TaxTMI 
TaxTMI 
2019 (12) TMI 895
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....lants- 'Cyrus Investments Private Limited' and 'Sterling Investment Corporation Pvt. Ltd.', the minority group of shareholders/ 'Shapoorji Pallonji Group' ("SP Group" for short) moved an application under Sections 241-242 of the Companies Act, 2013 alleging prejudicial and oppressional acts of the majority shareholders (Tata Groups). 3. There being a doubt as to whether the Appellants had more than 10% of the equity of shareholding of the Company, the Appellants- 'Cyrus Investments Private Limited & Anr.' also filed a petition for waiver under Section 244 of the Companies Act, 2013. The National Company Law Tribunal ("Tribunal" for short), Mumbai Bench, initially dismissed the petition under Sections 241-242 of the Companies Act, 2013 being not maintainable, also dismissed the petition for waiver. 4. On challenge, this Appellate Tribunal by its judgment dated 21st September, 2017 taking into consideration the exceptional circumstances including the fact that out of Rs. 6,00,000 crores of total investment in 'Tata Sons Limited', the Appellants- 'Cyrus Investments Private Limited & Anr.' had invested approximately Rs. 1,00,000 crore held that it was a fit case for waiver and re....
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....nal relationship that existed between the two families both in business and outside. The relationship was not based purely on commercial considerations but because of factors outside of pure economic factors. In fact, a few members of the 'Tata Group' divested their shareholding in 1st Respondent Company in favour of 'SP Group' which transfer was approved at the meeting of Board of Directors of 'Tata Sons Limited' (1st Respondent Company) which then comprised of Directors of Tata Group only. 11. The business relationship between the two groups as Shareholders of 'Tata Sons Limited' (1st Respondent Company) is culmination of preexisting relationship between the 'SP Group' and 'Tata Family' over the last 50 years. There was no element of a formal business partnership between the two groups as envisaged in law inasmuch as in the matter of regulating the relationship between the 'SP Group' and the 'Tata Group', law and the other formalities took a backseat. Till the dispute started the relationship between the two groups has been driven primarily on the basis of mutual trust and confidence between two groups of friends' / family members. 12. Although a two-group company, 'Tata So....
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....nt Company) and the Tata Group Companies. Mr. Cyrus Pallonji Mistry (11th Respondent) displayed due deference and respect to the past leadership of 'Tata Sons Limited (1st Respondent Company) and went out of his way to protect their legacy. Mr. Cyrus Pallonji Mistry (11th Respondent) addressed these legacy hotspots internally and 11th Respondent and his team did not comment on these issues in the public domain, during 11th Respondent's tenure as 'Executive Chairman'. Removal of 'SP Group' from management and 11th Respondent as 'Executive Chairman' 15. Learned counsel for the Appellants submitted that an abiding theme of Respondents' conduct is the consistent and steady squeezeout of the Appellants' rights and title to, and interest in, their ownership of 1st Respondent Company in a manner that is lacking in probity and is unfair. 16. It is submitted that Mr. Cyrus Pallonji Mistry's (11th Respondent) sudden and hasty removal as 'Executive Chairman' must be seen in the context of: (i) his efforts to remedy past acts of mismanagement inherited from the past management and opening up embarrassing issues; (ii) yet being respectful in resisting interference from Mr. Ratan N. Tat....
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.... 1st Respondent Company and Tata Group Companies is evident from the record which shows a range of topics over which pre-consultation was demanded under the threat of alleging a violation of the Articles of Association and went far beyond offering solicited advice or guidance. The interference is evident from the numerous presentations and discussions held with Mr. Ratan N. Tata (2nd Respondent) and Mr. Cyrus Pallonji Mistry (11th Respondent) on a wide range of topics and these extended well beyond even legacy hotspots. Over 550 emails were exchanged between 11th Respondent and 2nd Respondent demonstrating the scale of interference. Such interference fostered a pattern of decision making that led to the Board of 1st Respondent Company being undermined including: (i) 2nd Respondent dictating the contents of minutes and directly interacting with officials of the Tata Group Companies, (ii) Nominee Directors stepped out of a meeting to take instructions from 2nd Respondent and 14th Respondent on how to vote in a matter and (iii) 14th Respondent dictating the contents of the note to be placed before the Board of 1st Respondent Company. 21. Faced with having to deal with a formal inst....
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....ta Group Companies' independent directors objecting to 11th Respondent's ouster, notices were issued by 1st Respondent Company at the behest of the Trustees of the Tata Trusts to the Tata Group Companies to remove 11th Respondent as a director of the Tata Group Companies. A few independent directors resigned. Others fell in line. Similarly, 11th Respondent who was the 'SP Group's' representative on the Board of Directors of 1st Respondent, was also removed as a director by requisitioning a special general meeting of 1st Respondent as retribution for these proceedings being initiated by the Appellants. The purported reasons such as compliance with a summons from the tax authorities being equated with a breach of confidentiality, were supplied later. 25. When these proceedings were sub-judice, an attempt to convert 1st Respondent into a Private Limited Company was made, in a marked departure from a long legacy of its being a public limited company having revenue in excess of USD 100 billion and involving control of over 100 operating companies including 29 listed and public companies. As a public company 1st Respondent would be subjected to a higher standard of governance and with....
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....t in line with expectation. 29. It was further submitted that Article 121B- with 15 days' notice for a director to introduce a matter is rendered redundant since decisions would be subject to Article 121. The effect of all this is that important matters which would rightly benefit from the deliberation by all members of the Board would be deprived of such inputs by not even being brought before the Board. 30. Article 121A specifies a list of matters which are to be brought before the Board of 1st Respondent Company. In fact, Article 121A would also be a clear indicator that important items ought to be considered by the Board which would be wholly negated should Article 121 be used in the manner that it was. 31. It was contended that Article 121 has been used as a tool of oppression whereby irrespective of the strength of the Board and provisions as to the presence of independent directors on the Board, just two trustee nominee directors alone can decide what gets approved (even this was brought down from 3 to 2). 32. According to counsel for the Appellants, widespread abuse by Mr. Ratan N. Tata (2nd Respondent) and Mr. N.A. Soonawala (14th Respondent) of Article 121 is ....
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....e Mr. N.A. Soonawala (14th Respondent) could add value as an advisor. 36. The record demonstrates that far from providing advice when sought, Mr. Ratan N. Tata (2nd Respondent) and Mr. N.A. Soonawala (14th Respondent) actively interfered in the affairs of 1st Respondent Company. Contrary to the claims being made now noteworthy feature of these "grievances" and breach of Articles are raised not by the Trust Nominee directors of the Trustees of the Tata Trusts or other members of the Board of Directors of 1st Respondent Company acting independently. These were all issues and grievances raised by Mr. Ratan N. Tata (2nd Respondent) and Mr. N.A. Soonawala (14th Respondent). 37. According to Appellants, Article 121 A(h) of the Articles requires matters relating to how 1st Respondent Company would vote as a shareholder of the Tata Group Companies to be decided at a meeting of the Board of 1st Respondent Company. The 'Welspun' transaction entailed 'Tata Power' acquiring certain business assets of 'Welspun'. The Articles of Tata Power do not confer any special rights on 1st Respondent Company to pre-approve transactions which were to be entered by the Board of Tata Power. The acquisit....
