TaxTMI 
TaxTMI 
2017 (9) TMI 1500
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....dhary and Mr. Kostubh Devnani, Advocates, Mr. S.N. Mookherjee, Senior Advocate with Mr. Dhruv Dewan, Mr. Nitesh Jain, Mr. Sayak Maity, Mr Arjun Sharma, Mr. Rohan Batra, Mr. Kostubh Devnani and Ms. Reena Choudhary, Advocates, Mr. Sandeep Sethi, Senior Advocate with Mr. Nikhil Rohatgi and Mr. Rajiv Kumar, Advocates, Mr. Mohan Parasaran, Senior Advocate with Mr. Saswat Patnaik, Mr. Aditya Panda, Mr. Ashwin Kumar D.S. and Ms. Aditi Dani, Advocates JUDGMENT SUDHANSU JYOTI MUKHOPADHAYA, J. This common judgement disposes of two appeals against two different orders, passed in one Company Petition. 2. The appellants Cyrus Investments Pvt. Ltd. and Sterling Investment Corporate Pvt. Ltd., both shareholders of 1st Respondent Company - Tata Sons Limited, preferred Company Petition No. 82 of 2016 before the National Company Law Tribunal, Mumbai (hereinafter referred to as 'Tribunal') under Sections 241, 242 and 244 of the Companies Act, 2013 alleging continuing act of 'Oppression & Mismanagement' of members of 1st Respondent along with an application seeking Interim Relief. 3. On 22nd December 2016, the Tribunal passed a consent order. During the pendency of the s....
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....Learned Tribunal by second impugned order dated 17th April 2017 dismissed the application for waiver preferred by appellants and, thereby dismissed the Company Petition. Against the orders dated 6th March 2017 and 17th April 2017, these respective appeals have been preferred. 8. The question for determination in these appeals are:- (a) whether the petition preferred by appellants under Sections 241 and 242 of the Companies Act is maintainable? In other words, whether the appellants qualify the condition of holding minimum 1/10th of the 'Issued Share Capital' of the 1st Respondent Company, and (b) In case the 1st question is decided in negative against the appellants, then whether the appellants have made out a case of waiver of all or any or the requirements specified in Clause 1(a) of Section 244 so as to enable the appellants (the members) to apply under Section 241. Proposition on behalf of the appellants on the issue of maintainability:- 9. According to Mr. Sundaram Learned Senior Counsel for the Appellant, the Companies Act, 2013, itself has created and recognises classes of members. It has in this regard also made significant departures from th....
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....e members of the Company; or c. Any class of members of the Company. Section 244, on the other hand, while providing for the right to apply under section 241, creates a different set of class of members, as enumerated herein below: - a. Not less than one hundred members of the company; b. Not less than one- tenth of the total number of members; and c. Any member or members holding not less than one-tenth of the issued share capital of the company. 13. Therefore, according to Learned Counsel for the appellants, the words "share capital" as found in Section 244, would have to be read in conjunction with Section 241, and thus the reference to "share capital" in Section 244 ought to be read qua the "class of members" sought to be protected by the Statute, under section 241. Moreso, when different classes of members are recognized by the Companies Act, 2013, inter alia in Chapter IV which deals with share capital. Therefore, (a) and (b) looks are the member(s) or the holder of the share but for (c) the relevance is the nature of the holding. 14. According to Learned Senior counsel, the reference to "Issued share capital" in Section 244 has....
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....drafting cannot be referred to as simply an omission on the part of the Legislature, owing to the fact, that the very same Legislature makes use of the very same term, where it thought fit to do so. 18. Referring to Section 43 which relates to 'Kinds of Share Capital' with Equity and Preference, Section 47 which deals with voting rights of two classes of shareholders, Section 48 which relates to variation of shareholders' rights and Section 49 'Calls on shares of same class too be made on uniform basis", it was submitted that unlike Section 87 of the Companies Act 1956, which restrained the voting rights of equity shareholders to equity share capital and a preference shareholders to preference share capital. It was contended that Section 47 of the Act 2013, grants the right to vote on every resolution placed before the company. The voting rights of a preference shareholders continued to be restrained to those resolutions placed before the company which directly affect the rights attached to such preference shares, except in the case of default by the company in payment of dividends as enumerated in second proviso. 19. In support of the contention that differen....
