Judicial Overreach Unwarranted

High court order staying Religare Enterprises AGM risks undermining shareholder rights, regulatory authority, and market confidence

- SHRIRAM SUBRAMANIAN

IN A MOVE that has raised eyebrows in corporate and legal circles, the Madhya Pradesh High Court (HC), through an order dated December 18, 2024, stayed the annual general meeting (AGM) of Religare Enterprises Limited (REL). The decision was in response to a writ petition filed under Article 226 of the Constitution. The petition sought, among other reliefs, the appointment of an independent commission of enquiry and protection of minority shareholder interests. The petitioners argued that the proposed acquisition by Burman Group entities that received Reserve Bank of India (RBI) approval could consolidate control in the hands of a few. However, the implications of the judicial intervention extend far beyond the immediate case.

Under Section 96 of the Companies Act, 2013, holding an AGM is a statutory obligation. This forum allows shareholders to express their views, deliberate on corporate decisions, and safeguard their interests. Interfering with this process without substantial legal grounds disrupts a fundamental aspect of corporate democracy. The HC's decision jeopardizes the statutory obligation to hold AGMs, undermining the fundamental rights of shareholders.

This approach contrasts with established judicial precedents. For instance, in the 2022 Zee Entertainment Enterprises case, the Bombay HC overturned a single-judge order restraining shareholders from calling an extraordinary general meeting (EGM). The judgment reaffirmed the principle that courts should refrain from obstructing statutory processes like AGMs or EGMs unless there is compelling evidence of fraud, oppression, or mismanagement.