NCLT order on petition challenging the mismanagement & oppression of minority shareholders
In another twist in the Legal battle between Cyrus Mistry and Tata Sons, Cyrus Mistry’s investment firms have filed an appeal at the National Company Law Appellate Tribunal (hereinafter referred to as ‘NCLAT’), challenging the rejection of their petition alleging mismanagement and oppression of minority shareholders. The Tata Group surprised everyone when on October 24, the Tata Sons board, the holding company for the conglomerate, approved a resolution to remove Cyrus Mistry as chairman of Tata Sons.
Cyrus Investments Pvt. Ltd and Sterling Investments Pvt. Ltd (hereinafter referred to as ‘Petitioners’) moved the NCLAT against the 6 March order by the National Company Law Tribunal (hereinafter referred to as the ‘NCLT’) that the petition was non-maintainable. NCLT had ruled that Cyrus Investments and Sterling Investments were not qualified to file the petition alleging mismanagement and oppression of minority shareholders at Tata Sons, the holding company of the $103 billion Tata group.
The Petitioners approached the Tribunal for seeking waiver of the qualification mandate set out in Section 244 (1) of the Companies Act, 2013 (hereinafter referred to as the ‘Act’), to enable them to pursue their Petition filed under Section 241 of the Act, on the ground that the interest of the Petitioners in Tata Sons Limited is substantial, the issues raised in the Petition are more appropriate to be dealt with under Section 241 and the cause raised is substantial in importance to the Petitioners, to class of members, to the Company itself and to the Public.
The basic claim of the Petitioners is that they together hold 18.37 % equity in Tata Sons and the affairs of the company have been/being conducted in a manner not only prejudicial and oppressive to them but also to the company and public. Under the new Act shareholders are required to hold 10 % equity to be qualified to file such a petition. Even though the two firms own over 18 % of ordinary equity shares of the Tata Group, their holding falls below 10 % when preference shares are taken into account.