NCLT Told to Decide on Maintainability of Mistry’s Petition First
Appellate Tribunal ruling provides some relief to the former Tata Sons Chairman
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