The National Company Law Tribunal (NCLT) on Monday ruled that the petition filed by Cyrus Mistry’s family firms, claiming that Tata Sons was oppressing minority shareholders was not ‘maintainable’.
The ruling is a setback for Mistry, who was ousted unceremoniously from the chairmanship of Tata Sons on October 24, 2016. The firms, the NCLT ruled, did not fulfill the eligibility criteria for approaching the tribunal since they did not own the minimum required 10 per cent of the issued share capital of the company. “The petitioners have failed to convince the court that the application is maintainable,” BSV Prakash Kumar, presiding member of NCLT, said.
The NCLT will, on Tuesday, hear fresh arguments by Mistry’s lawyers seeking waiver of this requirement. The law provides that if the petitioner is not eligible to approach the tribunal, it can seek for waiver.
However, Tata Sons lawyers have already, in an earlier reply, opposed the move saying a waiver should not be granted at this late stage since Mistry’s original petition had not sought one.
To seek relief for oppression, the petitioner needs 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 lower. Otherwise, according to section 244 of the Companies Act, the petitioner must be a member or members holding not less than one-tenth of the issued share capital of the company.
Simply put, Monday’s order agrees with Tata Sons’ contention that while Mistry’s family investment arms — Cyrus Investments and Sterling Investment Corporation — do hold 18.4 per cent of the ordinary shares of the company, they hold just 2.17 per cent of the issued share capital even if preference shares are considered. Hence, they 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. Mistry’s firms, they said, have met the one-tenth requirement if only equity shares are considered.