Mistry’s Plea Not Frivolous, Says NCLAT
The NCLAT found “exceptional circumstances” to grant Cyrus Mistry a waiver.
The National Company Law Appellate Tribunal didn’t find Cyrus Mistry’s plea to bring oppression and mismanagement charges against Tata Sons Ltd. frivolous and said “exceptional circumstances” warranted a waiver from the shareholding requirement, according to its detailed order.
Mistry won relief from the appellate tribunal to argue his case at the National Company Law Tribunal despite not meeting the 10 percent shareholding threshold under Section 241 of the Companies Act to bring such charges. The NCLT has to pass its order in three months.
Two 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. They had moved the NCLT in December, nearly two months after Tata Sons removed him as chairman of the $105-billion group’s parent. After the NCLT denied Mistry relief, the companies moved the appellate tribunal.
The shareholding pattern of Tata Sons is such that only two people (Ratan Tata and Narotam Sekhsaria) will individually qualify to file the petition for oppression and mismanagement, the NCLAT said. Apart from them, “none of the 49 member(s) are eligible to file an application under Section 241, individually having less than 10 percent of the shareholding,” said the order released on Friday.
“One or the other minority shareholder cannot be asked or directed to form a group of” 10 percent shareholders as it will be dependent on the prerogative of the other members, the order said. “We are of the view that this is one of the exceptional and compelling circumstances, which merit the application for waiver,” said the NCLAT judgement.
Explaining the reasons to allow the waiver, the NCLAT said, the appellants’ interest worth up to Rs 1 lakh crore in a group whose valuation is about Rs 6 lakh crore is “is another factor, which we have kept in our mind to answer the application for ‘waiver’ in favour of the appellants”.
While the appellate tribunal did not give an opinion on the merits of Mistry’s allegations, it said his plea “cannot be stated to be a frivolous application”.