Case Note & Summary
The case involves an appeal by Invesco Developing Markets Fund and OFI Global China Fund LLC (collectively holding 17.88% of shares in Zee Entertainment Enterprises Limited) against a judgment of the learned Single Judge of the Bombay High Court that restrained them from calling and holding an Extra Ordinary General Meeting (EGM) requisitioned under Section 100(2)(a) of the Companies Act, 2013. The appellants had issued a requisition on 11th September 2021 seeking removal of certain directors and appointment of new directors. The respondents, Zee Entertainment Enterprises Limited and its Managing Director Punit Goenka, opposed the requisition on grounds that the proposed resolutions were illegal and that the appellants had an ulterior motive. The learned Single Judge had granted an injunction restraining the EGM. On appeal, the Division Bench of the Bombay High Court (S.J. Kathawalla and Milind N. Jadhav, JJ.) reversed the Single Judge's order. The court held that the shareholders' right to requisition an EGM under Section 100 is a statutory right and that the company cannot refuse to convene the meeting on the basis of alleged illegalities in the proposed resolutions. The court further held that the proposed resolutions for removal of directors are not per se illegal and that the shareholders are entitled to vote on them. The court emphasized that the jurisdiction of courts to interfere with the holding of an EGM is limited to cases of fraud or oppression, which were not established in this case. The appeal was allowed, and the injunction was vacated, permitting the appellants to proceed with the EGM.
Headnote
A) Company Law - Shareholders' Rights - Right to Requisition EGM - Section 100(2)(a) Companies Act, 2013 - The court held that shareholders holding 17.88% of paid-up share capital have a statutory right under Section 100(2)(a) to requisition an Extra Ordinary General Meeting (EGM) for removal of directors and that the company cannot refuse to convene the meeting on the ground that the proposed resolutions are illegal or that the shareholders have an ulterior motive. The court emphasized that the right to requisition is a fundamental right of shareholders and interference by courts is limited to cases of fraud or oppression. (Paras 1-50) B) Company Law - Removal of Directors - Validity of Resolutions - Sections 100, 169 Companies Act, 2013 - The court examined the proposed resolutions for removal of directors and held that they are not per se illegal. The court noted that Section 169 of the Act permits removal of directors by ordinary resolution and that the shareholders are entitled to vote on such resolutions. The court rejected the argument that the resolutions were vague or lacked particulars, stating that the shareholders have the right to decide on the removal based on their assessment of the directors' performance. (Paras 51-74)
Issue of Consideration
Whether the learned Single Judge was correct in restraining the shareholders of Zee Entertainment Enterprises Limited from calling for and holding an Extra Ordinary General Meeting as requisitioned by them, and whether the proposed resolutions in the requisition suffer from any illegality.
Final Decision
The appeal is allowed. The impugned judgment dated 26th October 2021 is set aside. The injunction restraining the shareholders from calling and holding the EGM is vacated. The appellants are permitted to proceed with the EGM in accordance with law.
Law Points
- Shareholders' right to requisition EGM under Section 100(2)(a) of Companies Act
- 2013 is a statutory right
- Court's jurisdiction to interfere with EGM is limited to cases of fraud or oppression
- Proposed resolutions for removal of directors are not per se illegal
- Board cannot refuse to convene EGM on merits of resolutions
- Section 169 of Companies Act
- 2013 provides for removal of directors by ordinary resolution
