Failing to get any relief from the Mumbai bench of the National Company Law Tribunal (NCLT), which dismissed its petition alleging mismanagement and oppression of minority shareholders at Tata Sons, the family firms of Cyrus Mistry on Friday moved an appeal in the National Company Law Appellate Tribunal (NCLAT). On April 17, the NCLT had also dismissed Mistry’s firms plea to grant it waiver from the rule which would have enabled it to move the tribunal despite not having the requisite shareholding in Tata Sons, thus leaving no option for them but to move in appeal to the appellate body.
The appeal filed on Friday is against the March 6 NCLT order dismissing Mistry’s petition on the ground of maintainability. An appeal against the dismissal seeking waiver may be filed later as the detailed order by NCLT is still to be released. The NCLAT is yet to fix the date of hearing.
On March 6, the NCLT had ruled that the two petitions filed by Mistry’s family’s investment firms against his ouster from Tata Sons were not maintainable as they did not fulfil the eligibility criteria for approaching the tribunal as the firms, put together, did not own the minimum required 10 per cent issued share capital of the company.
After this, the firms had sought a waiver from this rule so that their main petition can be heard, which was also dismissed by the tribunal on April 17. Giving waiver is at the discretion of the tribunal.
According to Section 244 of the Companies Act, to seek relief for oppression, the petitioner(s) need to comprise “not less than one hundred members of the company or not less than one-tenth of the total number of its members, whichever is less, or any member or members holding not less than one-tenth of the issued share capital of the company”.
Mistry’s family investment arms — Cyrus Investments and Sterling Investment Corporation — do hold 18.4 per cent of the ordinary shares of Tata Sons but they hold just 2.17 per cent of the issued share capital when even preference shares are considered and, hence, are not eligible to seek relief for oppression.
Mistry’s lawyers had argued that equity shareholders were a different class of shareholders from preference shareholders and Mistry’s firms have met the one-tenth requirement when only equity shares are considered. They had argued that given the substantially larger size of preference share capital of the company, if both equity and preference shares are considered, then at least 81 per cent of equity shareholding is required to meet the one-tenth eligibility criteria.