The National Company Law Tribunal (NCLT) held that ousted Tata Sons' chairman Cyrus Mistry's family-held firms are not eligible under the Companies Act to seek relief for acts of alleged oppression and mismanagement against them as minority shareholders of the $103 billion corporate conglomerate.
Cyrus Investments Pvt Ltd and Sterling Investment Corporation will now argue for a waiver of the eligibility condition under Companies Act. "The petitioners have failed to satisfy that the petition is maintainable. We will now hear matter regarding waiver," said the NCLT bench.
The order was reserved on February 20 by a bench of Prakash Kumar and Nallen Senapathy after concluding a hearing on preliminary maintainability of a petition filed by the two firms. The firm filed a petition against Tata Sons, Ratan Tata, other directors and trustees. Cyrus Mistry was removed as director of Tata Sons on February 6 at a special shareholders meeting after failing to get a stay on it from the tribunal.
But claiming that the petitioner is de facto Mistry himself, and the relief will direct to his reinstatement as director, A M Singhvi, the counsel for Tata Sons, said the case should be thrown out at the threshold itself as legally the mandatory eligibility criteria is not met. Members who can allege oppression and mismanagement are only those who have one-tenth the equity capital shareholding, Singhvi argued.
The arguments were on interpretation of the eligibility criterion under section 244 of the Companies act which Singhvi, S Sarkar, Mohan Parasaran and S N Mukherjee, all appearing for the Tata Camp, said decides which members or shareholders can approach the tribunal for relief against oppression and mismanagement.
Singhvi said, the section deals with "issued Share capital". "Both equity and preference are part of Issued share capital" and hence not a separate class each as sought to be interpreted "mischievously" by the Mistry team, he said.
Contending that the Mistry plea of "separate class of Shareholders" would lead to rewriting the law. He argued that a plain literal meaning must be given to the law when there is no ambiguity and he stressed that there was none.
Mistry firms' counsel C A Sundaram and Mistry's counsel Janak Dwarkadas, however, had argued that the 2013 Companies Act now provides legal remedy against a company's oppressive actions to separate classes of shareholders, the one-tenth eligibility requirement has to be read and applied separately to equity and preference shareholders.
In this case, they had said, the two firms were equity shareholders which with 18 % have more than the requisite shareholding. But Tata Sons said it only amounted to 2.17 per cent since preference shares must be factored in and hence rendered them ineligible.
The NCLAT had directed the Mumbai tribunal to first decide the maintainability and waiver issue before going into merits of the case. Now that it has rejected the maintainability plea, the plea for waiver to the 10 per cent shareholding condition - permissible in law and sought by Mistry firms - will be argued.
