NCLAT breather for Cyrus Mistry in battle with Ratan Tata for control of Tata Sons

By: | Published: February 9, 2017 5:33 AM

In a breather for Cyrus Mistry, the National Company Law Appellate Tribunal (NCLAT) has accepted his counsel's appeal that the National Company Law Tribunal (NCLT) should first decide whether his petition is maintainable or not.

Cyrus Mistry ousted from taat sons, tata sons sharehilers remove cxyrus mistry as director, cysrus mistry removed as diorector, cyrus mistrry iusted as director of tata sonsIn a breather for Cyrus Mistry, the National Company Law Appellate Tribunal (NCLAT) has accepted his counsel?s appeal that the National Company Law Tribunal (NCLT) should first decide whether his petition is maintainable or not. (Source: PTI)

In a breather for Cyrus Mistry, the National Company Law Appellate Tribunal (NCLAT) has accepted his counsel’s appeal that the National Company Law Tribunal (NCLT) should first decide whether his petition is maintainable or not. If the NCLT decides against it, it should then decide whether a waiver, as requested, is being provided to him and thereafter, hear the merits of the main case.

We are of the opinion that during the final hearing the question of maintainability should be decided first and if it is answered in negative, against the appellants, the question of waiver of the petition be decided if any strong ground has been made out to claim exception under provisions to sub section (1) of Section 244. In case, aforesaid issues are decided in favour of the appellants, then the tribunal can decide the case on merit,” the appellate tribunal’s judgment reads.

This order overrules the NCLT’s Jan 31 order that Mistry’s lawyers should argue their main case without worrying about the maintainability or the waiver petition.

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It is settled proposition of law that a party can raise maintainability at any point of time, therefore, it is the discretion of the court to decide whether the maintainability point is to be decided at threshold or along with the main company petition,” the January 31 order of the NCLT’s Mumbai bench reads.

Mistry had, a week before the January 31 hearing, sought a waiver of section 244 of the Companies Act, 2013, which states that to seek relief under sections 241 and 242, 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”.

In his petition seeking a waiver, Mistry had stated that although the petitioners do not meet the strict legal requirements because of the number of members in the register of members, the reality of the matter is that they constitute one of the only two group of members in a very closely held company. He had filed this petition in response to Tata Sons allegation that while the Shapoorji Pallonji (SP) Group holds 18.4% of the ordinary shares of the company, it holds just 2.17% of the issued share capital when even preference shares are considered. This, according to it, doesn’t meet the eligibility criteria laid down in the Companies Act, 2013.

Secondly, the NCLAT has also asked the NCLT to hear Mistry’s main petition without being influenced by any of the observations made in any of its last orders.

This is most likely in reference to the NCLT’s observation on January 31 that it was perplexed by Mistry’s counsel’s stance that he won’t put forward his arguments in the main case until the tribunal gave a verdict on Mistry’s waiver plea and whether or not his petition was maintainable.

The two member bench had even gone on to label this stance ‘disobedience’.

What could be the biggest positive for Mistry in the NCLAT’s order is the fact that he has been allowed to file amendments to his original petition and argue about the legality of his removal from Tata Sons board on February 6. “In case the question of maintainability and/or waiver on merit is decided if favour of the appellants, it is always open to the tribunal to pass appropriate order restoring the original position of Respondent No. 11 (Mistry), was at the time of filing of the company petition,” the NCLAT’s order adds.

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