Monday’s order of the National Company Law Tribunal’s (NCLT) Mumbai bench, on the plea of Cyrus Mistry against Tata Sons, is the culmination of the process that started in December 2016, when after his sacking as Tata Sons chairman earlier that year in October, Mistry had moved the company tribunal.
Monday’s order of the National Company Law Tribunal’s (NCLT) Mumbai bench, on the plea of Cyrus Mistry against Tata Sons, is the culmination of the process that started in December 2016, when after his sacking as Tata Sons chairman earlier that year in October, Mistry had moved the company tribunal. Though the order in no way brings the curtains down on the matter as the Mistry side has clearly stated that they would go for an appeal, barring a partial relief which Mistry got from the National Company Law Appellate Tribunal in September 2017, the company tribunal orders have gone against him in the case so far.
On September 21, 2017 the National Company Law Appellate Tribunal (NCLAT) granted Mistry’s family firms waiver from a shareholding clause that prohibited them to file cases against Tata Sons for mismanagement and oppression of minority shareholders. The appellate tribunal then directed the Mumbai bench of the NCLT to allow the Mistry family firms to present their case and decide on it on merits.
It was on this direction from the NCLAT that the Mumbai bench of the NCLT heard the case and delivered its order on Monday.
By directing the company tribunal to hear Mistry’s case on merits, the NCLAT had set set aside the NCLT’s April 17 order that had rejected the waiver plea of Mistry’s firms. The appellate tribunal said that there is a prima facie case made out for the grant of waiver from the minimum shareholding requirement to allow the Mistry firms to raise the issue before the NCLT, Mumbai.
However, the appellate tribunal had upheld the NCLT’s order that the petition of the family firms were not maintainable because they lacked the minimum shareholding to raise such issues. The family firms of Mistry had moved the NCLAT when in March-April, 2017 the Mumbai bench of the NCLT had dismissed two of their petitions — one arguing mismanagement and oppression of minority shareholders at Tata Sons and the other which sought a waiver from the minimum shareholding bit to present their case.
The first dismissal had taken place on March 6, when the NCLT said that the firms — Investments and Sterling Investment Corporation — were not maintainable as they did not fulfil the eligibility criteria for approaching the tribunal as they, put together, did not own the minimum required 10% issued share capital of Tata Sons. 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 hold 18.4% of the ordinary shares of Tata Sons but their holding goes down to just 2.17% of the issued share capital when even preference shares are considered. 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.
After the dismissal of this plea, the firms approached the NCLT that they be given waiver from the 10% shareholding norm and their case be heard. But the NCLT dismissed the plea on April 17. As per law, granting waiver is on the discretion of the tribunal.
Mistry, who had first moved the tribunal in December, 2016, 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 to 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.