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....arned counsel for the Appellants submitted that to further ensure that such prejudicial and oppressive acts could proceed unchecked and to further the attempts at complete unilateral control of the company, pendente lite these proceedings, a sudden attempt has been made to convert the company from public limited to private limited, which is also under challenge. The entire background and manner in which such conversion was done would clearly indicate that the overhaul of Company law to ensure proper management of public limited companies and to ensure proper protection of minority shareholders, is sought to be undermined and avoided. 40. According to learned counsel for the Appellants, the manner of conversion was also wholly against the law and in fact, against the provisions of the Companies Act itself and contrary to the assurances made to shareholders that the same would be subject to approval by the Tribunal, after hearing all stakeholders. The only motivation of the conversion was not the interest of the company but to marginalise and further oppress the only independent minority shareholder. 1st Respondent Company also withheld material facts relating to the conversion fr....
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.... will of the 1st Respondent Company. 1st Respondent Company as the promoter, the single largest shareholder; is the owner of the Tata brand; and by virtue of Article 121-A, in effect controls the management and policy decisions of such companies. Therefore, various instances of mismanagement in how decisions relating to such companies are taken against the interests of 1st Respondent Company and consequently its shareholders form part of the record. 45. The Appellants have provided 'Illustrative Instances of the Prejudice Occasioned by Undermining Governance', which we have noticed and discussed at appropriate stage. Disparaging Remarks Against the Appellants by The Tribunal 46. While challenging the order, learned counsel for the Appellants highlighted the disparaging remarks against the Appellants and judicial bias in the impugned order by referring to certain observations made therein. It was submitted that the Appellant is aggrieved by certain observations and findings which deeply affect the reputation of Mr. Cyrus Pallonji Mistry- (11th Respondent) (Appellant in other case) and attack his integrity both professionally and personally. 47. It was submitted that the ....
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.... majority or the affirmative vote of any particular Director or Directors is specified in the Articles, the Resolution shall be passed only with the assent of such special majority or such affirmative vote. An Interested Director shall not be entitled to vote. For this purpose, a Director shall be treated as interested in a contract or arrangement entered or proposed to be entered into by the company: (a) with the Director himself or his relative; or (b) with any body corporate, if such Director, along with other Directors holds more than two percent of the paid-up share capital of that body corporate, or he is a promoter, or manager or chief executive officer of that body corporate; or (c) with a firm or other entity, if such Director or his relative is a partner, owner or Member, as the case may be, of that firm or other entity." 53. It was submitted that even as per the 'Secretarial Standard on Meetings of the Board of Directors', is any special majority or the affirmative vote of any particular Director or Directors specified in the Articles, the Resolution shall be passed only with the assent of such special majority or such affi....
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....irly prejudice such member or members but that otherwise the facts would justify the making of a winding up order on the ground that it was just and equitable that the company should be wound up. 62. Mr. Harish Salve, learned Senior Counsel referred to the principles of 'Unfair Prejudice Remedy' i.e. principle 14 as applicable to English Law, but it is not necessary to highlight the same, as two of the decisions have already been referred to above. 63. Dr. Abhishek Singhvi, learned Senior Counsel submitted that the allegations pertaining to replacement/ removal of Mr. Cyrus Pallonji Mistry- (11th Respondent) are in the nature of directorial complaints which cannot be raised in a petition under Section 241 of the Companies Act, 2013. 64. It was submitted that directorial dispute has no nexus with the shareholders' proprietary rights, therefore, the same cannot be agitated or entertained in a petition under Sections 241-242 of the Companies Act, 2013 (Sections 379-398 of the Companies Act, 1956). Reliance has also been placed on the decision of the Hon'ble Supreme Court in "S.P. Jain v. Kalinga Tubes Ltd.─ AIR 1965 SC 1535" wherein the Hon'ble Supreme Court held that t....
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....lonji Mistry's- (11th Respondent) removal would also not impinge on any right enjoyed by the Appellants as shareholders of Tata Sons Limited' (1st Respondent Company) which can be protected, executed or enforced in the present proceedings. 69. According to Dr. Abhishek Manu Singhvi, learned Senior Counsel, there is no provision in the Articles of Association of Tata Sons Limited' (1st Respondent Company) or any shareholders' agreement which entitles the Appellants to participate in the management of Tata Sons Limited' (1st Respondent Company) or nominate any directors to the board of Tata Sons Limited' (1st Respondent Company). Tata Sons Limited' (1st Respondent Company) is not quasi-partnership, by any stretch of imagination. Consequently, the Appellants are not permitted to make allegations regarding the removal of Mr. Cyrus Pallonji Mistry's- (11th Respondent) either as Chairman or as a director of the 'Tata Sons Limited' (1st Respondent Company). 70. It was submitted that the Appellants cannot allege that the removal of Mr. Cyrus Pallonji Mistry's- (11th Respondent) by the Board of Directors of 'Tata Sons Limited' (1st Respondent Company) on 24th October, 2016 as the 'Exe....
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....pondent) and the Tata Trusts. 73. It was submitted that prior to a board meeting on 24th October 2016, Mr. Ratan N. Tata (2nd Respondent) and 7th Respondent met Mr. Cyrus Pallonji Mistry- (11th Respondent) and requested him to step down from the position of the Chairman of 'Tata Sons Limited' (1st Respondent Company). This request was made in the hope that Mr. Cyrus Pallonji Mistry- (11th Respondent) would understand that his continuance as the Chairman of Tata Sons had become unacceptable to Tata Trusts and would accordingly, in a dignified manner, step down from the position. However, Mr. Cyrus Pallonji Mistry- (11th Respondent) refused to accede to this request, constraining the directors nominated by the Tata Trust to bring the motion of Mr. Cyrus Pallonji Mistry's- (11th Respondent) replacement in the board meeting held on 24th October 2016. It is important to state that on the said date, the Board of 'Tata Sons Limited' (1st Respondent Company) comprised of 9 directors, including Mr. Cyrus Pallonji Mistry- (11th Respondent). Therefore, the 3 directors nominated by the Tata Trusts could not, on their own, pass the resolution to replace Mr. Cyrus Pallonji Mistry's- (11th Res....
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....irectors". Therefore, according to him, the limited role of the 'Selection Committee' under Article 118 is to recommend a candidate for the appointment as the Chairman of the Board of Directors. It is absurd to interpret this Article to mean that the "Selection" Committee would also take decisions regarding the removal of the Chairman. Such an interpretation would be inherently contradictory to the purpose behind the constitution of a Selection Committee and entirely counterintuitive to the express words in the Article, which, were consciously chosen to mean that a committee has to be constituted for the purposes of selection of Chairman (and not for its removal). 75. Therefore, Article 118 does not otherwise deal with the removal of the incumbent Chairman. On the other hand, it provides that the process of obtaining the affirmative vote of all directors appointed under Article 104B (i.e. the Trusts Nominee Directors) in a board meeting, should be followed even in the case of removal of the Chairman. It is in that context that the phrase "the same process shall be followed for the removal of the incumbent Chairman" appears in Article 118. 76. According to learned Counsel, the....
