TATA Sons’ conversion: No specific slur on Registrar of Companies, says NCLAT

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Published: January 7, 2020 5:40:41 AM

During the course of the hearing, the MCA on behalf of the RoC had submitted that in the absence of any prescription by the central government under any rule in terms of section 2 (66) of the Act, the paid-up share capital should be read as “zero”.

TATA Sons, Registrar of Companies, NCLAT, industry newsWhile the Companies Act, 2013 defined a private company as one which has a minimum paid-up share capital “of one lakh rupees or such higher paid-up share capital”, the amendment to the Act that came into being with effect from May 29, 2015, omitted such threshold.

Pronouncing its judgment on the RoC appeal on Monday, the NCLAT said, in the absence of any prescription of minimum paid-up share capital required for a private company, the RoC cannot wield any power or jurisdiction to carry out any changes in the Register of Companies or certificate of incorporation of Tata Sons and the Memorandum of Association of the Tata Sons.

While the Companies Act, 2013 defined a private company as one which has a minimum paid-up share capital “of one lakh rupees or such higher paid-up share capital”, the amendment to the Act that came into being with effect from May 29, 2015, omitted such threshold.

During the course of the hearing, the MCA on behalf of the RoC had submitted that in the absence of any prescription by the central government under any rule in terms of section 2 (66) of the Act, the paid-up share capital should be read as “zero”.

The two-member NCLAT bench, headed by its chairperson justice SJ Mukhopadhaya, however, is not willing to accept the submission of the MCA. It said, “ such submission can not be accepted as there cannot be a private company or public company. For the said reason, the amended Section 2(68), it is specifically mentioned that ‘as may be prescribed by the central government’. In view of the aforesaid position of law, the prayer for amendment in the judgement dated December 18, is rejected.” “We find there is a wrong perception of the RoC as no observation has been made against the RoC, Mumbai, nor anything alleged against him,” the NCLAT said.

In reply to NCLAT’s earlier direction to clarify why the Companies Act has been silent on the relevant criterion since 2015 amendments to it, director-prosecution at MCA Sanjay Shorey said there has been no prescribed capital limit for any public or private company in order to ensure the ease of doing business.

Tata Sons was initially a ‘private company’, but after insertion of Section 43A (1A) in the Companies Act, 1956, on the basis of average annual turnover, it assumed the character of a deemed ‘public company’ with effect from February 1, 1975. In September, 2017, Tata Sons had received its shareholders’ nod to convert itself into a private limited company from a public limited company. It got the RoC approval for the conversion on August 6, 2018.

The National Company Law Appellate Tribunal (NCLAT) on Monday stood by its December 18 order, rendering Tata Group holding company Tata Sons’ conversion into a ‘private company’ ‘illegal’ for it being against Section 14 of the Companies Act, 2013 and also being prejudicial and oppressive to minority shareholders, but has clarified that no specific mala fide action has been alleged against the Registrar of Companies (RoC) for its role in the conversion.

In its December 18 order, the appellate tribunal had observed that Tata Sons’ board of directors had acted hurriedly to convert the company without following due procedure, “with the help of” the RoC. The RoC moved an application in the appellate tribunal through the ministry of corporate affairs (MCA) seeking
to “amend certain parts of  the order that has cast aspersions on it and to correctly reflect the conduct of the RoC, Mumbai as not being ‘illegal’ and being as per the provisions of the Companies Act, 1956/2013”.

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