The National Company Law Appellate Tribunal today declined to pass an interim order on Cyrus Mistry's plea against the conversion of Tata Sons Ltd. to a private limited company.
But the two-judge bench headed by NCLAT Chairperson Justice SJ Mukhopadhyay asked Tata Sons not to take steps on the sale of minority shareholders' stake until the appellate tribunal decided on Mistry's plea alleging oppression by the group holding company.
The Mistry-led investment companies had sought an interim stay on the conversion of Tata Sons from a public limited company to a private limited company.
Mistry was represented by Senior Advocate CA Sundaram who argued that after the Tata company won the case at the National Company Law Tribunal it “hurriedly” moved the Registrar of Companies for conversion. The ROC issued it a certificate without due process under company law - that is, shareholder approval in the annual general meeting and an application under Section 14 of the COmpanies Act, 2013 - Sundaram said.
Senior Advocate Abhishek Manu Singhvi, who represented Tata Sons, argued that no application was required as Tata Sons was incorporated as a private company in 1917 and even when company law amendments made it a ‘deemed public company' its articles continued to include features inherent to a private company.
According to company law a private company is characterised by three key features
- it restricts the right to transfer its shares
- limits the number of its members to two hundred
- prohibits any invitation to the public to subscribe for any securities of the company
The bone of contention in this phase of the legal fight between Mistry and Tata is Article 75 of Tata Sons' articles of association. It relates to the company's power of transfer and permits the company at any time, by a special resolution, to force a shareholder to sell his shares.
While Article 75 has existed for a long time, the earlier deemed public company nature of Tata Sons prevented it from being used. Now that Tata Sons has converted to being a private company, it can resolve to direct any shareholder to sell his shares.
Keeping this mind the NCLAT ordered that till the case is decided no action should be taken on basis of Article 75.
We direct the Respondents (Tata Sons) not take any step in terms of Article 75 for transfer of shares of minority shareholders like Appellants (Mistry Entities) and others during the pendency of the appeal.NCLAT Order
These were interim proceedings and the NCLAT will start hearing arguments on Mistry's main case of oppression and mismanagement by Tata Sons on Sep. 24. Mistry lost the case at the NCLT and has filed an appeal with the appellate tribunal.
The battle between the two dates back to November 2016 when Cyrus Mistry was forced to step down as chairman of Tata Sons prompting the acrimonious exchange of allegations of mis-governance by both sides.
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