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....his performance was not universally applauded as the Appellants are trying to contend. 81. According to him, all the Directors of 'Tata Sons Limited' (1st Respondent Company) who participated in the board meeting on 24th October 2016 are individuals with great experience and repute in either business or public life, who fully understood the implications and consequences of the vote they were called upon to cast in the matter of replacement of Mr. Cyrus Pallonji Mistry's- (11th Respondent) in the board meeting on 24th October 2016 and thereafter, exercised their best judgment in the interest of 'Tata Sons Limited' (1st Respondent Company), by voting to replace Mr. Cyrus Pallonji Mistry- (11th Respondent). While some of the reasons which led to a loss of confidence in the stewardship of Mr. Cyrus Pallonji Mistry- (11th Respondent) are detailed in the press statement dated 10th November 2016 issued by 'Tata Sons Limited' (1st Respondent Company), the past performance is not the only criteria for judging the performance of a leader but the Board and shareholders are also entitled to take into account the future prospects and the continued ability to lead the company. In the present ....
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....to learned counsel for the Respondents, no application is required to be filed under Section 14 of the Companies Act, 2013. 85. Mr. Mohan Parasaran, learned Senior Counsel appearing on behalf of Mr. Nitin Nohria (7th Respondent), Mr. Venu Srinivasan (6th Respondent), Mr. K.B. Dadiseth (16th Respondent), Mr. R.K. Krishna Kumar (17th Respondent), Mr. S.K. Bharucha (18th Respondent), Mr. N.M. Munjee (19th Respondent), Mr. R. Venkataramanan (20th Respondent), submitted that the nominee director do not prohibit the taking of the views of the nominator so long as the nominee director discharges his or her fiduciary duty to the company as a Director of that Company. 86. Reliance has been placed on Section 166 of the Companies Act, 2013 which outlines the duties of directors, and include the duty to act in accordance with the Articles of Association of the Company; act in good faith in order to promote the objects of the company for the benefit of its members, its employees, etc; act with due and reasonable care and exercise independent judgment; avoid conflict of interest. 87. Section 166 serves as an inbuilt check or a safeguard to ensure that even a nominee director discharges ....
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....Mr. Ratan N. Tata (2nd Respondent) retired from the Board of 1st Respondent Company (Tata Sons). 94. It was also informed that Mr. Nitin Nohria (7th Respondent) and Mr. Vijay Singh (9th Respondent) are two Trust Nominee Directors. It is stated that on the particular date of removal of Mr. Cyrus Pallonji Mistry (11th Respondent), they leave a Board meeting to seek instructions from Mr. Ratan N. Tata (2nd Respondent) on specific issues which were being discussed in the meeting. 95. The following lapses of Mr. Cyrus Pallonji Mistry (11th Respondent) have been pointed out by learned counsel for Mr. Nitin Nohria (7th Respondent): a) A serious lapse of governance was witnessed in the context of the acquisition of 'Welspun Renewables Energy Limited' by 'Tata Power Renewable Energy Limited', a subsidiary of the 'Tata Power Company Limited' ('Welspun Acquisition'). This was a major acquisition and the purchase consideration for the transaction was estimated to be approximately in excess of USD 1 billion. The concern of 1st Respondent (Tata Sons) arose from the high level of debt in Tata Power of Rs. 40,000 crores and the non-resolution of the tariff issue of its Mundra Projec....
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.... such language being entered in the, minutes, Mr. Nitin Nohria (7th Respondent) and Mr. Vijay Singh (9th Respondent) requested for an opportunity to talk to Mr. Ratan N. Tata (2nd Respondent) so that they could find the language acceptable to both Mr. Cyrus Pallonji Mistry (11th Respondent) and the Trusts to be entered into minutes. d) Mr. Nitin Nohria (7th Respondent) wanted to bring a consensus rather than act in a manner which would require the Chairman of the Board, i.e., Mr. Cyrus Pallonji Mistry (11th Respondent) to record an objection in the minutes. This has been twisted out of context by the Appellants for their self-serving ulterior motives. No instructions were sought from Mr. Ratan N. Tata (2nd Respondent). This is, a glaring example of irreparable trust deficit between Mr. Cyrus Pallonji Mistry (11th Respondent) and the majority shareholders, since even the minutes of meetings became contentious. 96. Though the aforesaid allegations have been made by 7th Respondent, no supporting document enclosed in support of such allegation or lapse on the part of 11th Respondent. 97. Similar plea has been taken by other Respondents. Analysis of Facts and Law:- ....
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....1), an order under that subsection may provide for- (a) the regulation of conduct of affairs of the company in future; (b) the purchase of shares or interests of any members of the company by other members thereof or by the company; (c) in the case of a purchase of its shares by the company as aforesaid, the consequent reduction of its share capital; (d) restrictions on the transfer or allotment of the shares of the company; (e) the termination, setting aside or modification, of any agreement, howsoever arrived at, between the company and the managing director, any other director or manager, upon such terms and conditions as may, in the opinion of the Tribunal, be just and equitable in the circumstances of the case; (f) the termination, setting aside or modification of any agreement between the company and any person other than those referred to in clause (e): Provided that no such agreement shall be terminated, set aside or modified except after due notice and after obtaining the consent of the party concerned; (g) the setting aside of any transfer, delivery of goods, payment, execution or other act relating t....
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.... so altered. (7) A certified copy of every order altering, or giving leave to alter, a company's memorandum or articles, shall within thirty days after the making thereof, be filed by the company with the Registrar who shall register the same. (8) If a company contravenes the provisions of sub-section (5), the company shall be punishable with fine which shall not be less than one lakh rupees but which may extend to twenty-five lakh rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than twenty-five thousand rupees but which may extend to one lakh rupees, or with both." 99. The aforesaid provisions make it clear that if any member of a company complains that the affairs of the company have been or are being conducted in a manner 'prejudicial to public interest' or in a manner 'prejudicial' or 'oppressive' to him or any other member or members or 'prejudicial to the interests of the company' may file application under Section 241(1) of the Companies Act, 2013. 100. The test as to when the proposed measure can be subject of the proceedings....
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....e purpose of introducing Section 210 in the English Companies Act was to give an alternative remedy to winding up in case of mismanagement or oppression. The law always provided for winding up, in case it was just and equitable to wind up a company. However, it was being felt for sometime that though it might be just and equitable in view of the manner in which the affairs of a company were conducted to wind it up, it was not fair that the company should always be wound up for that reason, particularly when it was otherwise solvent. That is why Section 210 was introduced in the English Act to provide an alternative remedy where it was felt that though a case had been made out on the ground of just and equitable cause to wind up a company, it was not in the interest of the shareholders that the company should be wound up and that it would be better if the company was allowed to continue under such directions as the court may consider proper to give. That is the genesis of the introduction of Section 153-C in the 1913-Act and Section 397 in the Act. Section 397 reads thus :- "Application to Court for relief in cases of oppression.─(1) Any members of a company ....
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....e stressed in Elder's case as summarised at p. 394 in Meyer's case :- "(1) The oppression of which a petitioner complains must relate to the manner in which the affairs of the company concerned are being conducted; and the conduct complained of must be such as to oppress a minority of the members (including the petitioners) qua shareholders. (2) It follows that the oppression complained of must be shown to be brought about by a majority of members exercising as shareholders a predominant voting power in the conduct of the company's affairs. (3) Although the facts relied on by the petitioner may appear to furnish grounds for the making of a winding up order under the 'just and equitable' rules, those facts must be relevant-to disclose also that the making of a winding up order would unfairly prejudice the minority members qua shareholders. (4) Although the word 'oppressive' is not defined, it is possible, by way of illustration, to figure a situation in which majority shareholders, by an abuse of their predominant voting power, are 'treating the company and its affairs as if they were their own property' to the ....