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....iance was also placed on decision of Hon'ble Supreme Court in "Infrastructure Leasing and Financial Services Limited v. BPL Limited"- 2015(3) SCC 363, wherein Hon'ble Supreme Court noticed the concept of class as:- "30. delineating with the concept of class, referred to Palmer's Treties on Company Law, observed: - "What constitutes a class The court does not itself consider at this point what classes of creditors or members should be made parties to the Scheme. This is for the company to decide, in accordance with what the Scheme purports to achieve. The application for an order for meetings is a preliminary step, the applicant taking the risk that the classes which are fixed by the Judge, usually on the applicant's request, are sufficient for the ultimate purpose of the section, the risk being that if in the result, and we emphasise the words 'in the result', they reveal inadequacies, the Scheme will not be approved. If e.g. rights of ordinary shareholders are to be altered, but those of preference shares are not touched, a meeting of ordinary shareholders will be necessary but not of preference shareholders. If there are differen....
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.... to protect even such class and a meaning cannot be attributed to Section 244 which would militate totally there against. In the instant case, even the majority equity shareholders who holds 66% of the equity would not be eligible to maintain such an action. 25. It was also contended that the purpose of Section 244 being to ensure that speculative actions of an insignificant percentage of shareholders are discouraged and thereby stop mischievous litigation, it is relevant that in the Respondent No.1 company, the valuation of the company being in the region of at least 6 lakh crores, the interest of the Petitioners in the overall value of the Company would be over 1 lac crores. The value of the preference shareholding would only be Rs. 291 cores and not to carry voting rights other than in the exceptional circumstances found in Section 47(2), of the 2013 Act. 26. According to appellants, a construction that results in hardship, serious inconvenience, injustice, absurdity or anomaly or which leads to inconsistency or uncertainty and friction in the system which the Statute purports to regulate has to be rejected and preference should be given to that constructions which avoids ....
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....t will be anomalous result if it be said that if a building is constructed illegally or in an unauthorised manner, action can only be taken against the person who is doing the unauthorised act or illegal act but after the construction of the building is passed over to others, the construction of the building enjoys immunity from any action in respect of the same. That it appears, could not be a proper construction particularly in this case in view of the specific language used in the latter part of sub-section (1) of Section 478 of the Act set out hereinbefore. Keeping in background the facts of this case and the said provisions, in our opinion, the action taken by the Corporation was warranted by the provisions of the Act. Therefore it cannot be said that the notice issued by the Municipal Corporation was unauthorised or illegal. In that view of the matter, the judgment and order of the High Court of Gujarat impugned in this case must be set aside on this aspect of the matter and the appeal is thus allowed and the respondent's suit dismissed. We express no opinion on the other point of delegation. The parties will bear, in the facts and circumstances of the case, their own cos....
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....ment, it may be departed from so as to avoid that absurdity and inconsistency. (Grey v. Pearson [(1857) LR 6 HL Cas 61 : (1843-60) All ER Rep 21] , HLC p. 106.) Similarly, a construction giving rise to anomalies should be avoided... xxx". 31. In the said case, the Hon'ble Supreme Court noticed that while constructing an enactment, court will avoid construction which is unworkable or impracticable, inconvenient, anomalous or illogical, as noticed below : "35.Bennion on Statutory Interpretation has mentioned law to the same effect under Section 312 and has observed that there is a presumption that absurd result is not intended and in Section 314 it has been observed that the court has to avoid an inconvenient result while interpreting a provision. It was stated that it can be presumed that Parliament intends that while construing an enactment the court will avoid a construction that is unworkable or impracticable, inconvenient, anomalous or illogical as the same is unlikely to be intended by Parliament. In Rosali V. v. TAICO Bank [(2009) 17 SCC 690 : (2011) 2 SCC (Civ) 626] , this Court referring to Halsbury's common sense construction rule held that it is a well-....
