Invesco v Zee

In a recent judgment pronounced in Invesco Developing Markets Fund v. Zee Entertainment Enterprises Limited[1] (“Judgment”), on March 22, 2022, a Division Bench of the Bombay High Court (“BHC”) allowed Invesco’s appeal against a judgment dated October 26, 2021[2]. The October 26 judgment was passed by a Single Judge of the BHC (referred to hereinafter as the “Impugned Order”), which had granted an injunction restraining Invesco from calling for and holding an extraordinary general meeting (“EGM”) of Zee.

Factual background

The Invesco v. Zee dispute has its genesis in the requisition notice, dated September 11, 2021, issued by Invesco (which holds a 17.88% stake in Zee) under Section 100(2)(a) of the Companies Act, 2013 (“Act”), calling for an EGM of Zee (“Requisition”). Invesco had proposed the removal of three directors of Zee, including its Managing Director & CEO. The Requisition had also proposed the appointment of six independent directors on Zee’s Board of Directors (“Board”).

After Invesco filed a petition under Section 98 of the Act before the National Company Law Tribunal (“NCLT”), Mumbai, seeking an order that the requisitioned EGM be called and held, Zee was directed to consider the Requisition. On October 1, 2021, Zee rejected the Requisition as being invalid/ illegal and simultaneously filed a Suit and an Interim Application[3] therein before the BHC, inter alia seeking an injunction restraining Invesco from taking any action or step in furtherance of the Requisition, including calling for and holding the EGM under Section 100(4) of the Act. The Ld. Single Judge vide the Impugned Order granted Zee the injunction.

In a previous blog, we had examined the legislative intent behind the enactment of Section 430 of the Act and inter alia noted that the Impugned Order could lead to a deluge of parallel proceedings (before the NCLT and the civil courts), thereby undoing the said legislative intent.

This blog examines the Judgment, which sets aside the Impugned Order and re-affirms the legislative intent behind the enactment of Section 430 of the Act (i.e. there is an absolute bar on civil court jurisdiction in respect of any matters which the NCLT or NCLAT is empowered to determine).

Analysis of the Judgment

On Sections 98 and 100 of the Act

In the Impugned Order, the Ld. Single Judge had concluded that the resolutions proposed by Invesco sought to bring about an “illegality”, which would result in a situation where Zee is in violation of multiple statutory compliance requirements. As per the Ld. Single Judge, the issue was not about the interpretation of the expression ‘valid requisition’ in Section 100(4) of the Act, but about the Court’s power to invalidate such requisitions, which were purportedly ‘illegal’.[4]

Setting aside these findings, the Division Bench of the BHC has held that on a plain and literal reading of Section 100(4), the expression “valid requisition” is restricted to numerical and procedural compliances with the requirements of Section 100, and nothing further. The Division Bench relied upon the landmark decision of a Constitution Bench of the Supreme Court of India (“SC”) in LIC v. Escorts[5] and the decision of the BHC in Cricket Club of India v. Madhav L. Apte[6] (in the context of Section 169(6) of the Companies Act, 1956, which broadly corresponds to Section 100(4) of the Act) to hold inter alia that (i) the word ‘valid’ had no reference to the ‘object’ of the requisition, but rather to the requirements in the Section itself; (ii) an eligible shareholder is not bound to disclose the reasons for the resolutions proposed to be moved at the requisitioned meeting; (iii) the reasons provided are not subject to judicial review; (iv) there is no discretion vested with the Board to sit in judgment over ‘any matter’ to be placed for consideration at a requisitioned EGM; (v) the Board has a mandatory obligation to call the EGM, if the procedural and numerical requirements specified under Section 100 are met; (vi) the Act and/or its provisions pertaining to listed companies do not enable courts to deviate from the ratio set out in LIC v Escorts (which was rendered in the context of the 1956 Act); and (vii) even if the requisition is illegal or invalid, the Board is still obliged to call for the meeting.

The Judgment further holds that unlike Section 303(5) of the English Companies Act, 2006[7], Section 100 of the Act does not contain any provision which provides that a resolution may be moved at a requisitioned meeting unless “it would, if passed, be ineffective”, and therefore, the principles enshrined in Section 303(5) of the English Companies Act, 2006, cannot be imported into Section 100 of the Act.

The Judgment specifically notes that the language used in Sections 98 and 100 of the Act aid corporate democracy and protect shareholder rights, and that this intent and object of the legislature cannot be ignored whilst construing the relevant provisions of the Act.

Interpretation of Section 430 of the Act

Section 430 of the Act provides that no civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which the NCLT or the NCLAT is empowered to determine by or under the Act or any other law for the time being in force, and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act, or any other law for the time being in force, by the NCLT or the NCLAT.

The Division Bench of the BHC has held that in the face of the absolute bar (on civil court jurisdiction) contained in Section 430, the Impugned Order could not have granted an injunction against Invesco. The Bench further held that given the scheme of Sections 96-100 of the Act, the Invesco v Zee dispute would squarely fall within the NCLT’s jurisdiction, and since it is Invesco’s case that it is “impracticable” for them to hold the EGM, they are entitled to approach the NCLT under Section 98 for an order to do so. The Division Bench also held that a civil court could not interfere with the jurisdiction of the NCLT by granting an injunction, which would effectively prevent the NCLT from considering Invesco’s prayer.

