Zee Entertainment Enterprises Ltd. (ZEEL) managing director and chief executive Punit Goenka’s fate hangs in balance after two institutional investors have requisitioned an Extraordinary General Meeting of shareholders to pass resolutions for removal of Punit and two other directors. The two non-executive non-independent directors, Manish Chokhani and Ashok Kurien, have already resigned following the requisition letter. However, Goenka has not taken any such step.

The said two institutional investors are Invesco Oppenheimer Developing Markets Fund and OFI Global China Fund LLC, which together own 17.88% of the paid-up share capital of ZEEL. They have sought to appoint six new independent directors. While Invesco holds 7,43,18,476 equity shares of ZEEL, OFI Global owns 9,73,50,000 shares.

The letter was written by the two investors on 11th September and was addressed to the Board of Directors of ZEEL. It requisitions the calling of an EGM of the shareholders under section 100(2)(a) and other applicable provisions of the Companies Act. It has asked for the passing of resolutions for removal of Punit Goenka, Manish Chokhani and Ashok Kurien, all as directors of ZEEL. The same letter also requisitions the EGM to pass resolutions for appointment of the following six as independent directors: Surendra Singh Sirohi, Naina Krishna Murthy, Rohan Dhamija, Aruna Sharma, Srinivasa Rao Addepalli and Gaurav Mehta.

For the resolutions for removal of the aforenamed three directors, the letter of the two institutional investors states that it (the said letter) should be treated as a Special Notice under section 169(2) read with section 115 of the Companies Act. For the resolutions for appointment of new directors, the letter is asked to be treated as a proposal for candidature of the withinnamed persons. The letter requests the Board of Directors to take all necessary action to call for and conduct the EGM, as requisitioned by the two institutional investors.

Zee has disclosed the fact about the receipt of the Special Notice from the two investors, to both, the Bombay Stock Exchange as well as the National Stock Exchange.

Just five days prior to the investors’ letter to ZEEL, Yes Bank, which is the single largest shareholder of Dish TV India Ltd. (a Zee group company), had similarly written to the Board of Directors of the company (Dish TV India), seeking removal of Managing Director Jawahar Lal Goel, and directors Rashmi Aggarwal, Bhagwan Das Narang, Shankar Aggarwal and Ashok Kurien from the Board of Directors, on 27th September at the Annual General Meeting of the company. The letter by Yes Bank also lists down the reasons for demanding the removal of the directors.

The grounds stated in the letter by Yes Bank are:
(a) The present board of directors of the Company (“Board”) had approved a rights issue process, pending objections raised with the Board by the Bank time and again, solely to dilute the shareholding of the Bank and to prejudice the interests of, inter alia, the Bank which was the single largest shareholder of the Company as of date;
(b) The Board was not acting in line with good corporate governance standards and was not a fair representation of the incumbent significant shareholders of the Company being various banks and financial institutions holding about 45% shareholding in the Company. The Board was purportedly acting at the behest of certain minority shareholders holding merely 6% of the shares in the Company. This was reflected from the fact that even though the Bank, vide various letters issued to the Board, asked the Board to desist from approving/conducting the proposed capital-raising exercise by way of rights issue, the Board, without consulting the significant shareholders of the Company, went ahead to make a press announcement dated May 28, 2021 regarding its intention to proceed with an INR 1,000 crore rights issue;
(c) The Board had completely sidelined the multiple requests of the Bank to reconstitute the Board, inter alia, by appointment of the nominee directors. In this regard, the Bank had issued letter dated June 19, 2021 to the Board, emphasising the need for reconstitution of the Board and asking the Board not to proceed with the rights issue process till such time as the Board was reconstituted. The Bank vide another letter dated June 25, 2021 sought induction of Mr. Akash Suri and Mr. Sanjay Nambiar as additional directors on the Board of DTIL, who were part of the top management team of the Bank and had vast experience in their respective fields to take on the role of directors on the Board. However, the Board had not acted on the legitimate request of the Bank; and
(d) The Board had acted in complete haste and taken arbitrary decisions to proceed with the rights issue process (i) completely disregarding other viable and possible options for fund raising, that would be in the best interest of the Company and its stakeholders, (ii) solely to cause prejudice and to defeat/dilute the rights and entitlements of the significant shareholders by diluting their stake in the Company, and (iii) even after being aware that the matter was under consideration before the Securities and Exchange Board of India and the stock exchanges pursuant to Yes Bank’s letter dated June 19, 2021.