The National Company Law Tribunal (NCLT) on Tuesday gave the green signal to Tata Sons Ltd to hold a planned shareholder meeting on 6 February, which will consider a proposal to remove former chairman Cyrus P Mistry as a director from its board.
The tribunal refused to grant a stay despite being pressed by the counsel of Mistry’s family investment firms, Aryama Sundaram.
“This bench has not passed any stay on the EGM (extraordinary general meeting) scheduled for 6th February. … Relief (to Mistry family firms) is recused. Now either the petitioner can file an appeal or be bound by an order,” said B.S.V. Prakash Kumar, one of the two members of the NCLT bench.
Earlier this month, the Mistry firms filed a contempt of court petition seeking a stay on the Tata Sons EGM. This has been dismissed by the NCLT, which asked the firms to club it with their original petition alleging mismanagement of Tata Sons and oppression of minority shareholders. Cyrus Mistry was ousted as chairman of Tata Sons in a boardroom putsch on 24 October.
The bench asked Sundaram, the counsel for Cyrus Investments Pvt. Ltd and Sterling Investments Pvt. Ltd, to argue the merits of the original petition.
Sundaram asked the NCLT to first clarify whether the petition was maintainable. In its response to the Mistry family firms’ petition, Tata Sons had said that the two firms were not qualified to file such a petition because they didn’t hold enough equity under Company Act rules.
Cyrus Investments and Sterling Investments together own 18.4% of the ordinary shares of Tata Sons, but only 2.17% if preference shares are included, said the holding company of the Tata group. Similarly, the Tata Trusts, which control two-thirds of Tata Sons, said that any suit filed against them needed the permission of the charity commissioner.
“This (equity) class of shareholders is affected and since we form 18% of the equity shareholders, the petition is maintainable and we have the right to appeal if we feel there is going to be a change in the board. Changes in the board are done through EGMs, which qualifies equity shareholders only to vote. Since we form 18% of that class, the petition is valid and maintainable,” Sundaram argued.
This did not work.
“This bench is virtually perplexed. None of the judgments of the Supreme Court or sections of the Companies Act cited by the petitioner counsel is in relation to the matter of maintainability. Moreover, normally maintainability point will be taken from the respondent side. But here the petitioner is arguing on the point of maintainability,” said Prakash Kumar.
The bench expressed its displeasure, saying that the Mistry family firms’ counsel was not cooperating with the proceedings. The tribunal said it will not spell out the judgement on maintainability separately and will hear arguments on maintainability only as a part of the overall arguments made on the original petition.
It asked Sundaram to argue on the merits of the original petition on 13 February, the next day of the hearing. After concluding hearings on behalf of the Mistry firms, the tribunal will hear Tata Sons’ arguments on 20 and 21 February.
While agreeing to postpone the hearing from Mistry’s side by two weeks, Prakash Kumar said, “The petitioner counsel can’t argue on the matter and is only asking for adjournment. Content in the petitioner counsel’s argument is a clear recusal from the direction given by the court. The meaning is that he can’t and is not ready to argue…The road map was already laid out on 22 December and thereafter on 18 January. As the court earlier said, there was enough time given to the petitioner counsel.”
After the hearing, Sundaram told reporters that the Mistry family firms will look at other options to get a stay on the 6 February EGM.
“Now we may want to take other remedies against the order (the oral order allowing the EGM on 6 February) so we asked (for an) adjournment,