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....ot lack of confidence between shareholders per se that brings s. 210 into play, but lack of confidence springing from oppression of a minority by a majority in the management of the company's affairs, and oppression involves at least an element of lack of probity or fair dealing to a member in the matter of his proprietary rights as a shareholder. 18. These observations from the four cases referred to above apply to Section 397 also which is almost in the same words as Section 210 of the English Act, and the question in each case is whether the conduct of the affairs of a company by the majority shareholders was oppressive to the minority shareholders and that depends upon the facts proved in a particular case. As has already been indicated, it is not enough to show that there is just and equitable cause for winding up the company, though that must be shown as preliminary to the application of Section 397. It must further be shown that the conduct of the majority shareholders was oppressive to the minority as members and this requires that events have to be considered not in isolation but as a part of a consecutive story. There must be continuous acts on the part of th....
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....ollowing on one or other of these forms of combination, one result followed from the method adopted, "which is common to partnership, that there should be the utmost good faith between the constituent members". Finally, it was held that the court ought not to allow technical pleas to defeat the beneficent provisions of section 210 (page 344 per Lord Keith; pages 368-369 per Lord Denning). 46. In an application under section 210 of the English Companies Act, as under section 397 of our Companies Act, before granting relief the court has to satisfy that to wind up the company will unfairly prejudice the members complaining of oppression, but that otherwise the facts will justify the making of a winding up order on the ground that it is just and equitable that the company should be wound up. The rule as regards the duty of utmost good faith, on which stress was laid by Lord Keith in Meyer, (supra) received further and closer consideration in Ebrahimi v. Westbourne Galleries Ltd., wherein Lord Wilberforce considered the scope, nature and extent of the 'just and equitable' principle as a ground for winding up a company. The business of the respondent company was a very profitab....
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....referred to certain decisions under section 210 of the English Companies Act including Meyer (supra) and observed: "These observations from the four cases referred to above apply to section 397 also which is almost in the same words as section 210 of the English Act, and the question in each is whether the conduct of the affairs of the company, by the majority shareholders was oppressive to the minority shareholders and that depends upon the facts proved in a particular case. As has already been indicated, it is not enough to show that there is just and equitable cause for winding up the company, though that must be shown as preliminary to the application of section 397. It must further be shown that the conduct of the majority shareholders was oppressive to the minority as members and this requires that events have to be considered not in isolation but as a part of a consecutive story. There must be continuous acts on the part of the majority shareholders, continuing upto the date of petition, showing that the affairs of the company were being conducted in a manner oppressive to some part of the members. The conduct must be burdensome, harsh and wrongful and mere lack of ....
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.... so, whether to wind up the company would unfairly prejudice such member or members, but that otherwise the facts would justify the making of a winding up order on the ground that it was just and equitable that the company should be wound up. 106. If both the aforesaid questions are answered in affirmative, the power can be exercised by the Tribunal under Section 242 of the Companies Act, 2013 with a view to bringing to an end the matters complained of, and make such order as it thinks fit. 107. To find out whether there is any direct control of 'Tata Trusts', the majority shareholders on the Company ('Tata Sons Limited'), as alleged, we have noticed the relevant provisions of Articles of Association of the Company, as discussed below. 108. Article 86 of 'Tata Sons Limited' relates to 'Quorum at General Meetings', as follows: "86. Quorum at General Meetings No quorum at a general meeting of the holders of the Ordinary Shares of the Company shall be constituted unless the members who are personally present are not less than five in number including at least one authorised representative jointly nominated by the Sir Dorabji Tata Trust and the Sir Rata....
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....'s the Chairman shall have a casting vote." Provision engrafted in this Article is unequivocal that affirmative vote of majority of Directors nominated by 'Tata Trusts' is indispensable for matters required to be decided by a majority of Directors. This amply demonstrates the pre-eminent position, the Directors nominated by 'Tata Trusts' hold on the Board of Directors. This is the reason, the Appellants have termed the power of the nominated Directors of the 'Tata Trusts' as 'veto power', over the majority decision of the Board of Directors'. 111. Article 121 is depended on aggregate paid up ordinary share capital of 'Tata Trust'. However, if it is read along with Article 121A, particularly clause (g), it will be evident that it is difficult to change the shareholding of 'Tata Trust' to make it less than 40%, as in the Board's meeting, the nominated Directors of 'Tata Trust' have affirmative vote (veto power): - **121A. The following matters shall be resolved upon by the Board of Directors: (a) a five-year strategic plan that should include an assessment of the proposed strategic path of the Company, business and investment opportunities, propose....
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....t requires, mean each or any of the4 following companies" Tata Consultancy Services Ltd., Tata Steel limited, Tata Motors Limited, Tata Capital Ltd., Tata Chemicals Ltd., Tata Power Company Ltd., Tata Global Beverages Ltd., The Indian Hotels Company Ltd., Trent Limited, Tata Teleservices (Maharashtra) Limited, Tata Industries Limited, Tata Teleservices Limited, Tata Communications Limited, Titan Company Limited and Infiniti Retail Limited and any other Company in which the Company (or its subsidiaries) holds twenty percent or more of the paid up share capital and whose name is notified in writing to the Company by the Directors nominated under Article 104B". 112. Article 121A (h) relates to voting rights of the Company at the general meeting of any 'Tata Company', including appointment of a representative of the Company ('Tata Company') under Section 113(1) (a) of the Companies Act, 2013 in respect of a general meeting of any Tata Company named therein. In the meeting of the 'Tata Company', or the Group Companies in which the 'Tata Sons Limited' (Company) holds twenty percent or more of the paid up share capital, names of Director are to be notified in writing by the Di....
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....ary shares' of any shareholders including the Appellant's without notice can be exercised through a special resolution in the general meeting of the holders of the ordinary shares of the company which requires presence of nominated Directors of the 'Tata Trusts', who have affirmative vote. The nominated Directors of 'Tata Trusts', to look into the interest of the 'Tata Trusts', may not allow majority decision of the Company ('Tata Sons Limited') to reduce the paid up ordinary share capital of 'Tata Trusts' below 40% aggregate, which otherwise will result into their exit (Exit of the nominated Directors). 119. The Tribunal or this Appellate Tribunal has no jurisdiction to hold any of the Articles illegal or arbitrary, the terms and conditions being agreed upon by the shareholders. However, if any action is taken even in accordance with law which is 'prejudicial' or 'oppressive' to any member or members or 'prejudicial' to the Company or 'prejudicial' to the public interest, the Tribunal can notice whether the facts would justify the winding up of the Company and in such case, if the Tribunal holds that it would unfairly prejudice member or members or public interest or interest o....
