Bombay High Court Judgment on Invesco Vs Zee

Bombay High Court’s single bench decision barring Invesco from calling for an extraordinary general meeting (EGM) of Zee Entertainment could set a bad precedent for shareholders’ rights in the long run, according to legal experts.

“ This order may have the effect of dwindling the rights of shareholders in a company, by abridging their unconditional and exclusive right to call for an EGM,” said Aditya Nayyar, Partner, Ortis Law Services

Read More : Case summary of Satbir Singh Vs State of Haryana

Invesco had requested for an EGM, under section 100 of the Companies Act. According to experts, it’s one of the many Indian laws which upholds and protects the popular rights of these shareholders, who are in the nonage.

Rahul Kamerkar, Advocate, explained, “ Section 100 of the Act is a fair and popular right given to any group of shareholders having 10 per cent share capital to importunity an EGM. The courts don’t have power (under the Companies Act) to dock this right on the graces/ legitimacy of the proposed

Resolution indeed before it’s put to bounce. In my opinion, indeed a blatantly illegal proposed resolution won’t empower the courts (under the Companies Act) to dock the rights of nonage shareholders under this section, anything lower than that would open up a Pandora’s Box wherein any Board will have the capability to get an instruction on any EGM requested by a group, that too from a High Court, grounded on the graces/ legitimacy of the perpetration of the proposed resolution, indeed before it’s put to bounce.”

Also read Judges anticipate Zee-Sony junction to go through soon

According to Kamerkar, allowing the judgment to stand might lead to an absurd situation wherein the Directors of Companies can use their company’s coffers to hire the stylish counsel, and the nonage investor group will have to match the same from their own pockets, simply to defend the graces of a proposed resolution which in utmost cases, nonage shareholder generally lose the vote on.

Picky shareholders

Anupam Shukla, Partner, Pioneer Legal believes this could make nonage shareholders pickier now on when it comes to taking up issues with the operation, “ such a decision by the court may affect activist shareholders being cautious of picking fights with the operation without careful deliberation and suitable medication.”

“ I do n’t suppose the Bombay High Court’s single bench decision to bar Invesco from holding the EGM will set a precedent since it’s likely to be overturned by the Division Bench or by the Supreme Court. Also, I do n’t suppose this will become a precedent since all these matters are confined to the data of the Zee Invesco case,” said Milind Jha, Partner at Link Legal.

Invesco, who’s the largest nonage shareholder for Zee Entertainment Enterprises has presently appealed the single bench decision on October 26. The matter is being heard by the Division Bench of Justice SJ Kathawala and Justice Milind Jadhav at the Bombay High Court.