NCLT Told to De­cide on Main­tain­abil­ity of Mistry’s Pe­ti­tion First

Ap­pel­late Tri­bunal rul­ing pro­vides some re­lief to the for­mer Tata Sons Chair­man

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Mum­bai: The is­sue of main­tain­abil­ity of Cyrus Mistry's main pe­ti­tion will have to be heard and dis­posed off first be­fore pro­ceed­ing to the mer­its of the case, the Na­tional Com­pany Law Ap­pel­late Tri­bunal (NCLAT) ruled, giv­ing respite to the for­mer chair­man of Tata Sons.

The Ap­pel­late Tri­bunal wrote that that dur­ing the fi­nal hear­ing at Na­tional Com­pany Law Tri­bunal (NCLT) on Fe­bru­ary 13, the ques­tion of main­tain­abil­ity should be de­cided first and if it the ver­dict is neg­a­tive against the Mistry fam­ily’s firms, then the quasi-ju­di­cial body will have to de­cide whether to give a waiver to Mistry.

This is in con­trast to NCLT's stand on Jan­uary 31 when it wanted to hear the main pe­ti­tion along with is­sues of main­tain­abil­ity, pro­posed waiver and Tata Sons' share­holder meet­ing on Fe­bru­ary 6. “We have come back to where we left it. We have lost a week and a board seat in the mean­while,” said a lawyer in­volved with the case. Tata Sons re­moved Mistry from the board on Mon­day, with the res­o­lu­tion re­ceiv­ing 80% of vot­ing shares to re­move him.

The ques­tion of main­tain­abil­ity is im­por­tant as Tata Sons has ar­gued the main pe­ti­tion filed on De­cem­ber 20 is not main­tain­able as Mistry’s fam­ily firms own only 2.17% shares of the to­tal share cap­i­tal (in eq­uity and pref­er­ence shares) of Tata Sons. Ac­cord­ing to law, they ar­gued, a share­holder needs at least 10% to file a pe­ti­tion in the NCLT. Mistry’s lawyers have sought a waiver.

Tata Sons de­clined to com­ment on the de­vel­op­ment.

“This is the lim­ited ‘vic­tory’ that you re­fer to (more like a small re­lief) – how­ever, he still has to sur­mount the chal­lenge posed by Tata on main­tain­abil­ity first,” said Ran­jit Prakash, chief ex­ec­u­tive part­ner at Archeus Law. “Mistry’s side may be amend­ing their sub­mis­sions and may make one more at­tempt to get him re­stored.” Mistry's Coun­sel C Aryama Sun­daram on Jan 31 wanted NCLT to clear its po­si­tion on the main­tain­abil­ity of the case be­fore start­ing his ar­gu­ments on the main pe­ti­tion so that he could ap­peal against any ad­verse de­ci­sion.

In the main pe­ti­tion, Mistry’s firms — Cyrus In­vest­ments and Ster­ling In­vest­ments — have al­leged op­pres­sion of mi­nor­ity share­holder rights and mis­man­age­ment at the Tata Group.

The Ap­pel­late Tri­bunal also said NCLT could re­store Mistry’s di­rec­tor­ship on the board of Tata Sons if ‘op­pres­sion and mis­man­age­ment’ comes to the no­tice of the court.

Mistry’s fam­ily firms hold 18.4% eq­uity stake in Tata Sons. The rest of the eq­uity shares are held by Tata Trusts and Tata group com­pa­nies.

The next hear­ing is sched­uled on Fe­bru­ary 13 and 14 for ar­gu­ments against Tata Sons’ al­leged op­pres­sion of mi­nor­ity in­ter­ests. Tata Son’s coun­sel will ta­ble counter-ar­gu­ments on Fe­bru­ary 20 and 21.

Tri­bunal said pe­ti­tion will have to be heard and dis­posed off first be­fore pro­ceed­ing to the mer­its of the case

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