A Division Bench of the Bombay High Court, in the case of Invesco Developing Markets Fund (formerly Invesco Oppenheimer Developing Markets Fund) (“Appellants”) v. Zee Entertainment Enterprises Limited, [APPEAL (L) NO.25420 OF 2021, decision dated March 22, 2022] has examined the issue of whether numerical and procedural compliances would satisfy the valid requisition requirement specified under Section 100(4) of the Companies Act, 2013 (“CA 2013”) for calling of a meeting requisitioned by the shareholders.
The Appellants collectively held 17.88% (seventeen point eight eight percent) of the total paid up share capital of Zee Entertainment Enterprises Limited (“Zee”) and on September 11, 2021 had issued a requisition to Zee in terms of Section 100(2)(a) of the CA 2013 for calling an extraordinary general meeting (“EGM”) to inter-alia remove 3 (three) non-independent directors of Zee and appoint 6 (six) independent directors on the board of Zee subject to the approval of the Ministry of Information & Broadcasting, Government of India (“MIB”).
On September 23, 2021, the Appellants addressed a letter to Zee calling upon it to comply with the requisition issued on September 11, 2021. Thereafter, the Appellants filed a company petition under Section 98(1) read with Section 100 of CA 2013 before National Company Law Tribunal, Mumbai Bench (“NCLT”) to seek an order calling an EGM of Zee.
On September 30, 2021, Zee’s board of directors concluded that the requisition was invalid/ illegal and recorded its inability to convene the EGM and thereafter on October 1, 2021, Zee rejected the requisition citing multiple legal infirmities contained in the requisition and filed a suit before High Court of Bombay seeking relief that the requisition notice is illegal, ultra vires, invalid, bad in law and cannot be implemented and that the same is in contravention of CA 2013, SEBI ((Listing Obligations and Disclosure Requirements) Regulations, 2015, MIB, Articles of Association of Zee and other applicable laws. In the suit, Zee preferred an interim application (L) no. 22525 of 2021 seeking injunction against the Appellants from taking any action or steps in furtherance of the requisition including calling and holding an EGM under Section 100(4) of CA 2013.
Single Judge pronounced the impugned judgment on October 26, 2021 wherein it restrained the shareholders of Zee from calling and holding an EGM under Section 100(4) of CA 2013 as requisitioned by the shareholders of Zee on the basis that the resolutions proposed under the aforesaid requisition were illegal. An appeal was preferred against such order.
Whether the Single Judge Bench could have expanded the meaning of the term “valid requisition” appearing in Section 100(4) of the CA 2013 to the object of the requisition rather than the requirements in the section?
To examine whether the words “valid requisition” would include within its ambit an analysis of whether the resolutions proposed under the requisition are illegal, the Court first relied upon LIC v. Escorts, [(1986) 1 SCC 264], to note that a notice requisitioning a meeting of a company is not liable to be questioned, as no court or tribunal can restrain the holding of an EGM. The Court treated the case of Escorts (supra) as an authority for the following proposition: no Court or Tribunal can restrain the holding of an EGM so long as the requisition of shareholders in that behalf is compliant with the procedural and numerical requirements of Section 100 of CA 2013.
The Court had then placed reliance on Cricket Club of India v. Madhav L. Apte, [ 45 Comp Cas 574 (Bom)], to note that the word “valid” is restricted only to the satisfaction of the numerical and procedural requirements and the adjective has no reference to the object of the requisition but rather to the requirements in that section itself.
To conclude, the Court held that, the term “valid requisition” in Section 100(4) of the CA 2013 is restricted only to the numerical and procedural compliance and nothing further. The Court further held that, on a literal and plain reading of Sections 98 and 100 of CA 2013, the board of a company does not have the power or discretion to sit in judgement over “any matter” for consideration of which the meeting is requisitioned.
Please find attached a copy of the judgment.
This update has been contributed by Arka Majumdar (Partner) and Juhi Wadhwani (Associate).
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