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.... in Section 244 is accepted to be inclusive both classes of share capital and interpretation ought to be given that would render statute workable and would not frustrate the very provision. Learned counsel also distinguished the judgement relied upon by the Tribunal while passing the impugned order. Proposition on behalf of the Respondents (except 11th Respondent) 36. On behalf of the respondents, the main argument was advanced by Mr. Abhishekh Manu Singhvi, Senior Advocate on behalf of the 1st Respondent Company - Tata Sons Limited. 37. Referring to Section 241 of Companies Act 2013, Learned Senior Counsel submitted that in the case of a company having share capital, the following three categories of members have the right to approach the NCLT for the purpose of making an application under Section 241 of the 2013 Act. (i) Not less than 100 members of the company or, (ii) 1/10th of the total number of members; or (iii) Member(s) holding not less than 1/10th of the issued share capital of the company. 38. In a manner of speaking, the aforesaid three categories are akin to three types of entry passes for entering the portals of Tribunal for the ....
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....ot even urged in the Petition. 42. It was also submitted that the respondents in their replies pointed out that appellants were holding much less than 1/10th of the issued share capital of the 1st Respondent Company. Faced with this quandary, the Appellants called upon the Tribunal to "construe" Section 244 of the 2013 Act in a way that the expression "issued share capital" occurring therein is read/treated as "relevant issued share capital" on the basis that the concept of "class of members" occurring in Section 241(1)(b) is liable to be imported into Section 244(1) of the 2013 Act. In other words, the argument taken both before the Tribunal and this Appellate Tribunal is that 1/10th of the issued share capital of a company must be reckoned separately for equity and preference shareholders, such that it will be sufficient for section 244(1) if - petitioning members holding only equity shares hold 1/10th of the issued equity share capital and conversely petitioning members holding only preference shares hold 1/10th of the issued preference share capital. 43. According to Learned Senior Counsel for the 1st Respondent it is not clear from the construction of Section 244(1) prop....
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....ounsel also contended that if appellants' interpretation is accepted, it would wreak havoc and would be akin to driving a coach. 51. According to respondents' language of Section 244 being clear and unambiguous, the rule of literal interpretation should be applicable to its interpretation. 52. Reliance was also placed on the decision of Hon'ble Supreme Court in "Nasiruddin v. Sita Ram Agarwal [2003] 2 SCC 577; Commissioner of Sales Tax, U.P. Lucknow v. Parson Tools and Plants [1975] 4 SCC 22; V.L.S. Finance Ltd. v. Union of India [2013] 6 SCC 278 and Raghunath Rai Bareja v. Punjab National Bank [2007] 2 SCC 230. 53. Mr. Mukul Rohtagi, Learned Senior Counsel who appeared on behalf of the 2nd Respondent while taken similar plea further submitted that the language of Section 244(1) of the Companies Act, 2013 is clear and explicit. It is therefore, liable to be construed literally. Right from Companies Act 1956, it is well settled that the term 'Issued Share Capital' used in Section 399 of the said act comprised both the issued equity and preference share capital. [Ref. Northern Projects Ltd. v. Blue Coast Hotels and Resorts Ltd., (2009) 148 Comp Case 279; ....
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....ibed under Section 244 of the 2013 Act. That being the case, the expression "class of members" cannot have any effect on the construction of the expression "issued share capital" occurring in Section 244(1) of the 2013 Act. 56. According to him Section 241 of the 2013 Act gives locus to a member make a complaint to the National Company Law Tribunal in respect of matters specified in Section 24(1)(a)&(b) of the said Act. This locus is subject to the specified in Section 244 of the 2013 Act. Neither the locus provisions nor the eligibility provisions make any reference to "class of membership". That being the case, no question arises of reading the expression "issued share capital" as "relevant share capital", depending on the class of member applying for the relief. Instead the legislature where it thought fit to give a particular class of members a right, it has expressly provided for the same. (See Sections 48(2) & 236 (1) of the 2013 Act) 57. Similar was the arguments advanced by Mr. Mohan Parasaran, Learned Senior Counsel on behalf of the 6th Respondent and the other respondents. Relevant Provisions of the Companies Act, 2013. 58. To decide the issue, it is desira....
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....s and other sums due on his or their shares; (b) in the case of a company not having a share capital, not less than one-fifth of the total number of its members: Provided that the Tribunal may, on an application made to it in this behalf, waive all or any of the requirements specified in clause (a) or clause (b) so as to enable the members to apply under section 241. Explanation. -For the purposes of this sub-section, where any share or shares are held by two or more persons jointly, they shall be counted only as one member. (2) Where any members of a company are entitled to make an application under subsection (1), any one or more of them having obtained the consent in writing of the rest, may make the application on behalf and for the benefit of all of them." 60. Bare perusal of Section 244 makes it clear that in this case the Company having a share capital, only following categories of Members can apply: - (i) Minimum one hundred members of the company or one-tenth of the total number of its members, whichever is less and (ii) Any member or members (jointly) holding not less than one-tenth of the 'issued share capital&....
