Partial Win For Cyrus Mistry As NCLAT Allows Him To Challenge Tata Sons
Ousted Tata Sons Ltd. chairman Cyrus Mistry can pursue charges of oppression and mismanagement against the company as an appeals tribunal granted him partial relief.
The National Company Law Appellate Tribunal rejected his first plea to bring the charges, saying he didn’t have the requisite shareholding. However, the NCLAT granted him a waiver from the condition, allowing him to argue his case at the National Company Law Tribunal. The NCLT has to decide the matter in three months.
Mistry called appellate tribunal’s decision a “vindication of what we have stood for”.
We will continue to pursue highest standards of corporate governance and demand complete transparency of the group for the benefit of all the millions of shareholders and indeed, the employees of the Tata Group companies.Statement From Cyrus Mistry’s Office
Tata Sons said in an emailed statement that it has taken stock of the order and will continue to defend the company’s position at all appropriate legal forums.
The relief for Mistry comes even as parent of the $103-billion salt-to-software group plans to change its legal status from a public to a private company. That will restrict his family’s ability to sell its 18.4 percent stake to external investors.
The Mistrys hold the shares through two investment firms—Cyrus Investments Pvt Ltd. and Sterling Investments Pvt Ltd.— which had filed the case against Tata Sons and Ratan Tata in December 2016. They moved the appellate tribunal after the NCLT denied them relief. The litigation stems from his removal as chairman on October 24 last year. He was later removed as director from the board of Tata Sons as well as other group companies.
Under Section 241 of the Companies Act, 2013, the petitioner must have one-tenth of the issued share capital of a company or represent 10 percent of the total number of members for it to be maintainable.
The Mistry firms own a combined 18.4 percent of ordinary equity shares of Tata Sons, but their holding falls below the required 10 percent when preference shares are taken into account. The two firms had argued for a waiver of the eligibility criteria, which the NCLT denied in April.