Exceptional circumstances for waiver in Mistry case
Court notes ~6 lakh-cr Tata Sons valuation vs ~291-cr investment in preference shares
The National Company Law Appellate Tribunal (NCLAT) has said the combined equity and preference shares shareholding of Tata Sons in future would leave only two shareholders of the Tata group holding company eligible to file a complaint of oppression and mismanagement against the firm, reducing the rest to mute spectators.
Tata Sons, valued at ~6 lakh crore, came out with a ~291-crore preference share issue which was subscribed mainly by Ratan Tata and Narotam Sekhsaria — the two beneficiaries in question — and other Tata group veterans, while keeping out the Mistrys.
“We find that except Tata having issued shareholding of 31.43 per cent and Sekhsaria, having 17.01 per cent shareholding capital of the company, none of the 49 members are eligible to file an application under Section 241, individually having less than 10 per cent of the shareholding. That means except that the minority shareholders join together, i.e. either six in number or such number of members whose joint shareholding will come up to 10 per cent of the issued share capital of the company, which will be also not less than three to four members, none of the 49 shareholders can file an application under Section 241 alleging ‘oppression and mismanagement’,” the order by Justice S J Mukhopadhaya, retired judge of the Supreme Court, said. The order was uploaded on the court’s site on Friday.
Thus, the order noted that only two major shareholders, Tata and Sekhsaria, have the right and prerogative to file such applications. “One or the other minority shareholder cannot be asked or directed to form a group of 10 per cent of the members, that means six persons in the present case, as it will be dependent on the prerogative of the other members. We are of the view that this is one of the exceptional and compelling circumstances, which merit the application for ‘waiver’ subject to the question, whether (proposed) application under Section 241 relates to ‘oppression and mismanagement’,” the order said.
When contacted, a Tata Sons spokesperson declined to comment.
“Appellants (the Mistrys) have pleaded and not disputed by respondents is that the valuation of the company being in the region of at least ‘~6 lakh crore’. The interest of the appellants in the overall value of the company would be over ‘~1 lakh crore’. Therefore, the interest of the appellants in the overall value of the company is 1/6th of the total value of the company. On the other hand, the value of the preference share holding would be only ~291 crores, who do not carry voting rights other than in the exceptional circumstances,” the order said.
“The interest of the appellants to the extent of ‘~1 lakh crore’ of the overall value of the company whose valuation being in the region is about ~6 lakhs crore is another factor, which we have kept in our mind to answer the application for ‘ waiver’ in favour of the appellants,” the order said.
The NCLAT also reviewed