Setback for Cyrus Mistry: NCLT says pleas against Tata Sons 'not maintainable'

The National Company Law Tribunal (NCLT) on Monday held that ousted Tata Sons' chairman Cyrus Mistry's family-held firms are not eligible under the Companies Act to seek relief for acts of alleged oppression and mismanagement against them as minority shareholders.

Cyrus Investments Pvt Ltd and Sterling Investment Corporation will now argue for a waiver of the eligibility condition under Companies Act. NCLT will decide on whether it can waive this requirement on March 7.

"The petitioners have failed to convince the court that the application is maintainable," said B.S.V. Kumar, presiding member of NCLT.

As per new Companies Act, minority shareholder should be holding at least one-tenth of the "issued share capital" or should represent at least one-tenth of the total number of minority shareholders. The term issued share capital covers not only the issued equity capital but also the issued preference capital.

Tata Sons argued that if preference capital is also considered, the two petitioner firms hold only 2.17 per cent of the total issued share capital of Tata Sons, while the Pallonji Mistry Group holds 18.4 per cent of ordinary share capital.

Tata Sons had earlier opposed the petitions filed by Cyrus Mistry Investment and Sterling Investment Corporation, saying as per a Supreme Court order on Companies Act, the petitioners could not seek a relief against alleged violation of their rights as minority shareholders.

The Companies Act also provides for these conditions to be waived by the tribunal as per its discretion, but the lawyers of Tata Sons argued that since the petitioners did not seek waiver at the time of filing the petitions, they cannot ask for such a leave later.

Last December, the two Mistry firms challenged before NCLT Cyrus Mistrys unceremonious removal by Tata Sons as its chairman and also as a director of its board on October 24.

The NCLT bench of BSV Prakash Kumar and V Nallasenapathy had allowed both the parties to argue on the maintainability and waiver applications. The waiver plea by two Mistry firms seeks a direction to drop the requirement of minimum 10 per cent shareholding by a minority shareholder under the Companies Act of 2013 for filing such a petition.

Though the Companies Act also says these conditions can be waived if an application is made, the Tatas said as the petitioners did not seek any waiver at the time of filing the petitions, any leave sought later was not maintainable.