The National Company Law Appellate Tribunal (NCLAT) on Friday asked Tata Sons to not force its ousted chairman Cyrus Mistry to sell his shares in the company till his appeal is pending, but refused to stay its conversion into a private company.
The tribunal, in an interim order on Mistry’s plea for putting on hold the approval for conversion, posted the matter for hearing on September 24.
Shareholders of Tata Sons, the holding company of the $103-billion Tata group, had voted in favour of turning it into a private limited company in September last year. This happened despite opposition from Mistry’s family firms. The family derives almost $17 billion of their fortune from the 18.4 per cent stake in Tata Sons.
The Mistry family has also challenged the order of the Mumbai bench of National Company Law Tribunal (NCLT) that upheld ouster of Cyrus as chairman of Tata Sons in 2016. The board of Tata Sons had dismissed Mistry as the chairman and said former chairman Ratan Tata would take over as interim chairman. Mistry had contended that the articles of association of Tata Sons were biased against the rights of minority shareholders and thereby oppressive, a charge Tata Sons dismissed, saying Mistry, who had been on its board since 2006, had never raised this issue until he was ousted from the company.
Besides change to a private company, the Mistry family had in NCLAT challenged the move by the company to restrict shareholders from freely selling their stake and the Article 75 of the articles of association that can be used by the board to force a shareholder to sell out.
“Taking into consideration the facts and that the appeal is pending and if the Appellants (Mistry) are forced to sell their shares which may affect the merits of the appeal, as they will cease to be member(s) of the company (Tata Sons).
“We direct the Respondents (Tata) not take any step in terms of Article 75 for transfer of shares of minority shareholders like Appellants (Mistry) and others during the pendency of the appeal,” the tribunal said.
Over change of status of Tata Sons, NCLAT said, "No further interim order is required to be passed at this stage".
Tata Sons has contended that it was always a closely held private entity but was considered a public limited company due to its size under an old legal provision. The status of the public limited company allowed investors greater flexibility in transferring their shares.
A few years back, the law was altered, allowing Tata Sons' shareholders to approve a change to its legal status last year, overriding objections from Mistry. “The appeal is admitted for hearing," the tribunal said. A two-member bench headed by its Chairperson Justice S J Mukhopadhaya has directed Tata Sons and other respondents to file their reply within 10 days.
With inputs from PTI