Mumbai: In a significant move, two family-owned firms of ousted Tata Sons chairman Cyrus Mistry moved the National Company Law Tribunal (NCLT) with a fresh application on Tuesday for a waiver on a condition that requires them to have 10% equity shareholding in the Tata holding company.
The companies, Cyrus Investment and Sterling Investment Corporation, had moved the tribunal in December against Tata Sons, seeking a supersession of its board, citing mismanagement and oppression of minority shareholders’ rights. They also challenged the proposed removal of Mistry as Tata Sons director. The petition was filed under the Companies Act and the companies, both shareholders of Tata Sons, said that their equity share capital of over 18% was more than the 10% that the Companies Act required for such petitions to be filed. It said that the petition was thus maintainable in law.
But from the first day, Tata Sons had been raising preliminary issues of maintainability. In its reply too, Tata Sons sought dismissal of the petition on grounds of maintainability. It said that the Mistry companies hold only 2.17% of total share capital of Tata Sons — less than the required one-tenth — and are not eligible under section 244 of the Companies Act to file the petition in the NCLT.
Tata Sons said that the shareholding is on the basis of “total issued share capital” and includes “issued preference capital and not only paid-up equity share capital” and amounts to 2.17% of issues share capital.
Claiming that Tata Sons’ objection and submission is “not correct” the Mistry family companies, however, said that it sought the waiver “in order that” its petition against Tata Sons, which raises several “grave” issues “in public interest” is heard on merits. Under the law, the tribunal has powers to grant a waiver, but the plea is likely to attract opposition from Tata Sons.
Tata Sons had said it would first argue on the very maintainability of the main petition filed by the Mistry companies, which it said were an “alter ego” for Mistry himself. The tribunal fixed the company plea for hearing on January 31-February 1.
The Mistry companies said the 10% pre-requisite was to “prevent persons with minor interest from making frivolous applications of oppression and mismanagement”. They said though they “do not meet with strict legal requirements”, their 18 % equity “is of extremely significant value, at market value, and much more than the preference shares issued by Tata Sons worth Rs 294 crore”, to warrant a hearing of their case on merits. A dismissal on technical grounds would leave grave issues uninvestigated, they said.
The issues raised include allegations of “abuse and misuse of articles of association by Tata Trusts and Ratan Tata to control Tata Sons”, decision by Ratan Tata to continue with the “loss-making” Tata Nano project and the “illegal removal” of Cyrus Mistry as chairman of Tata Sons in “complete violation of law, principles of corporate governance, fairness, transparency and probity”, the $12-billion investment by TCL in Corus Group, use of “brute shareholding majority” to requisition Mistry’s removal as director from group companies, undermining status of independent directors in listed group companies, alleged breach of regulations against insider training and reference to joint venture between Air Asia and Telstra Trade Place.
The Shapoorji Pallonji family have held shares in Tata Sons since 1965 with Pallonji Shapoorji Mistry a director over 1980-2004. His son Cyrus Mistry was nominated as Tata Sons director by Ratan Tata in 2006 and has been a director since.