In a jolt to former Tata group chairman Cyrus Mistry, the National Company Law Tribunal (NCLT) has dismissed a plea filed by two Mistry family-owned investment companies seeking a waiver from the requirement for shareholders’ approval to file a petition against Tata Sons Ltd.
On Monday, a division bench of NCLT, comprising Justice BSV Prakash Kumar and technical member V Nallasenapahy, dismissed the petition filed by Cyrus Investment Pvt. Ltd and Sterling Investments Pvt. Ltd and said the petitioners are not qualified to avail the waiver.
According to people familiar with the development, the Mistry-owned investment companies can challenge the order in the National Company Law Appellate Tribunal.
Under the Companies Act, 2013, minority shareholders must hold at least a 10% stake to be qualified to file a petition for suppression by majority shareholders. Tata Sons argued that, if preference shares are also considered, the two Mistry-owned firms hold only 2.17% of the total issued share capital of Tata Sons.
According to the Companies Act, these conditions can be waived, but Tata Sons’ lawyers said as petitioners did not seek the waiver at the time of filing the petitions, they cannot seek the same later.
Since the tribunal has dismissed the waiver petition of Mistry-owned investment companies, the original petition that sought relief as minority shareholders also got dismissed.
Earlier, during the course of the argument, Abhishek Manu Singhvi, senior counsel who was representing Tata Sons, said as per earlier Supreme Court orders, the petitioners are not eligible to file such petitions before the NCLT as minority shareholders.
Email queries to Tata Sons and Cyrus Mistry did not elicit any immediate response.
On December 22, the Mistry-owned firms had approached the NCLT alleging mismanagement of Tata Sons and suppression of minority shareholders’ rights. According to the plea, Tata Sons and Tata Trusts disobeyed an NCLT order by initiating the removal of Mistry from the board.
Law firms Karanjawala & Co, Cyril Amarchand Mangaldas, Shardul Amarchand Mangaldas & Co are advising Tata Sons while law firm Desai & Diwanji, along with senior counsel Janank Dwarkadas, is advising Mistry-owned investment companies.
The dispute between Ratan Tata and Mistry camps surfaced in October last year when the group abruptly sacked Mistry.
In a petition, the Mistry-led investment companies alleged that Tata Sons abused the articles of association and the governance framework to enable Ratan Tata to gain control of the company.
In its response, Tata Sons said Mistry failed to put into effect a strategy for managing a large and complex group such as the Tata group, as committed by him in the detailed note tendered by him to the selection committee on October 2010. Mistry, even after identifying problem areas, was “slow and lacked a sense of urgency” in resolving the issues, it said in the response