In a major setback to Cyrus Mistry, the National Company Law Tribunal (NCLT) ruled on Monday that a petition filed by the investment firms owned by the family of the sacked Tata Sons Ltd chairman against the company and Tata Group patriarch Ratan Tata is not maintainable.
A division bench of Justice BSV Kumar and member V Nallasenapathy said that Cyrus Investment Pvt. Ltd and Sterling Investments Pvt. Ltd failed to convince the tribunal that their application was maintainable.
The Mistry family firms had filed the petition alleging mismanagement of the company and suppression of the rights of minority shareholders after Tata Sons sacked Mistry in October last year.
In the petition, the Mistry family firms had alleged that Tata Sons abused the articles of association and the governance framework to enable Ratan Tata to gain control of the company. The petition also named several directors of Tata Sons and its majority shareholder Tata Trusts. These include Amit Chandra, Ishaat Hussain, Ajay Piramal, N Chandrasekaran, RK Krishna Kumar and R Venkataraman. Chandrasekaran was named Tata Sons chairman in January.
Tata Sons had opposed the petition, saying that the Mistry firms were not eligible to file such petition as minority shareholders according to a Supreme Court order on the Companies Act, 2013. According to the Companies Act, shareholders are required to hold at least 10% equity of a company to be qualified to file such a petition. The act does not define equity to mean only ordinary equity.
Lawyers representing Tata Sons had argued last month that if preference capital was also considered, the two petitioner firms hold only 2.17% of the total issued share capital of Tata Sons. The firms together own 18.4% equity shares of the Tata Group’s holding firm.
The Companies Act also says that this condition can be waived. However, Tata Sons’ lawyers said the Mistry firms should have sought a waiver at the time of filing the petition and cannot do so now.
The tribunal said it will hear arguments from the Mistry firms on Tuesday to waive this rule.
Separate emails to the Mistry family firms and Tata Sons seeking comment remained unanswered till the time of filing this report.
The tribunal’s decision is the latest jolt to Mistry. The quasi-judicial body had earlier refused to grant any interim relief to Mistry.
In January, the NCLT had refused to stay Tata Sons’ extraordinary general meeting of shareholders to consider Mistry’s removal from the board. The meeting, held on 6 February, approved the company’s proposal.
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