Companies Act 2013 – Proposed Shareholder Resolution Must Be Legal For EGM To Be Called : Bombay High Court
[04 November 2021]
The Bombay High Court ruled that a shareholder resolution requisitioned under Section 100 of the Companies Act, 2013 must be legal so as to demand the Board of Directors hold 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 that holds 17.88% equity in ZEE) from acting in furtherance of a requisition notice on the grounds that it’s illegal, ultra vires, invalid, bad in law and incapable of implementation. Justice GS Patel, who considered the matter, observed in the order that the Court can examine if 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 considered at a requisitioned EGM. And the Court is never foreclosed from considering this”.