MUMBAI: Whatever be the outcome of shareholders polls in three Tata companies next week, independent director Nusli Wadia cannot be replaced in these entities, for now. Even if the vote goes against Wadia, his post will have to be kept vacant until further orders, the Bombay high court ruled on Friday.
The court has allowed Tata Motors, Tata Chemicals and Tata Steel to go ahead with its scheduled extraordinary general meetings (EGMs) next week and to act upon the results of the voting on the removal of Wadia from these companies, but it said that one board seat would have to be kept unfilled until the resolution of the suit brought by a few small shareholders.
Four minority shareholders led by investor Janak Mathuradas had sought to restrain promoters of the three companies from voting in EGMs on the resolution to strip Wadia of his directorships. Their argument was that only public shareholders should be allowed to vote on removal of independent directors as they protect the interests of minority shareholders.
Justice S J Kathawalla heard the retail shareholders’ plea for interim reliefs on Friday after allowing Tata Sons, the principal shareholder of Tata companies, and Wadia to become parties to the suit. Senior counsel Navroz Servai appearing for Mathuradas said section 169 of the Companies Act, which details the removal mechanism, applies to executive and non-executive directors but not to independent directors. “It does not apply since independent directors are appointed for a fixed tenure and not liable to retire by rotation”. His case was they can only be removed by a special resolution not an ordinary one. He also argued that the removal of independent director Wadia was for “extraneous and irrelevant considerations”.
Appearing for Sebi, senior counsel Fredun Devitre said it is a larger matter of policy. But as it stands, he said, Section 169 holds the field and allows the removal of even an independent director by an ordinary resolution.
Appearing as lead counsel for Tata Sons, senior counsel P Chidambaram opposed any grant of relief on the minority shareholders’ case. He said all their pleas were for “relief which is contrary to existing provisions of the Act…” He pointed out that the promoters were not shareholders in these three listed companies and that the outcome of the EGM is “not a foregone conclusion”.
Play rummy online & win big—Ace2ThreeAce2Three One stop access to online poker – Adda52.comAdda52.com Recommended By Colombia
Chidambaram said, “It is for the promoter to come to a conclusion whether an independent director is acting contrary to interest of a company and if they are wrong the independent director can speak at the meeting and retail shareholders can decide on the resolution.”
Appearing for Wadia, senior counsel Janak Dwarkadas argued that “an independent director is supposed to be a watchdog of the minority shareholders. Sebi is duty-bound to protect the interest of minority shareholders.” He said even the Supreme Court had said that Sebi has the widest powers to take steps as it thinks fit to do, to protect rights of minority shareholders and hence it is the correct authority to be asked to step in. “…thus if an independent director is being wrongfully removed it is virtually like taking away the watchdog because of numerical strength of voting promoters.”
Chidambaram added, “The argument that independent directors cannot be removed is absurd. If the President of India, judges, MPs can be removed it is inconceivable that independent directors cannot be removed.” The general body of a company is the only one to decide by voting as per corporate democracy whether to continue or remove a director, he said.