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....or consultation' and 'pre-clearance' from them. 124. The Appellants have highlighted wide range of topics which Mr. Ratan N. Tata (2nd Respondent), Mr. N.A. Soonawala (14th Respondent) and others brought up with Mr. Cyrus Pallonji Mistry- (11th Respondent) where their guidance was sought for. Written record of interventions by Mr. Ratan N. Tata (2nd Respondent) and Mr. N.A. Soonawala (14th Respondent) and collateral correspondence from other Respondents, including the Group Legal Counsel of the 'Tata Group' and interactions between Mr. Cyrus Pallonji Mistry- (11th Respondent), Mr. Ratan N. Tata (2nd Respondent) and Mr. N.A. Soonawala (14th Respondent) has been highlighted. 125. Some of the documentary evidence of correspondence between Mr. Cyrus Pallonji Mistry- (11th Respondent), Mr. Ratan N. Tata (2nd Respondent), Mr. N.A. Soonawala (14th Respondent) and Mr. Nitin Nohria (7th Respondent), are set out hereunder: (i) By e-mail dated 18th July, 2013, Mr. Ratan N. Tata (2nd Respondent) as CMO/TIL in reply to the request of Mr. Cyrus Pallonji Mistry- (11th Respondent) informed his view relating to cap ex-made to the Board by the TME Management. In the said e-mail, he as....
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....015 intimated Mr. Ratan N. Tata (2nd Respondent) that there are a number of initiatives in multiple areas which can be taken to pull 'Tata Motors' out. The C.V of a potential Managing Director of the 'Tata Motors' was also forwarded with observation that unless Mr. Ratan N. Tata (2nd Respondent) has any objection he may be called for an interview. (vi) E-mail from Mr. Cyrus Pallonji Mistry- (11th Respondent) to Mr. Nitin Nohria (7th Respondent) dated 29th January, 2015 shows that Mr. Cyrus Pallonji Mistry- (11th Respondent) expressed concern that if everything is to be presented to Mr. Ratan N. Tata (2nd Respondent) then what the Board of Directors of the Company will do, as an investment decision is to be taken by the 'Tata Sons Limited'. In response, Mr. Nitin Nohria (7th Respondent), a trustee Nominee Director vide emails dated 31st January, 2015 and 4th February, 2015 agreed to formulate a governance framework. (vii) E-mail dated 16th February, 2015 was sent by Mr. N.A. Soonawala (14th Respondent) to Mr. Cyrus Pallonji Mistry- (11th Respondent) wherein views expressed by Mr. Cyrus Pallonji Mistry- (11th Respondent) with respect to 'Tata Motors', Mr. N.A. Soona....
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....Respondent). 129. The aforesaid communications between the Respondents from 2013 to 2016 show that there was complete confusion in the Board about the governance framework of the Company ('Tata Sons Ltd.') as before deciding any matter or for taking any resolution by the Board decision used to be taken by Mr. Ratan N. Tata (2nd Respondent) for 'Tata Trusts', in which Mr. Nitin Nohria (7th Respondent) and Mr. N.A. Soonawala (14th Respondent), were taking active part. 130. This is also apparent from the stand taken by Dr. Abhishek Singhvi, learned Senior Counsel appearing on behalf of the Company ('Tata Sons Limited') that prior to the Board's meeting held on 24th October, 2016 before removing Mr. Cyrus Pallonji Mistry (11th Respondent), on the same date decision had already been taken by Mr. Ratan N. Tata (2nd Respondent) in presence of Mr. Nitin Nohria (7th Respondent) to remove Mr. Cyrus Pallonji Mistry (11th Respondent), who asked him to step down from the post of the 'Executive Chairman' of the Company ('Tata Sons Limited'). However, Mr. Cyrus Pallonji Mistry (11th Respondent) in absence of any decision of Board or any ground refused to accede to such dictate. 131. Dr. ....
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....to say a few words. However, Mr. R.N Tata commented that he was an observer at this stage. Mr. Amit Chandra thereafter sought the views of Mr. C.P Mistry on the said motion. In response, Mr. Mistry sought 15 days' notice for taking up such an item for the consideration of the Board and stated that the present action was illegal. Mr. Amit Chandra mentioned that the Trusts had obtained legal advice stating the such a notice is not necessary Mr. C P Mistry also said he would like to obtain legal advice since the legal opinions were not made available to him and he did not agree with the legal opinions since Mr. C.P Mistry was an interested party in relation to the motion. Mr. Amit Chandra requested Mr. Vijay Singh to act as the Chairman. Mr. Ishaat Hussain mentioned that he would like to abstain from the voting on this proposal. Mrs. Farida Khambata mentioned that she would also like to abstain from the voting on this proposal. All other directors (other than Mr. C.P. Mistry- interested, Mr. Ishaat Hussain and Mrs. Farida Khambata) supported the motion, Mr. Amit Chandra proposed that Mr. Vijay Singh be elected as the chairman for the Board meeting in place of Mr. C.P. Mistry.....
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....rising of (i) Mr. Ratan N. Tata (Nominee of Tata Trust); (ii) Mr. Amit Chandra (Nominee of Tata Trust); (iii) Mr. Venu Srinivasan (Nominee of Tata Trusts); (iv) Mr. Ronen Sen (Independent Director); and (v) Lord Kumar Bhatthcharya (Independent outside person); and (g) Until selection and appointment of a new chairman of the Board in terms of the companies act, 2013 and the article of associations of the company to vest substantial powers of management of the company with Mr. F.N Subedar Chief Operating Officer, and /or one or more senior officials and / or directors of the company, subject to the overall supervisions and directions of the Board, in such manner as the Board may decide from time to time. Mrs. Farida Khambata abstained from voting on this resolution. Mr. C.P Mistry recorded his objection by stating his view that it was not legal for the matter to be taken up. All the other directors voted in favour of the Resolution and the resolution and the Resolution was carried by the requisite majority. 3. Replacement of Mr. Cyrus P. Mistry as Executive Chairman Dr. Nitin Nohria proposed the following resolution for replacement of Mr. C.P Mistr....
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....omination and remuneration committee of the company be reconstituted with immediate effect, with the following directors as Members (i) Mr. Ronen San (Independent Director); (ii) Mr. Ajay Piramal (Independent Director); (iii) Mrs. Farida Khambata (Independent Director); (iv) Mr. Vijay Singh and (v) Mr. Vanu Srinivasan." Mr. C.P Mistry recorded his objection to moving the resolution by stating his view that it was not legal for the resolution to be taken up. Mrs. Farida Khambata abstained from voting on this resolution. The other Director voted in favour of the resolution and the resolution was carried by the requisite majority. 6. Appointment of Mr. Ratan N. Tata as Additional Director Mr. Ronen San proposed the following resolution for appointment of Mr. Ratan N. Tata as additional director, which was seconded by Mr. Ajay Piramal "RESOLVED THAT in accordance with Section 161 and other applicable provision of the companies act 2013 and the rules framed thereunder read with article 106 and other applicable provisions of the article of associations of the company Mr. Ratan N. Tata Director Identifications No.00000001) be and is hereby appointed as ....
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....other senior official and/ or directors Dr. Nitin Nohria proposed the following resolution which was seconded by Mr. Amit Chandra "RESOLVED THAT until selection and appointment of a New Chairman of the company in terms of the companies act, 2013 and the articles of association of the Company, substantial powers of management of the company may be vested with Mr. F.N. Subadar, chief operating officer of the company (who shall be a 'manager' of the company so long as substantial powers of management are vested with him) and /or one or more senior officials and / or directors of the company, subject to the overall supervision and direction of the Board in such form and manner as the board may decide from time to time." Mr. C.P Mistry recorded his objection to moving the resolution by stating his view that it was not legal for the resolution to be taken up. Mrs. Farida Khambata abstained from voting on this resolution. The other directors voted in favour of the resolution and the resolution was carried by the requisite majority. Mr. R.N Tata mentioned that there was a need to recognize what Mr. C.P Mistry had done over the last 4 years and that it wa....
