Mistry family firms petition not maintainable: NCLT
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Mumbai: The National Company Law Tribunal (NCLT) on Monday said that the Mistry family firms are not qualified to file a petition alleging mismanagement of Tata Sons Ltd and oppression of minority shareholders.
It will decide on whether it can waive this requirement on 7 March.
The ruling that the two firms’ petition was not maintainable was expected, although it was also expected that the NCLT would simultaneously hear and rule favourably on a petition seeking a waiver of maintainability norms filed by Cyrus Investments Pvt. Ltd and Sterling Investments Pvt. Ltd along with their original petition.
“The petitioners have failed to convince the court that the application is maintainable,” said B.S.V. Kumar, presiding member of NCLT. Under the new Companies Act, shareholders are required to hold 10% equity to be qualified to file such a petition. The Act does not define equity to mean only ordinary equity.
The two Mistry firms own a combined 18.4% of ordinary equity shares of the Tata group holding firm, but their holding falls below 10% when preference shares are taken into account. According to the Tatas, Mistry firms hold only about 2.17% then.
In a hearing on 31 January, the firms insisted that they wanted the tribunal to first hear the petition on maintainability. The tribunal did not agree and said that it would hear the plea on maintainability along with the main petition. The tribunal also gave the green signal to Tata Sons to hold a planned shareholder meeting. On 6 February, Cyrus Mistry was removed as a director of Tata Sons in this shareholders meeting, a few months after his ouster as chairman in a 24 October boardroom putsch.
The investment firms approached the National Company Law Appellate Tribunal (NCLAT) against the order. Dismissing the appeal, NCLAT said that tribunal must first hear the petition on maintainability issue, if it held against Mistry camp, the tribunal must hear them on their waiver plea and then on merits of the case.
If NCLT rules granting a waiver tomorrow, Tata Sons could challenge it in NCLAT since rules say such a waiver should be sought before filing a petition.
If it grants against, Mistry could go to court against Monday’s ruling and also on the waiver petition.