The Bombay High Court was hearing a petition filed by Zee earlier this month against a notice issued by two Invesco-controlled funds, which together own nearly 18% of Zee and are pushing the media company to call an extraordinary general meeting (EGM).
It sets a "ferociously dangerous precedent" when courts are asked to judge the merits and demerits of a proposed resolution, a move that hurts the "democratic right" of shareholders, Justice GS Patel observed.
Any resolution passed at the EGM will not be effective immediately with Zee having the right to contest it, the Bombay High Court said, suggesting to the company that it go ahead and call the meeting.
The court also asked Zee and Invesco to come up with a date for the EGM and appoint a neutral party to chair it.
Zee's lawyer is expected to respond to the suggestions on Friday when the court reconvenes.
Zee and Invesco did not respond to a request for comment.
Invesco wants a shakeup at the Indian TV network over corporate governance concerns at a time when the company is planning a merger with the local unit of Japan's Sony Group.
That move is set to create India's biggest broadcaster but Invesco has raised concerns about options given to Zee's founding family, which includes its CEO Punit Goenka, to raise their stake in the merged company to 20%. The founding family of Zee currently owns 4% of its shares.
Zee's founder and Goenka's father Subhash Chandra has accused Invesco of plotting a hostile takeover.
Invesco has denied the charge but said that earlier this year it tried to forge a deal between companies owned by Reliance Industries, controlled by billionaire tycoon Mukesh Ambani, and Zee.
"In my view, we should not belittle this dispute as a dispute for control by Invesco," said Mohit Saraf the founder of Saraf & Partners law firm, which is not involved in the case.
"This dispute will set the litmus test for enforceability of shareholding rights in this country."
(Reporting by Sankalp Phartiyal and Abhirup Roy; Editing by Edmund Blair, Kirsten Donovan)
By Sankalp Phartiyal and Abhirup Roy