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Out of 51 shareholders of Tata Sons only Ratan Tata and Narotam Sekhsaria are eligible to file against oppression and mismanagement as minority shareholders, NCLAT has observed while granting waiver to Cyrus Mistry on the minimum shareholding rule calling it 'exceptional' and 'compelling circumstances'.
The National Company Law Appellate Tribunal (NCLAT) had yesterday waived the minimum shareholding rule to the ousted Tata Sons chairman, Mistry to file a case of alleged oppression of minority shareholders against Tata Sons.
"We find that except Ratan Naval Tata having issued shareholding of 31.43 per cent and Narotam S Sekhsaria having 17.01 per cent shareholding capital of the company, none of the 49 members are eligible to file an application under Section 241, individually having less than 10 per cent of the shareholding," NCLAT said in the order, uploaded today.
Section 241 of the Companies Act 2013 empowers a minority shareholder of the company to approach NCLT against oppression and mismanagement. However, Section 244 mandates that they should have at least 10 per cent ownership in a company and the tribunal has power to grant the waiver.
While Tata is the Chairman Emeritus of Tata Sons, the holding firm of the USD 105 billion salt-to-software group, NS Sekhsaria is Chairman, Non-Independent and Non-Executive Director of Ambuja Cement.
The appellate tribunal further said that under the shareholding pattern of Tata Sons, as on December 21, 2016, unless other minority shareholders join together, whose total shareholding would come up to 10 per cent of the issued share capital of the company, none of them can file application alleging oppression and mismanagement.
"It will remain only in the hands of major shareholders, namely Mr Ratan Naval Tata or Mr Narotam S Sekhsaria, who only have right and their prerogative to file such application," said NCLAT.
It further said one or the other minority shareholder cannot be asked or directed to form a group of 10 per cent of the members, which in the present case would be six members, "as it will be dependent on the prerogative of the other member(s)".
"We are of the view that this is one of the exceptional and compelling circumstances, which merit the application for 'waiver' subject to the question whether (proposed) application under Section 241 relates to 'oppression and mismanagement'," it added.
Mistry family owns 18.4 per cent equity shares in the closely-held Tata Sons. However, their holding comes to 2.82 per cent if preferential shares are included, thereby not meeting the criteria of at 10 per cent ownership in a company for filing of a case of alleged oppression of minority shareholders.
Cyrus Investments Pvt Ltd and Sterling Investments Corporation Pvt Ltd had moved the NCLT against Tata Sons after Mistry's ouster last year alleging oppression of minority shareholders and mismanagement.
The tribunal also observed that the plain reading of the two petitions filed by the two investment firms will show that the "allegations relate to oppression and mismanagement; it cannot be stated to be a frivolous application."
However, it added: "We are not expressing any opinion with regard to merit of such allegation, but have only noticed the allegations."
The tribunal has remitted the matter back to the Mumbai bench of the National Company Law Tribunal and decide within three months.
"The case is remitted to the Tribunal to register the (proposed) application under Section 241... and after notice to the parties decide the application on merit uninfluenced by impugned orders preferably within three months," it said.
Earlier, on April 17, the Mumbai bench of the NCLT had rejected the waiver plea filed by the investment firms while on March 6, it had set aside the one over maintainability. Following that, both the investment firms had moved the appellate tribunal.
Following which, the two investment firms moved NCLAT.
The NCLAT bench, headed by Justice S J Mukhopadhaya, however, dismissed another petition filed by Mistry family's investment firms on maintainability, saying the firms do not have more than 10 per cent in Tata Sons.
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