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....correlation between the use of the expression "class" in Section 241(1)(b) and the eligibility requirements in Section 244(1) of the 2013 Act. 65. Even the core premise of Appellants' contention i.e if there is oppression against only one class of shareholders (preference or equity) shareholders of that class ought to be entitled to ventilate that particular class' grievance and for this purpose eligibility must be reckoned intra class is entirely without any merit. 66. In respect of a complaint of oppression, both under the 1956 Act as also under the 2013 Act, any member can make a complaint that any other member is being oppressed. In other words, it is not necessary that only member who is the object/target of oppression has the locus to maintain a complaint; any other member(s) can so do on this behalf. 67. Apart from all the above, it is important to point out that wherever the parliament though it fit to refer to "class" or "issued equity share capital", it has done so expressly. For instance, Section 236 of the 2013 Act, which uses the phrase "issued equity share capital" in the context of purchase of minority shareholding. Yet another example is Section 48 ....
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.... xx 37. The court's jurisdiction to interpret a statute can be invoked when the same is ambiguous. It is well known that in a given case the court can iron out the fabric but it cannot change the texture of the fabric. It cannot enlarge the scope of legislation or intention when the language of the provision is plain and unambiguous. It cannot add or subtract words to a statute or read something into it which is not there. It cannot rewrite or recast legislation. It is also necessary to determine that there exists ....
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....f an analogous law in a subsequent statute, or even if there is a casus omissus in a statute, the language of which is otherwise plain and unambiguous, the Court is not competent to supply the omission by engrafting on it or introducing in it, under the guise of interpretation, by analogy or implication, something what it thinks to be a general principle of justice and equity. To do so "would be entrenching upon the preserves of legislature" [ At p. 65 in Prem Nath L. Ganesh v. Prem Nath L. Ram Nath, AIR 1963 Punj 62, Per Tek Chand, J.], the primary function of a Court of law being jus dicere and not jus dare." "23. We have said enough and we may say it again that where the legislature clearly declares its intent in the scheme and language of a statute, it is the duty of the Court to give full effect to the same without scanning its wisdom or policy, and without engrafting, adding or implying anything which is not congenial to or consistent with such expressed intent of the law-giver; more so if the statute is a taxing statute. We will close the discussion by recalling what Lord Hailsham [ At p. 11, Pearl Berg v. Varty, (1972) 2 All ER 6] has said recently, in regard to im....
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....tant since last 57 years, the mere change of subject matter of such complaint cannot give rise to a different interpretation of the provision. 80. If the argument advanced on behalf of the appellants that "Issued Share Capital" should be read as "relevant issued and subscribed capital", it can be interpreted in different way, leading to ambiguity and absurdity, which interpretation is not permissible as it will cause mischief. 81. It is to be noticed that "Issued Share Capital" automatically means the "Issued and Subscribed Share Capital". The provision of Section 244 also makes it clear that it should be a paid up share capital as applicants have to show that they have paid all calls and other sums due on their shares. If different meaning of "Relevant Issued Share Capital" given, then in that case, the persons having only equity shares will claim that it should be read as "Issued Equity Share Capital" and those who have only "Preference Share Capital", they will claim to read it as "Issued Preference Share Capital" and third group having both Equity and Share Capital will claim that it should be read as "Issued Equity and Preference Share Capital". As the submission as made....
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.... deals with kinds of share capital and sub-section (1) of section 85 defines preference share capital and sub-section (2) defines equity share capital. Sub-section (1)(a) of section 87 of the Act deals with voting rights of equity shareholders and sub-section (2)(b) deals with voting rights of preference shareholders. Having regard to the provisions of sections 85, 86 and 87 of the Act, the expression "issued share capital" in section 399(1) of the Act can only refer to and refer only to the share capital which could be issued, i.e., both equity and preference share capital and therefore the expression "issued share capital" refers to both preference and equity share capital of the company. In other words, these sections can be used as tools of interpretation of the said expression. 25. The expression "issued share capital" can have no doubt about it when considered in relation to other provisions of the Act. Inserting the word "equity" after the word "issued" and before the words "share capital" will be adding a word which the Legislature clearly did not intend and to interpret it further as "legally valid issued share capital" would be doing violence to the section. The ....