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....g sought. The Board was informed that PNB Metlife was currently held by the following shareholders Punjab national Bank Ltd. 30% Elpro 21% M Pallonji and Company Pvt. Ltd. 18% Jammu and Kashmir Bank Ltd. 5% Met 28% Mr. Hussain proposed the following deal structure * Tata Sons and AIA to buyout the existing stake of all the shareholder in PNB MetLife aggregating to 70% other than Punjab National Bank Ltd. followed by a merger of the two insurance entities. * PNB to sell its stake in the merged entity through a "put" option within 3 years or Tata and AIA can exercise a "call" option in 4 to 5 years postmerger. * Tata Sons initial outgo on the deal being Rs. 1500 crores to Rs. 2700 crores with Tata Son holding in Tata AIA Life Insurance Company Ltd. expected to dilute from 51% to 45% Mr Hussain took the board through the valuation related benchmarks The Board noted that Tata AIA Life Insurance Company ltd. would be putting in the non binding bid on the above lines and Mr. Hussain informed the Board that Tata AIA would come back to the Board on further developments. Mr. Amit Chan....
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....rd of Directors or any of the trusts, namely- Sir Dorabji Tata Trust or the Sir Ratan Tata Trust at any time expressed displeasure about the performance of Mr. Cyrus Pallonji Mistry (11th Respondent). On the other hand, the record suggests that on 24th October, 2016, Mr. Ratan N. Tata (2nd Respondent) wanted that Mr. Cyrus Pallonji Mistry (11th Respondent) should step down, so Mr. Cyrus Pallonji Mistry was called for and in presence of Dr. Nitin Nohria (7th Respondent) was asked to step down from the post of Executive Chairman. 135. The proceedings of the Board of Director's dated 24th October, 2016 also show that 'Tata Trusts' asked its nominee Directors to bring a motion to request Mr. Cyrus Pallonji Mistry (11th Respondent) to step down from the post of the Executive Chairman on the ground that 'Tata Trusts' had lost confidence. Reasons have not been discussed or recorded in the proceeding of the meeting held in the afternoon of 24th October, 2016 between 2.00 p.m. to 3.00 p.m. for removal of Mr. Cyrus Pallonji Mistry (11th Respondent). 136. Statement of 'Tata Sons Limited' published in the Newspaper on 10th November, 2016 shows that the decision so taken had global effect....
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....ficant divestments from Tata Sons portfolio, despite a planned list of divestments indicated from time to time. e. Impairment provisions increased from Rs. 200 crores in 2012-13 to Rs. 2,400 crores in 2015-16 indicating inability to stem falling values and turn around the ''hot spots' referred to by Mr. Mistry. f. Thus, but for the TCS dividend and even before Impairment provisions, Tata Sons would have shown operating losses over the last 3 years (with a small surplus in between), showing the significant dependence on TCS. This dependence was indeed a source of concern for the Directors and its shareholders. 2. Selection of the Chairman It is also relevant to refer to the basis of selection of Mr. Mistry as Chairman in 2011 by the Selection Committee as provided under the Company Articles. Without going into the details, the Committee's original, objective was to look for a person with the experience of running large (and preferably diverse) businesses with considerable international exposure and other criteria. During the meetings, Mr. Mistry made any relevant comments and submitted a detailed note in October 2010 setting out his view....
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....millions' and other such nice-sounding phrases with no Indications on how these ambitious targets are to be achieved, is all this relevant when there are so many major problems which need urgent attention and action? Would it not be more appreciated if the reports talked specifically on these problem Issues and their solutions rather than continuously harping on the past versus the present? Nobody will deny that there were some problem companies but surely Mr. Mistry was fully aware of them since he was associated with the parent company, Tata Sons Limited, as a Director on the Board for many years prior to his appointment as Executive Vice Chairman in 2011 and then as Executive Chairman in 2012. He voluntarily took this position, knowing the composition of the Tata group and its many strong companies as well as the weaker and problem companies - which he presumably took on as a challenge for 'turning around' those difficult situations. Yet, after four years of full-time Involvement and executive authority, we continue to be told how these 'legacy' problem areas are a major drag on Mr. Mistry's otherwise good performance. How many more years would we be told this ....
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....chinery of Tatas as being biased and incorrect. In short, those who analyze the overall position of the group in an unbiased and professional way which may differ from the version put out by Bombay House (the Tata headquarters) are uniformly wrong, even if they only seek to present an overall balanced picture which may (and rightly should) include the negative aspects. This attitude does not befit an old and venerable house like Tatas known for their fair play and transparency. Insiders in Bombay House who have been with the group for many years silently and helplessly watched the conscious departure from old, proven and successful structures within the group and the Induction of very senior executives from outside the group with little or no experience of running large companies and being paid amounts reportedly running to several crores for purely functional positions at the very top. Some changes always accompany a change at the top and some may even be considered necessary but the ultimate test is whether these changes have shown improvement and success which is not visible even after four long years. The stellar performance of TCS and JLR have more than compe....
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.... alone, has written off a large part of its investment in its UK/Eurogean assets, it is interesting to not that the new buyers of some of the steel assets for GBP1. In the U.K have claimed a dramatic turnaround in the very first year of their take over. In our view these sub-par results cannot be blamed on the commodity cycle or economic conditions but on his leadership? Mr. Mistry repeatedly talks of 'bad' acquisitions but he forgets that his own firm had acquired South India Viscose Limited and Special Steals Limited many years ago from which they walked away, while Tatas always standby their companies in difficulties. 7. Handling of critical issues - Critical reports have been received of the handling of the Tata Steel Europe problems in the U.K. and the negotiations with Docomo of Japan in the respective countries. 8. Other issues a) The accusation of interference by the Trusts is not only wrong in reality but has been twisted to mislead people. One of the Important duties and obligations of the trusts and the Trustees is to protect the-assets of the Trusts, the most important and valuable being Investments in Tata Sons donated by the founder....
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.... to control main operating companies of the Tata group to the exclusion of Tata Sons and other Tata representatives. Indeed, this strategy of being the only Tata Sons representative on the Boards of the operating Tata companies, seems to have been a clever strategy planned and systematically achieved over the last four years, it is unfortunate that Tata Sons, acting in good faith, did not anticipate such devious moves by Mr. Mistry and thereby did not inform the other Directors of the operating companies about its dissatisfaction with Mr. Mistry at the level of Tata Sons. However, we will now do whatever is required to deal with this situation. Mr. Mistry has been consistently indicating that companies have performed well during his four-year term but the figure quoted by him always refers to the total of the group companies including TCS" and JLR which account for over 90% of the groups profits. Since he hardly contributed to the management of these two companies, it would be more important and relevant to look at the totals of the rest of the group which will show that while there has been an increase in turnover, the more telling figures are the facts that the profits o....
