market Fund and OFI Global China Fund’s requisition to hold an EGM.

Referring to the ‘multiples legal infirmities’ it has cited, Zee said the appointment of new independent directors, as proposed by Invesco in the requisition notice, is subject to prior approval from the Ministry of Information and Broadcasting.

According to JN Gupta, former ED, SEBI and MD at Stakeholders Empowerment Services, rejection on technical ground may not be the good governance on the part of Zee. “Zee is very well within its rights not to convene EGM because the law itself provides a remedy there. If I was in a position of Zee, I would have refused it on the fact that I am not calling it, you are free to call the EGM but I would not say that the notice is bad in law because then I should have provided them what was the bad in law in the notice. I don’t buy that argument because then they should have told that 20 days back,” he said.

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Gupta, however, pointed out that NCLT has a very limited scope of intervention in the issue. The tribunal cannot go beyond the law. “There is a provision that if there is a failure to call the meeting, the shareholders themselves can call the meeting. So, in my opinion, it is a matter for NCLAT and then for Supreme Court to decide. NCLT has to interpret the law, it cannot overwrite the law,” he explained.

Meanwhile, Hetal Dalal, President & COO, IIAS was disappointed with Zee’s handling of the case.

Zee has taken the legal opinion and therefore cannot hold the EGM and so, to that extent Invesco was right to preemptively approach NCLT because clearly the board was dragging it and now it has found the new reason to not hold the EGM.

She said the law states that now that the board is refusing to hold the EGM, the investors now have to go ahead and hold the EGM. “That is where the board was probably banking on. I am a little disappointed that the board is reacting in this particular manner. It is blocking the issue rather than addressing it in any and every form that it can, which is not the way to be,” she said.

This reinforces Invesco’s point of view that the board needs better independence, she noted.

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Corporate Lawyer HP Ranina told CNBC-TV18 that if f the requisition has not been made then the company can refuse to have the EGM. “Now, the board will appear before NCLT on Monday morning and show how it is invalid and then the NCLT will decide whether to direct them to hold the EGM or now. They will have to now establish their point that it is invalid before the NCLT,” he added.

The ball is in the NCLT’s court to decide whether this requisition was valid or invalid, he said.

For the entire discussion, watch the accompanying video.

(Edited by : Kanishka Sarkar)