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.... in terms of Section 41(3) of the Act needs to be considered only to be rejected. As rightly pointed out on behalf of the Company Originally Section 41 of the Act provided for two categories of members, namely a person who is a subscriber to the memorandum of association in terms of sub-section (1) of Section 41 and secondly a person whose name is entered in the register of members in terms of Section 4192) of the Act. As rightly pointed out on behalf of the Company it appears that sub-section (3) was brought on the Statute book w.e.f. 20.9.1995 to meet the requirements of the equity shareholders holding shares in the electronic form and thereby a third category was added by the introduction of the Depositors Act, 1996. As rightly pointed out on behalf of the Company sub-section (3) of Section 41 of the Act specifically mentions shares in the electronic form and therefore any reliance placed on the said sub-section to buttress the case of the Appellant appears to be erroneous, misleading and legally incorrect. As rightly pointed out on behalf or the Company, the Depositors Act 1996 was enacted for the purpose of facilitating the transactions of shares in dermat form thereby introdu....
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.... 86. The reasons assigned by Hon'ble Supreme Court, not only constitute the declaration of law under Article 141 of the Constitution of India but is also binding on all courts, including this Appellate Tribunal. 87. From the aforesaid discussion, while we hold that the expression "Issued Share Capital" as mentioned in Section 244(1) of the Companies Act, 2013 only refer to both 'Equity Share' and "Preferential Share Capital" of the company and similar finding having given by the Tribunal, we uphold the order dated 16th March, 2017. 88. As admittedly, the Appellants have less than 1/10th of the "Issued Share Capital of the company" (2.17%), we hold that the Appellants do not qualify under Section 244(1) to file a petition under Section 241 of the Companies Act, 2013 and the petition without waiver, at their instance is not maintainable. 89. In absence of any merit, we dismiss Company Appeal (AT) No. 133 and affirm the decision of the Tribunal, in so far as it relates to maintainability of the petition under Sections 241 and 242. WAIVER 90. The next question arises for consideration as to whether the application preferred by Appellants merits waiver under....
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....lass of members, which class is vitally interested in the subject litigation, whose issues may not be of any relevance to the separate class of preference shareholders, would be the most relevant consideration. The Appellants holding 18.37% of the equity shareholding having a present market value of more than Rs. 1 lakh crores would have a substantial interest in the Company and not an insignificant one. 95. It was further submitted that it is not for the Tribunal to go into the relative merits and demerits since to do so would be a decision on the merits of the case whereas the Tribunal is at present, is only considering the question as to whether the case ought to be heard at the behest of the Appellants. If the decision of the Tribunal amounts to deciding the merits of the case, then the merits ought to be gone into in detail. 96. According to appellants, if the waiver application is sought to be rejected on the ground that it does not make out a case under Section 241, then the only test to be applied for rejection at this stage would be those found in Order VII Rule 11, CPC, and what is to be looked into is only as to whether the Petition on the fact of it, if taken as a....
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....action falling within the scope of Section 241. For convenience, these tests can be referred to as 'exclusionary tests' or 'cause of action' tests as they would exclude cases which do not disclose a cause of action. (b) Apart from not being hit by any exclusionary tests, the petition should also meet certain positive prescriptions, or inclusionary tests, which merit the grant of the special privilege of waiver to the petitioners. 101. Exclusionary Tests, according to Learned Senior Counsel for the 1st Respondent company are as follows: - The first enquiry should be to see if the case made out in the petition falls within the contours of Section 241. A case which does not ex facie disclose a cause of action under Section 241 cannot merit the grant of waiver. For this purpose, the Tribunal should examine whether the allegations in the petition: (a) pertain to the affairs of the company with respect to which the petition has been filed? (b) do not concern continuing acts of oppression but instead call into question 'past and concluded' transactions or transactions which are ex facie time barred under Section 433 of the Act? ....