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....00 crores and all the shareholders would naturally be unhappy at this loss in their own value for ho fault of theirs but mainly due to this shocking and sudden statement on the part of the Chairman of these companies which may or may not have been shared with the Board and certainly not publicly disclosed, earlier. Here again, it is unfortunate that the shareholders and regulatory authorities would put the onus on the companies and not Mr. Mistry as the author of the statement for being responsible for this large loss in market value. As a group, we are committed to upholding the highest standards of ethics and value systems which the founders and the subsequent leaders have always strived to uphold, it is the spirit of the employees which has made the group what it is today and we are committed to resolving the current situation by doing whatever it takes and in a manner that ensures the protection of Interests of all stakeholders of the Tata group. Issued by Debasis Ray Group Spokesperson +919223386824" 137. From the opening sentence of 'Press Statement' dated 10th November, 2016, it is clear that sudden and hasty removal of Mr. Cyr....
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....g of Tata Companies which were facing losses. 141. If there was a failure and loss caused to one or other Tata Company which also affected the 'Tata Sons Limited', the 'Tata Trusts' or the Board of Directors could not be absolved of its responsibility, particularly when the nominee Directors of the Tata Trusts who have affirmative vote to reverse the majority decision. 142. Record show that the 'Tata Trusts' were required to be informed of all the matters, in advance, on the ground that it can take advance decision to counter any action which may jeopardise their dividend flow. 143. Mr. Cyrus Pallonji Mistry (11th Respondent) intimated the nominee Director that 'independent members' of the Board should not feel that they are irrelevant in any way. But, if all major decisions are taken in advance by the 'Tata Trusts' and for taking every decision, matters are to be placed before the 'Tata Trusts', in such case, independence of the Board of Directors of the Company becomes irrelevant. Mr. Cyrus Pallonji Mistry (11th Respondent) specifically informed the Respondent Nos. 2, 7 and others that the "nominee Directors should use their judgment to add value to the discussions at the B....
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....ecific conditions for 1st Respondent to submit an application or a banking license. 2nd Respondent states that "the approval would be on the clear understanding that the Trusts would have the opportunity to have a full presentation on the pros and cons of the proposed bank as also the alternative options on the basis of which the Trusts could debate and decide on their position in the matter". This was after two rounds of discussions were already held with 2nd Respondent. IPO of Tata Sky (v). Email dated 30th March, 2016, form 2nd Respondent to 11th Respondent− 2nd Respondent states that he has reservations on a proposal for an IPO of Tata Sky that was to be brought before an upcoming Board meeting of 1st Respondent. In a follow-on email dated 4th April 2016, 2nd Respondent seeks to table his views prior to the Board meeting and seeks a note with all options and the recommendations that is proposed to be put up to the Board of 1st Respondent. 11th Respondent adheres to the request for prior consultation so that the matter may be cleared to be taken up at the upcoming Board meeting. Rights issue of Tata Motors (vi). Letter dated 30th Jan 201....
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....a (10th Respondent) and Mr. Ranendra Sen (8th Respondent) and one Director, Mr. Vijay Singh (9th Respondent), a nominee Director of 'Tata Trust'. The 'Nomination and Remuneration Committee' consisting of aforesaid members in its meeting held on 28th June, 2016, appreciated the performance of Mr. Cyrus Pallonji Mistry (11th Respondent) and observed: "Mr. Vijay Singh mentioned that Tata Motors have come up with some of their best models in recent years. Mrs. Khambata and Mr. Sen complimented Mr. Mistry on his role as Group Chairman. Mr. Sen added from his experience from site visits that Mr. Mistry had earned the respect not only of CEOs and senior management but operational personnel. After reviewing the performance of the Executive Chairman, the Members unanimously recorded their recognition of his significant contributions across Group companies and expressed their appreciation of his multifaceted initiatives aimed at preserving and promoting cohesive functioning of the Group in accordance with its distinctive values." (Emphasis Supplied) 148. The members of the 'Nomination and Remuneration Committee' also stressed the need for clarity on the functioning of th....
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....d him to resign. 153. There are various examples and instances cited by the Appellants and records enclosed, but they are not required to be discussed as certain relevant instances have already been noticed. 154. As per Articles of Association (Article 121) the nominated Directors of the 'Tata Trusts' have affirmative voting rights over the majority decision. The voting rights of the Company ('Tata Sons Limited') at a general meeting of any Tata Companies i.e., 'Tata Consultancy Services Ltd.', 'Tata Steel Limited', 'Tata Motors Limited', 'Tata Capital Ltd.', 'Tata Chemicals Ltd.', 'Tata Power Company Ltd.', 'Tata Global Beverages Ltd.', 'The Indian Hotels Company Ltd.', 'Trent Limited', 'Tata Teleservices (Maharashtra) Limited', 'Tata Industries Limited', 'Tata Teleservices Limited', 'Tata Communications Limited', 'Titan Company Limited' and 'Infiniti Retail Limited' etc. is also vested with the Board of Directors (Article 121A (h)). Therefore, for any policy decision of the 'Tata Companies', including appointment of representatives of the Company ('Tata Sons Limited') under Section 113(1) (a) of the Companies Act, 2013, affirmative vote of the nominated Directors is must (A....
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....d Respondent) and two other members all the other members have less than 10% shareholding and the allegations were serious, therefore, the order of waiver was passed by this Appellate Tribunal on 21st September, 2017. 159. In the present case, we have noticed the aforesaid fact of investment of Rs. 1,00,000 Crores out of Rs. 6,00,000 Crores by 'Shapoorji Pallonji Group' to consider the effect of absence of a nominee Director of minority group ('Shapoorji Pallonji Group') or a Director who can take care of minority members (group). On the other hand, in terms of Article 104B read with Article 121 and 121A, the nominee Directors of the 'Tata Trusts' have control over the meeting of the Board of Directors, having power to annul the majority decision by refraining from exercise of affirmative vote. 160. Even in absence of such right of minority members ('Shapoorji Pallonji Group'), because of healthy atmosphere and clear understanding between two groups i.e. 'Tata Group' and 'Shapoorji Pallonji Group' for last 40 years, except for few years in between thereof, one of the persons of 'Shapoorji Pallonji Group' was made as the Executive Chairman or Director, which includes Mr. Cyrus....
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....other Group Company. The third day i.e. 14th December, 2016, Mr. Cyrus Pallonji Mistry (11th Respondent) was also removed from the post of Director of 'Tata Tele Services'. b) Because of the aforesaid consecutives orders of sudden removal from one after another 'Tata Company' (Group Companies) as Mr. Cyrus Pallonji Mistry (11th Respondent) had no option, resigned from the posts of Director(s) of rest of the Group Companies. c) It further proceeded with certain unexplained actions taken thereafter converting 'Tata Sons Limited' from 'Public Company' to 'Private Company', after the decision of the Tribunal and discussed below. Conversion of 'Tata Sons Limited' from 'Public Company' to 'Private Company' 166. 'Tata Sons Limited' was initially a 'Private Company' but after insertion of Section 43A (1A) in the Companies Act, 1956 on the basis of average annual turnover, it assumed the character of a deemed 'Public Company' w.e.f. 1st February, 1975, as follows: "43A. Private company to become public company in certain cases.─ (1) Save as otherwise provided in this section, where not less than twenty-five per cent of the paid-up ....
