Cyrus Mistry firms ask NCLT to waive off norms to allow suit against Tatas

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New Delhi: Cyrus Mistry’s family investment firms have rebutted Tata Sons Ltd’s allegations that they don’t have the necessary qualification to file a suit against the holding company of the Tata group.

In a fresh affidavit filed on Tuesday, the investment firms have requested the National Company Law Tribunal (NCLT) to waive some norms of the Companies Act to allow them to proceed with the suit.

The firms, Cyrus Investments Pvt. Ltd and Sterling Investments Pvt. Ltd, on 22 December filed a suit alleging mismanagement of Tata Sons and oppression of minority shareholders. They together hold around 18.37% of equity share capital of Tata Sons.

In reply to this suit, Tata Sons filed an affidavit on 9 January asking NCLT to dismiss the suit since the petitioners do not hold at least 10% of the “issued share capital” of Tata Sons or representing at least one-tenth of the total number of members, as required by the Companies Act. According to the Tata affidavit, the Mistry family firms hold only 2.17% of the total issued share capital of Tata Sons, if preference capital is also included.

In the application filed on Tuesday, the Mistry family firms said that Tata Sons’ understanding of the legal provision is not correct. Further, it asked the tribunal to waive off the 10% minimum shareholding norm requirement “without prejudice to its contention that its petition is maintainable”.

Tuesday’s petition said that there are enough ‘facts, circumstances and sufficient reasons’ which warrants the tribunal to exercise its powers so that the petition can be heard on its merits. If not done so “the grave issues raised in the petition would go entirely uninvestigated”, it said.

The Companies Act gives the NCLT powers to waive off the 10% requirement if an application is made. However, the Tata Sons application has pointed out that since the two investment firms hadn’t sought any waiver at the time of filing the petition, any leave “if sought now, will only be an after-thought and not even maintainable”. Another reason cited by Tata Sons in its 9 January affidavit, requesting a dismissal of the suit was because the allegations related to insider trading and hawala transactions fall outside the jurisdiction of the NCLT.

In the present case, the 18.37% of the equity shareholding of the Mistry family in Tata Sons is of significant value and much more valuable than the preference share issued by Tata Sons which aggregate to Rs294 crore, said the Mistry family firms’s fresh petition. Therefore, the bench should exercise its discretionary power, it added.

“The wording in the Company Act doesn’t specify whether its the preferential or shared capital it just says ‘capital’ and therefore open to interpretation and gives power to NCLT to waive off,” said Shriram Subramanian, managing director at InGovern Research, a proxy firm. “Given the nature of the matter, they (Mistry family) should be given a fair chance,” he said. NCLT will next hear the matter on 31 January.