The investors have approached the tribunal under Section 98 (1) and 100 of the Companies Act to seek its intervention to direct the company to call for the EGM before October 28.
On September 11th, Invesco-owned Invesco Developing Markets Fund and OFI Global China Fund LLC had sent a notice to the ZEE board, seeking an EGM to discuss the removal of three directors, including MD and CEO Punit Goenka, from the board and induction of six new independent directors of its choice.
“The board of directors have not proceeded to call an extraordinary general meeting of the shareholders of the company, despite its valid requisition addressed by the applicants,” said the company in its petition. “The company has since 2019 been increasingly intermingled in the financial trouble of the family, including but not limited to the pledging of the promoter shares, guarantees given by the company on behalf of entities own by the promoter family, and related party transactions between the company and other promoter-owned entities which has also seen financial distress.”
A ZEE spokesperson said that the, board of the company “remains committed” to act within the “framework of law” and is focused towards enhancing the company’s growth and shareholder value.
“It (the board) is in the process of taking the required steps within the statutory period. The company does not wish to comment on any impulsive or premature steps taken by Invesco Developing Markets Funds and OFI Global China Fund,” the spokesperson said.
Invesco holds 17.88% in ZEE via Invesco Developing Markets Fund and OFI Global China Fund LLC.
“The non-convening of the EGM is a deliberate and oppressive act on the part of the respondents. It also constitutes gross mismanagement of the Company’s affairs by the Respondents. The Respondents’ failure is consistent with its previous acts of oppression and mismanagement,” said the investor in the petition.
On Wednesday, the investors had approached the tribunal for seeking urgent relief. However, after hearing primary arguments, a bench led by Bhaskara Pantula Mohan and Narender Kumar Bhola has posted the matter for further hearing to September 30.
When contacted, Bhavik Mehta, Partner at the law firm Dhruve Liladhar & Co, who is representing Invesco and OFI Global China Fund refused to comment.
Law firm Trilegal is representing ZEE in the case.
Invesco has pointed out that while ZEE has maintained a “stoic silence” on its requisition, the board on September 22nd announced the approval and execution of a non-binding term sheet with Sony Pictures Networks India (SPN), in relation to a potential transaction involving a composite scheme of arrangement for the merger of the company and SPN.
The investors have said that they were surprised to receive information on the proposed transaction.
“A court-ordered and monitored extraordinary general meeting would ensure that the Company’s compliance with its statutory obligations and is in the public interest,” said Invesco in its petition, a copy of which was reviewed by ET.
The investors have further argued that, before the EGM, as requisitioned by the applicants is convened, the respondents may take various steps to render the process infructuous.
“The announcement of the proposed transaction (merger) is plainly an act to achieve that end. It is therefore imperative that the EGM as requisitioned by the applicants is called on or before October 28th,” said the investors in their plea.
A legal expert said that this move may not have any immediate impact on the merger talks; however, it is a precursor of the hurdles that this deal will have to overcome on the road to fructification.
On September 23rd, a day after ZEE and SPN announced signing of the non-binding term sheet, Invesco sent a letter to ZEE board, standing firm on its call for the EGM.
The expert quoted above stated that as per the law, ZEE can take 21 days to announce a date for an EGM from the day it receives such a request. In this case, it had till October 2nd.
“While Invesco is entitled to exercise legal rights, its end game is not clear. If they want other shareholders to support the change in management, they should spell out their plans for ZEE,” said the lawyer. “This move looks like a pressure tactic.”
Analysts have said the merger with SPN will have a positive impact on ZEE as there are more areas of synergy than there are overlaps.
They said the combined entity will have a profit after tax of about Rs 3,100 crore, a price-earnings multiple of 16x-17x and a market cap of Rs 50,000-60,000 crore.
