Make oppression, mismanagement case, says NCLT

Investment companies controlled by ousted Tata Sons Ltd chairman Cyrus Mistry failed to make a case of mismanagement and oppression of minority shareholders in its court battle with the Tata Group, the National Company Law Tribunal (NCLT) ruled.

Rejecting the Mistry firms’ petition that sought a waiver of rules on minimum shareholding to permit admission of its petition, NCLT said such waiver can be granted only in cases of fraud, misappropriation of company assets, breach of trust by directors, fraudulent payout from the company funds and breach of Articles of Association.

The text of the order, which was passed on 17 April, was made available on April 22.

The Mistry family holds 18.34% of common equity in Tata Sons, but when preference shares are taken into account, the holding falls to 2.17%. In March, the NCLT had ruled the petition was not maintainable, citing the Companies Act requirement of at least 10% holding to file such a petition. The NCLT on April 17 rejected Mistry’s petition seeking a waiver from this rule, along with the main petition on mismanagement.

The 48-page order said waiver from conditions mentioned in the Companies Act can be granted only in compelling, exceptional cases and the petition plea did not make such a case. The plea also failed to mention whether Mistry firms’ economic interest was hurt by the action of the Tata Sons, the order stated.

The petition was filed by Mistry family firms Cyrus Investments Pvt Ltd and Sterling Investments Pvt Ltd.