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.... is not granted. In other words, the complaining shareholder(s) has no forum before which he could agitate his grievances apart from the Tribunal by way of a petition under Section 241. In particular, this would be in cases where it is only the Tribunal which can grant the effective remedy to the petitioners such as reduction of share capital consequent to a buy-back of securities by the company. 103. It was submitted that a plain reading of Section 430 shows that it only bars the jurisdiction of civil courts in respect of suits or other proceedings that the Tribunal or this Hon'ble Appellate Tribunal are "empowered to determine by or under" the Act. There is nothing in the language of Section 430 which is even remotely suggestive of the fact that a litigant who does not meet the qualifying eligibility criteria under Section 244(1) or a member whose application for waiver has been rejected is altogether precluded from agitating his grievance before ordinary civil courts. 104. According to Learned Senior Counsel, the legislative intent seems to be precisely to the contrary, i.e. members satisfying the eligibility criteria of Section 244(1) have an exclusive forum in the fo....
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....makes substantive allegations around the purported illegal removal of 11th Respondent as the Chairman of Tata sons and thereafter as a director. It is a settled principle of law that directorial complaints cannot constitute a cause of action under under Section 241 of the Act. Reliance was also placed on the decision of Hon'ble Supreme Court in "S.P.Jain v. Kalinga Tubes", (1965) 2 SCR 720 and "Hanuman Prasad Bagri v.Bagri Cereals Private Limited," (2001) 4 SCC 420. (iv) The Appellants' conduct disentitles them from seeking relief under the equitable jurisdiction of Section 241 It was submitted that the Appellants are companies which are controlled by 11th Respondent and his family. The timing of the filing of the Petition after 11th Respondent's removal as Executive Chairman of Tata sons and his resignation as a director from certain other companies in which Tata Sons is a shareholder, leaves no iota of doubt that the Petition is not a genuine shareholder action. In fact, the Petition is a vindictive action filed to espouse 11th Respondent's cause after he was removed as Executive Chairman. This action has been filed to get even with the Tata Trusts and th....
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....he positive prescriptions or the 'inclusionary tests' which would merit the grant of waiver. From bare averments, there is nothing to show even remotely that the Petition concerns a supervening national or larger public interest. The gravity of the consequences which have been explicitly explained to invoke it as a ground for waiver, except a mere bald pleading, nothing has been pleaded and pleading is simply inadequate. 107. Learned Senior Counsel for the 1st Respondent while submitted that Section 241(1)(b) does not form the subject matter of the Petition. It was also contended that the impugned order in so far it relates to waiver is a discretionary order and ought not to be set aside unless perverse, arbitrary or capricious. Reliance was placed on decision of Hon'ble Supreme Court in "Wander Limited and Anr. v. Sntox India Private Limited" [1990]Supp. SCC 727. "Skyline Education Institute India (Private) Limited v. S.L.Vasani" [2010] 2, SCC 142, "Mohd. Mehtab Khan v. Khushnuma Ibrahim Khan" [2013] 9 SCC 221 and "Bed Raj v. State of Uttar Pradesh" AIR 1955 SC 778. 108. Mr. Mukul Rohtagi, Learned Senior Counsel for the 2nd Respondent submitted that a bare readin....
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....: A bare perusal of the allegations made in the Petition would demonstrate that the same are essentially in the nature of a personal onslaught only against 2nd Respondent. According to him, shareholders of a company cannot be permitted to initiate proceedings for feeding private grudges of warring groups. Reliance was made to the judgement of Hon'ble Orissa High Court in "N.K.Mohapatra v. State of Orissa", AIR 1994 Ori 301. 112. It was also contended that Appellants have not come to the court with clean hands. The only real cause of action for filing the Petition is the removal of 11th Respondent as the Chairman of 1st Respondent Company. The Petition is nothing but a proxy litigation at the behest of 11th Respondent to agitate his own personal grievance against 2nd Respondent and to malign the reputation of 1st Respondent, where 11th Respondent chose not to become the Petitioner. Instead, the Appellant companies are being used as a front solely for and on behalf of 11th Respondent. 113. It was further submitted that the allegations not pertaining to the Corus acquisition, the Nano Project, removal of 11th Respondent as director from various operating companies, transacti....
