Appellate tribunal said NCLT was wrong in not giving sufficient time to the company
Invesco Developing Market Funds, a key shareholder of Zee Entertainment Enterprises (ZEEL), on Thursday suffered a setback with the National Company Law Appellate Tribunal (NCLAT) setting aside the October 5 order of NCLT Mumbai asking the media firm to file a counter reply by October 7.
The order comes as a major relief for ZEEL, which had sought more time from the NCLT to file a counter reply in the matter where Invesco has sought directions from the adjudicating authority to the media firm for convening the extraordinary general meeting (EGM) of the company (EGM).
In its order on Thursday, the NCLAT said that it was an error on the part of NCLT not to grant ZEEL reasonable and sufficient time for filing the reply.
“It is clear that the learned NCLT has committed an error in not granting reasonable and sufficient time for filing a reply, which is a complete violation of Rule 37 of NCLT Rules and principles of natural Justice,” The NCLAT order stated. “It is also important to mention that Rule 37 of NCLT Rules provides a grant for reasonable and sufficient time to file a reply/counter,” it added.
“Therefore, in the circumstances, as stated above, we are of the opinion that reasonable and sufficient opportunity should be given to the appellants for filing a reply. After hearing both the parties, the learned NCLT should proceed further. The appeal is disposed of accordingly-no order as to costs,” the NCLAT said.
The appellate tribunal said that Section 98 of the Companies Act, does not prescribe any time limit or limitation on the NCLT to pass order within that time limit. “Engrafting the provisions of Section 100(4) in Section 98 would be wholly misconceived and untenable. Undisputedly, the reliefs sought in the company petition are specifically under Section 98 of the Companies Act. Given that Section 98 does not prescribe any time limit, the learned NCLT ought to have granted reasonable time to the appellant to file a reply,” the order said.
As is known, ZEEL had moved the NCLAT on October 6, challenging the October 5 order of the NCLT that had asked it to file a counter-reply to Invesco’s plea within two days – which meant by October 7. The company had sought more time to file a reply and a stay on the proceedings in NCLT till NCLAT passed its orders.
The NCLT Mumbai bench had earlier on Thursday adjourned the matter to October 8 since at that time NCLAT had reserved its order.
The dispute between ZEEL and its largest shareholder started after ZEEL board refused to honour Invesco Developing Markets Funds and its subsidiary OFI Global China Fund’s September 11 requisition to hold an EGM to evict certain directors. The foreign portfolio investors together hold a 17.88% stake in ZEEL.
Invesco had sought the ouster of ZEEL chief executive officer and managing director Punit Goenka and two non-executive directors, alleging breach of corporate governance norms.
Appearing for ZEEL before the NCLAT on Thursday, senior counsel NH Seervai urged the appellate tribunal to grant it permission to submit the reply within two weeks as “heavens will not fall” if it is filed within that time. He also questioned the NCLT’s order to file the reply in such a short period of time as the relevant statute provides a three-month time limit for such matters. In the NCLT, ZEEL had asked for a week’s time to file the reply.
Senior counsel Mukul Rohatgi, appearing for Invesco, urged the appellate tribunal to reject ZEEL’s plea saying that while ZEEL could file a voluminous suit ranging between 400-500 pages, what was the harm if they had filed a simple reply before the NCLT as was warranted by the adjudicating authority.