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.... (1A) Without prejudice to the provisions of sub-section (1), where the average annual turnover of a private company, whether in existence at the commencement of the Companies (Amendment) Act, 1974, or incorporated thereafter, is not, during the relevant period, less than such amount as may be prescribed, the private company shall, irrespective of its paid-up share capital, become, on and from the expiry of a period of three months from the last day of the relevant period during which the private company had the said average annual turnover, a public company by virtue of this sub-section: Provided that even after the private company has so become a public company, its articles of association may include provisions relating to the matters specified in clause (iii) of sub-section (1) of section 3 and the number of its members may be, or may at any time be reduced, below seven. (1B) Where not less than twenty-five per cent of the paid-up share capital of a public company, having share capital, is held by a private company, the private company shall,- (a) on and from the date on which the aforesaid percentage is first held by it after....
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....e Registrar that it has become a private company and thereupon the Registrar shall substitute the word `private company' for the word `public company' in the name of the company upon the register and shall also make the necessary alterations in the certificate of incorporation issued to the company and in its memorandum of association within four weeks from the date of application made by the company.] (3) Sub-section (3) of section 23 shall apply to a change of name under sub-section (2) as it applies to a change of name under section 21. (4) A private company which has become a public company by virtue of this section shall continue to be a public company until it has, with the approval of the Central Government and in accordance with the provisions of this Act, again become a private company. (5) If a company makes default in complying with sub-section (2), the company and every officer of the company who is in default, shall be punishable with fine which may extend to five hundred rupees for every day during which the default continues. ****** (8) Every private company having a share capital shall, in addition to the certificate refer....
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....l, so far as may be, apply, as if the reference to invitation to the public to subscribe for shares or debentures occurring in that section, includes a reference to invitation from the public for acceptance of deposits.] [(11) Nothing contained in this section, except sub-section (2A), shall apply on and after the commencement of the Companies (Amendment) Act, 2000.]" 167. As per sub-section (2) of Section 43A, within three months from the date on which a 'Private Company' becomes a 'Public Company', the Company informed the Registrar that it has become a public company and thereupon the Registrar deleted the word "Private" before the word "Limited" in the name of the company upon the register and made the necessary alteration in the Certificate of Incorporation issued to the company and its 'Memorandum of Association'. As per sub-section (4) of Section 43A, a 'private company' which became a 'public company' by virtue of the aforesaid provisions, is to continue to be a public company until it has, with the approval of the Central Government and in accordance with the provisions of the Act, again becomes a 'private company'. 168. Pursuant to Section 43A (1A), the ....
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....any' into a 'Private Company'; it is required to pass a special resolution and as per subsection (2) of Section 14, it requires approval by the Tribunal. Only after order of approval by the Tribunal, the Company can request the Registrar together with a printed copy of the altered articles, to register the Company as 'Private Company' or 'Public Company' as the case may be. 171. 'Private Company' is defined under Section 2(68) of the Companies Act, 2013, as follows: "2. Definitions.─ ..............(68) "private company" means a company having a minimum paid-up share capital of one lakh rupees or such higher paid-up share capital as may be prescribed, and which by its articles,- (i) restricts the right to transfer its shares; (ii) except in case of One Person Company, limits the number of its members to two hundred: Provided that where two or more persons hold one or more shares in a company jointly, they shall, for the purposes of this clause, be treated as a single member: Provided further that- (A) persons who are in the employment of the company; and (B) persons who, having been formerly in the employment of....
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....ciation and to record it as 'Private Company'. 177. However, aforesaid General Circular No. 15/2013 dated 13th September, 2013 and Notification dated 12th September, 2013 cannot override the substantive provisions of Section 14 of the Companies Act, 2013 which is mandatory for conversion of a 'Public Company' to a 'Private Company'. 178. Curiously, the 'Tata Sons Limited' remained silent for more than 13 years and never took any step for conversion in terms of Section 43A (4) of the Companies Act, 1956. Even after enactment of the Companies Act, 2013 which came into force since 1st April, 2014, for more than three years, it had not taken any step under Section 14. Till date, no application has been filed before the Tribunal under Section 14(2) of the Companies Act, 2013 for its conversion from 'Public Company' to 'Private Company'. In absence of any such approval by the Tribunal under Section 14, we hold that 'Tata Sons Limited' cannot be treated or converted as a 'Private Company' on the basis of definition under Section 2(68) of the Companies Act, 2013. 179. At the stage of hearing of the appeals, it was brought to our notice that the Registrar of Companies in the Cer....
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....te of decision making power vested with the Board of Directors with affirmative power of nominated Directors of the 'Tata Trusts'; the action in making change from 'Public Company' to 'Private Company'; the manner in which Mr. Cyrus Pallonji Mistry (11th Respondent) was suddenly and hastily removed without any reason and in absence of any discussion in the meeting shown in the Board of Directors held on 24th October, 2016 and his subsequent removal as Director(s) of different 'Tata Companies', coupled with global effect of such removal, as accepted by the Company in its 'Press Statement' form a consecutive chain of events with cumulative effect justifying us to hold that the Appellants have made out a clear case of 'prejudicial' and 'oppressive' action by contesting Respondents, including Mr. Ratan N. Tata (2nd Respondent), Mr. Nitin Nohria (7th Respondent) and Mr. N.A.Soonawala (14th Respondent) and other, the nominee Directors. We further hold that the company's affairs have been or are being conducted in a manner 'prejudicial' and 'oppressive' to members including Appellants, Mr. Cyrus Pallonji Mistry (11th Respondent) as also 'prejudicial' to the interests of the company and....
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....mited' and consequently as Director of the 'Tata Companies' for rest of the tenure. As a sequel thereto, the person who has been appointed as 'Executive Chairman' in place of Mr. Cyrus Pallonji Mistry (11th Respondent), his consequential appointment is declared illegal. (ii) Mr. Ratan N. Tata (2nd Respondent) and the nominee of the 'Tata Trusts' shall desist from taking any decision in advance which requires majority decision of the Board of Directors or in the Annual General Meeting. (iii) In view of 'prejudicial' and 'oppressive' decision taken during last few years, the Company, its Board of Directors and shareholders which has not exercised its power under Article 75 since inception, will not exercise its power under Article 75 against Appellants and other minority member. Such power can be exercised only in exceptional circumstances and in the interest of the company, but before exercising such power, reasons should be recorded in writing and intimated to the concerned shareholders whose right will be affected. (iv) The decision of the Registrar of Companies changing the Company ('Tata Sons Limited') from 'Public Company' to 'Private Company....
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....if they did not take active part in AirAsia incorporation, as if Mr. Cyrus did not preside over meeting on 15.09.2016 in further funding it, they went ahead to make a scurrilous statement, without a shred of paper, that Mr. Tata funded one Terrorist through hawala with diversion of AirAsia India funds. Para 245 3. These Petitioner as well as Mr. Cyrus have come out with unfounded allegations against Mr. Tata so as to settle their score for Mr. Cyrus was removed as Executive Chairman of the Company Para 304 4. Whose action in this episode is prejudicial? Is it Mr. Cyrus's action or the action of Mr. Tata saying to go ahead with the resolution is prejudicial? For the petitioners have filed this Company Petition, we have not gone any further over this issue leaving it to the wisdom of the petitioners to realize that the action of Mr. Cyrus is prejudicial to the interest of the company or Mr. Tata. 386 5. Is it that Mr. Cyrus will remain whole and sole and call the shots in the company by virtue of he being appointed by the majority as Executive chairman, and keep Mr. Tata representing majority and the trust nominee directors remain as credit cards in his wal....