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.... (i) The disputes raised being ex-facie barred by res-judicata or principles analogous thereto; (j) The disputes raised and the subject matter thereof are ex-facie barred by some other law and falls within the exclusive domain of some other court/tribunal or forum; 117. In so far as Inclusionary factors (Qualification) is concerned, it was contended that the Onus being on the Applicants to show from their application and/or the petition that the same makes out strong grounds/a compelling/strong prima facie case which entitle them to a waiver. While exercising its discretion, the Tribunal may, inter alia, keep the following considerations in mind: - (a) The allegations made in the application/petition disclose: I. that it is not merely a personal dispute of a shareholder but the acts complained of are prejudicial to the interest of the company and interest of the public; and II. that it in the interest of the company and all its members to pursue the petition; and III. that to wind up the company would unfairly prejudice such member or members, but that otherwise the facts would justify the making of a winging-up order on the g....
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....decision of 1st Respondent. Article 121 A lists out matters that necessarily have to be taken to the Board of Directors of 1st Respondent. Thereby, the Trustees have complete control of affairs of 1st Respondent and thereby affairs of all other Tata Group Companies. 125. According to Learned Senior Counsel for the 11th Respondent, the removal of 11th Respondent as Executive Chairman is in direct conflict with Article 118, which requires a committee to be formed. This removal cannot be seen as some isolated act of oppression but is to be seen in the context of and attendant with the various other evidently oppressive action that are evident from the pleadings. 126. Therefore, this is not a "directorial dispute" about removal of a director, but an oppressive act involving a material change effect by way of removal of the Executive Chairman who was remedying and acting in the interests of 1st Respondent. 127. Further according to 11th Respondent, the Company Secretary of 1st Respondent (23rd Respondent) has admitted that no committee was formed for the removal of the Executive Chairman in terms of Article 118, vide his email dated November 12, 2016. This email also confirms t....
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....'s shares, or if it has no share capital, in its membership, or in any other manner whatsoever, and that by reason of such change, it is likely that the affairs of the company will be conducted in a manner prejudicial to its interests or its members or any class of members, may apply to the Tribunal, provided such member has a right to apply under section 244, for an order under this Chapter." 133. Sub-Section (2) of Section 241 empowers Central Government to apply, if it is of the opinion that the affairs of the company are being conducted in a manner prejudicial to public interest, which is as follows: "(2) The Central Government, if it is of the opinion that the affairs of the company are being conducted in a manner prejudicial to public interest, it may itself apply to the Tribunal for an order under this Chapter." 134. Under sub-section (1) of Section 242, the Tribunal is empowered to pass order on any application made under section 241, as it thinks fit, with a view to bringing to an end the matters complained of, if it forms opinion in terms of clause (a) and (b) therein, and quoted below: - "242. Powers of Tribunal. ─(1) If, on any ap....
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....ction,--- xxx xxx xxx Provided that the Tribunal shall not grant leave under this clause unless notice of the intention to apply for leave has been served on the Central Government and that Government has been given a reasonable opportunity of being heard in the matter." ....
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....t till the Tribunal waive all or any of the requirements specified in clause (a) or clause (b) of sub-section (1), so as to enable the member(s) to apply under Section 241, no application under Section 241 can be entertained. 143. Therefore, before grant of waiver, the question of forming opinion by Tribunal on an application made under Section 241 and to pass any order as it thinks fit does not arise. If the Tribunal intends to decide the application under Section 241 on merit, it is required to waive the requirement as prescribed under sub-section (1) of Section 244. 144. For the reasons aforesaid, we hold that the Tribunal cannot deliberate on the merit of a (proposed) application under Section 241, while deciding an application for 'waiver' under proviso to sub-section (1) of Section 244. The factors dependent on merit (i) Prima facie case: Whether a prima facie case is made out or not is dependent on merit of the case as may pleaded in the (proposed) application under Section 241. As it is dependent on merit of the case, we are of the view that the Tribunal cannot decide the question as to whether a prima facie case has been made out or not w....
