Appellate Tribunal overturns Tata Sons' conversion to Private Company, reinstates ousted Chairman

The Appellate Tribunal declared the conversion of 'Tata Sons Limited' from a 'Public Company' to a 'Private Company' illegal and prejudicial to minority members. The Registrar of Companies' actions were deemed illegal, and 'Tata Sons Limited' was ordered to be recorded as a 'Public Company.' The Tribunal emphasized the necessity of complying with Section 14 of the Companies Act, 2013, for such conversions. The removal of Mr. Cyrus Pallonji Mistry as Executive Chairman was deemed illegal, and he was reinstated. The Board of Directors was restricted from exercising powers under Article 75 without valid reasons and shareholder notification. The Tribunal dismissed the applications and clarified certain points in the judgment.

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Issues Involved:
1. Legality of the conversion of 'Tata Sons Limited' from a 'Public Company' to a 'Private Company.'
2. Actions taken by the Registrar of Companies in relation to the conversion.
3. Compliance with Section 14 of the Companies Act, 2013.
4. Interpretation and applicability of Section 43A of the Companies Act, 1956.
5. Validity of the removal of Mr. Cyrus Pallonji Mistry as Executive Chairman.
6. Exercise of powers under Article 75 by the Board of Directors of 'Tata Sons Limited.'

Detailed Analysis:

1. Legality of the Conversion of 'Tata Sons Limited' from 'Public Company' to 'Private Company':
The Appellate Tribunal noted that 'Tata Sons Limited' was initially a 'Private Company' but became a deemed 'Public Company' under Section 43A (1A) of the Companies Act, 1956, effective from February 1, 1975. The Tribunal observed that the conversion back to a 'Private Company' was done hurriedly without following the legal procedure under Section 14 of the Companies Act, 2013. The Tribunal declared the conversion illegal, stating that it was prejudicial and oppressive to minority members and depositors.

2. Actions Taken by the Registrar of Companies:
The Tribunal found that the Registrar of Companies acted against the provisions of Section 14 of the Companies Act, 2013, in converting 'Tata Sons Limited' back to a 'Private Company.' The Tribunal declared the actions of the Registrar illegal and ordered the company to be recorded as a 'Public Company.' The Registrar was directed to correct the records accordingly.

3. Compliance with Section 14 of the Companies Act, 2013:
The Tribunal emphasized that the conversion of a company from a 'Public Company' to a 'Private Company' requires compliance with Section 14, which involves altering the articles by a special resolution and obtaining approval from the Tribunal (NCLT). It was noted that 'Tata Sons Limited' did not follow this procedure, rendering the conversion invalid.

4. Interpretation and Applicability of Section 43A of the Companies Act, 1956:
The Tribunal discussed Section 43A (2A) and (4) of the Companies Act, 1956, which allowed a 'Public Company' to become a 'Private Company' with the approval of the Central Government. The Tribunal noted that 'Tata Sons Limited' did not obtain such approval, and therefore, it continued to be a 'Public Company.' The Tribunal also pointed out that Section 43A (2A) was repealed by the Companies Act, 2013, and replaced by Sections 18 and 14.

5. Validity of the Removal of Mr. Cyrus Pallonji Mistry as Executive Chairman:
The Tribunal declared the removal of Mr. Cyrus Pallonji Mistry as Executive Chairman of 'Tata Sons Limited' illegal and set aside the proceedings of the Board of Directors' meeting held on October 24, 2016. Mr. Mistry was restored to his original position as Executive Chairman and Director of 'Tata Companies' for the rest of his tenure.

6. Exercise of Powers Under Article 75 by the Board of Directors:
The Tribunal directed that the Board of Directors and shareholders of 'Tata Sons Limited' should not exercise their power under Article 75 against the appellants and other minority members, except in exceptional circumstances and in the interest of the company. Any exercise of such power should be preceded by recorded reasons and intimation to the affected shareholders.

Conclusion:
The Tribunal rejected the prayer for amendment in the Judgment dated December 18, 2019, and dismissed both Interlocutory Applications. The Tribunal clarified that there were no aspersions cast on the Registrar of Companies, Mumbai, and corrected a typographical error in Paragraph 171 of the Judgment.

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