Significantly, the Judgment set aside the Ld. Single Judge’s finding to the effect that “the NCLT Rules that set out the list of provisions over which the NCLT/NCLAT have jurisdiction does not include Sections 100, 149, 150 or 168 [of the Act][8]. The Division Bench held that the plain and simple language contained in Section 430 of the Act cannot be defeated by the NCLT Rules, 2016 (“NCLT Rules”), and/or the Schedule of Fees provided thereunder; and that, in any case, the Schedule of Fees specifically provides for an application under Section 98, which Invesco has filed.

This re-affirms the position that the NCLT Rules and/or the Schedule of Fees, being in the nature of delegated legislation, do not (and cannot) confer ‘jurisdiction’ on civil courts, contrary to the clear legislative intent of Section 430 – which envisages exclusive jurisdiction of the NCLT/NCLAT on all company law matters. Hence, civil courts would not have any ‘residuary jurisdiction’ over provisions of the Act that are not specifically covered under the Schedule of Fees.

Consequences of interfering with corporate democracy

The Division Bench also analysed the consequences of allowing civil courts, in certain cases, to grant an injunction restraining the shareholders of a company from exercising their statutory right to call for and hold an EGM. In this regard, the Judgment holds that a wrong precedent would be set where any unwilling Board of a company, which intends to obstruct its shareholder/(s) from calling for and holding an EGM, will resolve that the company file a civil suit.

Before the civil court, the company may pray for an injunction alleging “resultant illegalities” in the proposed resolutions. Till such time as adjudication of the “illegalities” is completed, to balance equities, the civil court will injunct the meeting. Any decision would then be subject to multiple rounds of appeal. This would, in turn, open a flood gate of litigation where corporate democracy would be “rendered nugatory”.

The purpose of the SC’s decision in LIC v Escorts would be lost and the very foundations of corporate democracy in India would be undermined. This is also apparent from the fact that Invesco has been unable to call for and hold an EGM for more than six months. The Division Bench has thus held that they cannot lay down a precedent resulting in such drastic consequences, derailing the democratic functioning of companies across India, owing to the non-cooperative and obstructive conduct of the board of directors.

Concluding Thoughts and Key Takeaways

The Division Bench’s Judgment is a much-awaited decision, which reinstates the settled legal position on corporate democracy in India. Litigants can no longer question the NCLT’s jurisdiction to adjudicate questions arising out of Section 100 of the Act [or other provisions such as Section 186 (inter-corporate loans and investments) and Section 188 (related party transactions) that are not explicitly covered under the NCLT Rules]. Parallel proceedings (simultaneously before the NCLT and civil courts) cannot be initiated in corporate disputes, thereby re-affirming the legislative intent behind the enactment of Section 430, and the rationale behind having a single specialised forum for adjudication of all company disputes.

The Judgment conclusively determines the issue of whether civil courts may, in certain cases, have ‘concurrent jurisdiction’ to adjudicate disputes, which otherwise only the NCLT or the NCLAT are empowered to determine.

Perhaps the most significant takeaway from the Judgment[9] is its unequivocal re-affirmation of the principles of corporate democracy. The Division Bench has set aside the Ld. Single Judge’s findings “on all counts”. This not only sends a strong positive signal to private equity, venture capital, institutional and other investors, but also reinforces speedy and effective exercise of shareholder rights.

[1] Appeal (L) No. 25420 of 2021 in IA (L) No. 22525 of 2021 in Suit (L) No. 22522 of 2021 with IA (L) No. 25423 of 2021.

[2] Zee Entertainment Enterprises Limited v. Invesco Developing Markets Fund [2021] 229 CompCas 540 (Bom).

[3] Suit (L) No. 22522 of 2021 with IA (L) No. 22525 of 2021.

[4] The Impugned Order at Para 53.

[5] (1986) 1 SCC 264, at Para 100.

[6] [1975] 45 Comp Cas 574 (Bom).

[7] Section 303(5) states that “A resolution may properly be moved at a meeting unless- a) it would, if passed, be ineffective (whether by reason of inconsistency with any enactment or the company’s constitution or otherwise)”,

[8] The Impugned Order, at Para 75.

[9] Invesco has issued a Press Statement dated March 23, 2022, which mentions that Invesco has decided not to pursue the EGM as per its Requisition dated September 11, 2021.

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Photo of Bharat Vasani Bharat Vasani

Senior Advisor – Corporate laws at the Mumbai office of Cyril Amarchand Mangaldas. Bharat has over 30 years of experience at senior management level. His areas of specialization includes company law, corporate and commercial laws, securities law, capital market, mergers and acquisitions, joint…

Senior Advisor – Corporate laws at the Mumbai office of Cyril Amarchand Mangaldas. Bharat has over 30 years of experience at senior management level. His areas of specialization includes company law, corporate and commercial laws, securities law, capital market, mergers and acquisitions, joint ventures, media & entertainment law, competition law, employment law and property matters. He heads firm’s media and entertainment law practice.  He is highly regarded in Government circles and in various industry organizations for his proactive approach on public policy issues. Bharat was a member of the Expert Committee appointed by the Government of India to revise the Companies Act, 2013.

Prior to joining the Firm, Bharat was the Group General Counsel of the Tata Group.  He has been at the helm of and steered several large key M&A transactions pursued by the Tata Group in the last 17 years.

Bharat’s contribution to the legal fraternity has been recognized by the Harvard Law School’s Award for Professional Excellence in 2016. Bharat has won several other national and international awards for his various achievements. He had a brilliant academic record in law and first rank holder in all India company secretary examination. He can be reached at

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