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....n for 'waiver'. If the Tribunal, after perusal of proposed application under Section 241, without deciding the merit of the case forms opinion that the allegation relates to 'oppression and mismanagement' of the company, the question of referring the matter to the arbitrator does not arise. Similarly, if the Tribunal refuse to grant 'waiver' on the ground the (proposed) application do not merit waiver, the question of referring the case to arbitrator does not arise. (v) Directorial Complaint Whether the allegation is in the nature of Directorial Complaint or not can be decided by the Tribunal only at the stage of deciding merit of an application under Section 241 after taking into consideration the reply, if any, and hearing the parties. As it is dependent on merit, we hold that the question as to whether the allegation pertains to Directorial Complaint or not, cannot be decided by Tribunal while deciding an application for 'waiver' (vii) Conduct of Applicant: The question of deciding the conduct of an applicants to disentitle them from seeking a relief is also based on merit of each case. Therefore, we ho....
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....nder section 397 or 398:- (a) in the case of a company having a share capital, not less than one hundred members of the company or not less than one- tenth of the total number of its members, whichever is less, or any member or members holding not less than one- tenth of the issued share capital of the company, provided that the applicant or applicants have paid all calls and other sums due on their shares; (b) in the case of a company not having a share capital, not less than one- fifth of the total number of its members. (2) & (3)** ** ** ....
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....ains to 'oppression and mismanagement' of the company or its members. The merit cannot be decided till the Tribunal waives the requirement and enable the members to file application under Section 241. 151. Normally, the following factors are required to be noticed by the Tribunal before forming its opinion as to whether the application merits 'waiver' of all or one or other requirement as specified in clauses (a) and (b) of sub-section (1) Section 244:- (i) Whether the applicants are member(s) of the company in question ? If the answer is in negative i.e. the applicant(s) are not member(s), the application is to be rejected outright. Otherwise, the Tribunal will look into the next factor. (ii) Whether (proposed) application under Section 241 pertains to 'oppression and mismanagement' ? If the Tribunal on perusal of proposed application under Section 241 forms opinion that the application does not relate to 'oppression and mismanagement' of the company or its members and/or is frivolous, it will reject the application for 'waiver'. Otherwise, the Tribunal will proceed to notice the other factors. (iii) Whether sim....
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....wer can be vested with the Civil Court on the ground that the member is ineligible to apply before the Tribunal for alleged act of 'oppression and mismanagement'. 157. For the aforesaid reasons, we hold that Civil Court is not the forum for an ineligible member to sought relief as may be granted under section 242, if a case of 'oppression and mismanagement' is made out. Appellants' claim 158. Now the question arises whether the application for 'waiver' preferred by appellants along with (proposed) application under Section 241 merits 'waiver' of all or any one of the requirements specified in clause (a) or clause (b) so as to enable the appellants to apply under Section 241. To decide the same, it will be desirable to notice the relevant facts, without going into the merit of the (proposed) application. 159. There are 51 shareholders of 'Tata Sons Limited', whose shareholding, both equity and preferential as on 21st December 2016 are as follows (as pleaded and admitted): - TATA SONS LIMITED SUMMARY OF SHAREHOLDING - EQUITY & PREFERENCE SHARES-21.12.2016 Eq. Sh. (FV Rs. 1000/sh) Pref. Sh (FV Rs. 1,000/sh) ....
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....ection 241, individually having less than 10% of the shareholding. 161. That means in the context of present case, except that the minority shareholders join together, i.e. either six in numbers or such numbers of members whose joint shareholding will come up to 10% of the issued share capital of the Company, which will be also not less than 3 to 4 members, none of the 49 shareholders can file an application under Section 241 alleging 'oppression and mismanagement'. It will remain only in the hands of major shareholders, namely Mr. Ratan Naval Tata or Mr. Narotam S. Sekhsaria, who only have right and their prerogative to file such application. 162. One or the other minority shareholder cannot be asked or directed to form a group of 10% of the member(s) that means six person(s) in the present case, as it will be dependent on the prerogative of the other member(s). 163. We are of the view that this is one of the exceptional and compelling circumstances, which merit the application for 'waiver' subject to the question whether (proposed) application under Section 241 relates to 'oppression and mismanagement'. 164. Appellants have pleaded and not disp....
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....bsp; ** ** (g) Any matter affecting the shareholding of the Tata Trusts in the Company or the rights conferred upon the Tata Trusts by the Articles of the Company or the shareholding of the Company in any Tata Company if not already approved as part of the annual business plan; (h) Exercise of the voting rights of the Company at the general meetings of any Tata Compan....