Failing to get any relief from the Mumbai bench of the National Company Law Tribunal (NCLT), which dismissed its petition alleging mismanagement and oppression of minority shareholders at Tata Sons, the family firms of Cyrus Mistry on Friday moved an appeal in the National Company Law Appellate Tribunal (NCLAT). As is known, on April 17, the NCLT had also dismissed Mistry’s firms plea to grant it waiver from the rule which would have enabled it to move the tribunal despite not having the requisite shareholding in Tata Sons, thus leaving no option for them but to move in appeal to the appellate body.
The appeal filed on Friday is against the March 6 NCLT order dismissing Mistry’s petition on the ground of maintainability. An appeal against the dismissal seeking waiver may be filed later as the detailed order by NCLT is still to be released. The NCLAT is yet to fix the date of hearing. On March 6, the NCLT had ruled that the two petitions filed by Mistry’s family’s investment firms against his ouster from Tata Sons were not maintainable as they did not fulfil the eligibility criteria for approaching the tribunal as the firms, put together, did not own the minimum required 10% issued share capital of the company.
After this, the firms had sought a waiver from this rule so that their main petition can be heard, which was also dismissed by the tribunal on April 17. Giving waiver is at the discretion of the tribunal. According to Section 244 of the Companies Act, to seek relief for oppression, the petitioner(s) need to comprise “not less than one hundred members of the company or not less than one-tenth of the total number of its members, whichever is less, or any member or members holding not less than one-tenth of the issued share capital of the company”.
Mistry’s family investment arms — Cyrus Investments and Sterling Investment Corporation — do hold 18.4% of the ordinary shares of Tata Sons but they hold just 2.17% of the issued share capital when even preference shares are considered and, hence, are not eligible to seek relief for oppression. Mistry’s lawyers had argued that equity shareholders were a different class of shareholders from preference shareholders and Mistry’s firms have met the one-tenth requirement when only equity shares are considered.
They had argued that given the substantially larger size of preference share capital of the company, if both equity and preference shares are considered, then at least 81% of equity shareholding is required to meet the one-tenth eligibility criteria. Mistry, who had first moved the tribunal in December, had not filed for a waiver but later when the issue was raised by the lawyers of Tata Sons in the course of the hearings, had sought a waiver stating that if it is not granted, “the grave issues raised in the petition would go entirely uninvestigated”.
Though the NCLT had initially insisted Mistry’s lawyers argue their main case — that of oppression of minority shareholders and mismanagement at Tata Sons — the latter insisted that it first rule on maintainability and waiver. Once the NCLAT passed a direction to this effect, the NCLT first heard the waiver petition and then the waiver. The legal battle between Mistry and the Tatas is a fallout of the sacking of the former by the Tata Sons board on October 24, 2016. Subsequently, Mistry was removed as director/chairman of all the group firms, leaving him with no option but to take the legal route.