Mumbai: The National Company Law Tribunal (NCLT) on Monday refused to grant a waiver to Cyrus Mistry family firms from the minimum shareholding requirement for filing a petition alleging mismanagement and oppression of minority shareholders at Tata Sons Ltd.
NCLT also dismissed the main petition alleging mismanagement and oppression. In an oral order, the two-member bench dismissed the waiver petition and main petition . The final order will be available on Friday.
The Mistry family firms will now be moving the National Company Law Appellate Tribunal (NCLAT) against NCLT’s decision once they receive a copy of the order, said their lawyers.
Cyrus Investments Pvt. Ltd and Sterling Investments Pvt. Ltd asked the NCLT to waive the requirement that shareholders hold at least 10% of a firm to file a petition alleging mismanagement and oppression.
They were seeking the waiver after NCLT on 7 March ruled that their petition was not maintainable because of this technical requirement. While these firms hold 18.4% of ordinary shares in Tata Sons, when preference shares are counted, their ownership comes down to only about 2.17%.
Aryama Sundaram, counsel for the Mistry family firms, argued for the waiver citing concerns on voting and veto rights accorded to Tata trustees on the board of Tata Sons.
The spat between the Mistry firms and the Tatas started on 24 October when Mistry was removed as chairman of Tata Sons. He was later ousted from its board.
“Tata Sons interprets the ruling by the NCLT as demonstrating that the petitioners failed to make a convincing or compelling case that warranted a hearing on alleged mismanagement, oppression or other actions,” the holding company of the salt-to-software group said in an emailed statement. “We hope this brings to an end a vexatious campaign against the Company, the Tata Trusts and Mr. Ratan N. Tata.”
A spokesperson for Cyrus Mistry declined comment.
Some legal experts said they were surprised at NCLT’s decision.
“They had a valid reason for a waiver because it’s (Tata Sons) not a private company and the holding company holds several public companies,” said Ramesh Vaidyanathan, managing partner at law firm Advaya Legal. “Therefore, in my view, the option could have been exercised in favour of the petitioner. The tribunal, by dismissing the petition, has adopted a very hyper-technical approach.”
That said, the legal battle has not ended as there are several options for the Mistry investment firms, including approaching the high court or civil sessions court apart from NCLAT.
Adverse decisions at these forums can be challenged all the way till the Supreme Court depending on either party’s stomach for the fight.
NCLAT can refer the waiver plea back to the tribunal only if it finds fault in the order passed by NCLT. It can also dismiss the appeal filed by the Mistry firms. If it does, the Mistry firms can go to the Supreme Court. If NCLAT finds merit in the appeal of Mistry firms, then NCLT would need to hear the main plea, lawyers said, pointing out that so far NCLT has not heard the main petition.
J. N Gupta, managing director and co-founder at proxy advisory firm Stakeholders Empowerment Services, said it was highly unlikely that NCLAT will come up with a different interpretation of the law.
“I don’t think NCLAT will have a different view. This being a high-profile case, the NCLT would have applied all its wisdom. Nobody writes an order that stands the risk of being overthrown,” said Gupta.
“It will be challenging, since the waiver can be sought in compelling circumstances which are beyond ordinary (things), like on account of public interest. This appears to be a little tricky to prove for the Mistry camp,” said Tejesh Chitlangi, partner at IC Legal.