Tata Sons cannot force Cyrus Mistry out, yet: NCLAT
The company law appellate tribunal will on September 24 hear petition against Tata Sons going private
NEWDELHI/MUMBAI:IN a significant development in the Tata-mistry court battle, the National Company Law Appellate Tribunal (NCLAT) on Friday restrained Tata Sons Ltd from forcing the Mistry family out of the holding company and left to a later date its verdict on staying the conversion of the Bombay House-headquartered company to a private firm.
“If the appellants (Cyrus Investments) are forced to sell their shares which may affect the merits of the appeal, as they will cease to be member(s) of the company, we direct the respondents (Tata Sons) not take any step in terms of Article 75 for transfer of shares of minority shareholders like appellants and others during the pendency of the appeal. No further interim order is required to be passed at this stage,” said the tribunal.
The appellate tribunal admitted the plea by Cyrus Investments Pvt. Ltd seeking an interim stay on the conversion and posted the matter for hearing on September 24, after which the fate of Tata Sons as a public company is likely to be decided.
On July 9, the National Company Law Tribunal had allowed Tata Sons to go private, which was challenged in NCLAT by the Mistry family. The appeal filed by Cyrus Investments alleging “oppression and mismanagement” on the part of Tata Sons has been admitted by NCLAT
The appeal was in challenge to the 9 July order passed by the Mumbai bench of the National Company Law Tribunal (NCLT).
No stay has been granted on conversion of Tata Sons, the bench will decide after hearing final arguments next month
Tata Sons cannot force Cyrus Investments to sell their shares during the pendency of the appeal before NCLAT
“The registrar of companies having now changed the certificate of the company from ‘public limited company’ to ‘private company’, and in view of Article 75, the company may by special resolution resolve to direct the holders of ordinary shares to transfer their shares,” the bench had noted in its order on Friday.
Article 75 of the Articles of Association relates to “company’s power of transfer shares.” Friday’s order is the latest development in the boardroom battle between Mistry, who was ousted as chairman of Tata Sons in 2016, and the Ratan Tata-led firm. If the appellate tribunal allows Tata Sons to become a private firm, it
Cyrus P. Mistry
would insulate the company from any threat of being taken over by any entity in a “hostile manner”.
This means any shareholder of privately-held Tata Sons will have to seek permission from its board before selling his stake to another entity, including one with a hostile intent. The Mistry family, which had deep ties with the Tata group before the fallout, owns 18.4% stake in Tata Sons that is valued at $17 billion.
Shareholders of Tata Sons on September 22, 2017 voted in favour of the Tata group holding firm becoming a private company at the first annual general meeting (AGM) under the chairmanship of N Chandrasekaran.