Tata vs Mistry: Breather for RoC as SC stays order of NCLAT

By: |
January 25, 2020 6:10 AM

A bench led by Chief Justice SA Bobde issued notice to the Cyrus Mistry group and also stayed the NCLAT's January 6 order that rejected the RoC's application for impleadment and modification.

sc, supreme courtThe Supreme Court had on January 10 stayed in entirety the December 18 order that reinstated Mistry as chairman of Tata Sons after calling his removal in October 2016 as “illegal”.

The Supreme Court on Friday stayed the National Company Law Appellate Tribunal’s January order that rejected Registrar of Companies’ plea to modify its December 18, 2019 order casting aspersions on its role in approving Tata Sons as a private limited company from a public limited one.

A bench led by Chief Justice SA Bobde issued notice to the Cyrus Mistry group and also stayed the NCLAT’s January 6 order that rejected the RoC’s application for impleadment and modification. It also tagged the petition with the earlier batch of related appeals against the December order.

The Supreme Court had on January 10 stayed in entirety the December 18 order that reinstated Mistry as chairman of Tata Sons after calling his removal in October 2016 as “illegal”. The appellate tribunal while terming Tata Group’s actions against Mistry as “prejudicial” and “oppressive” had also termed the appointment of N Chandrasekaran as the new chairman as “illegal”. It had also called Tata Sons’ move to turn into a private company from a public limited as unlawful, and had ordered its reversal.

While dismissing the RoC’s application, the NCLAT had also allegedly assigned “fresh and additional reasons” to support the conclusion given in its earlier December judgment, which according to Tata Sons was not required. The NCLAT said that 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.

Tata Sons said that NCLAT exceeded its scope by giving a new dimension to the issue of minimum paid up share capital for private companies, which would adversely affect all private companies, including it. The new reasoning, given by the appellate tribunal, that there cannot be a private limited company since the minimum paid up capital has not been prescribed by the Central government leads to entirely “anomalous and absurd results,” Tata Sons said.

The NCLAT “fails to consider that absence of prescription of a minimum paid up share capital for the purposes of Section 2(68) of the Companies Act, 2013 does not mean that there cannot be any private limited company at all,” Tata Sons said, adding that the appellate tribunal exceeded its scope by giving conclusions which weren’t needed.

According to the company, this is “impermissible” as the jurisdiction under Section 420 of the Companies Act, 2013 is “only intended to correct errors which are apparent on the face of the record and not to render substantive findings on merits in order to explain, amplify and justify the conclusion reached” in the December judgment.

“Unfortunately, the impugned order completely ignores the scope of jurisdiction under Section 420 and travels far beyond its ambit,” it said.

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.

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