Lawstreet Journal

Companies Act 2013 - 'Proposed Shareholder Resolution Must Be Legal in Order for EGM to be Called' : Bombay High Court [READ ORDER]

Lawstreet Journal 7 Nov 2021 3:07am

Image courtesy: Lawstreet Journal Judiciary Companies Act 2013 - 'Proposed Shareholder Resolution Must Be Legal in Order for EGM to be Called' : Bombay High Court [READ ORDER]

CASE- Zee Entertainment Enterprises Ltd. v. Invesco Developing Markets Fund And 2 Others

The Bombay High Court recently ruled that a shareholder resolution sought under Section 100 of the Companies Act, 2013 must be legal in order for the Board of Directors to call an Extraordinary General Meeting (hereinafter EGM). 

The Single Judge Bench of Justice G.S. Patel was hearing a suit filed by Zee Enterprises Limited, a public limited and listed company, seeking an injunction against Invesco (investors and shareholders who own 17.88 percent of ZEE) from acting in furtherance of a requisition notice because it is illegal, ultra vires, invalid, bad in law, and incapable of implementation.

In the order, Justice GS Patel, who considered the matter, stated that the Court can investigate whether the matters proposed to be considered in the requisition are legal.

"...sometimes, it happens that a company must be saved from its own shareholders, however well-intentioned. If a shareholder resolution is bound to cause a corporate enterprise to run aground on the always treacherous shoals of statutory compliance, there is no conceivable or logical reason to allow such a resolution even to be considered. Shareholder primacy or dominion does not extend to permitting shareholder-driven illegality. A perfectly legal resolution, if carried, may well result in the diminution of the company's profits or business. That is not a court's concern. But the resolution must be legal. The interpretative question is therefore not over the word 'valid' at all but about the matters proposed to be… Continue Reading...

Tagged: Bombay High Court   Zee Entertainment  
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