TaxTMI 
TaxTMI 
2019 (12) TMI 895
X X X X Extracts X X X X
X X X X Extracts X X X X
....ted' 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 remitted petition under Sections 241-242 t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....amilies 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 Sons Limited' (1st Respondent Company) has controll....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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. Tata (2nd Respondent), and Mr. N.A. Soonawala (14th Respo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t 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 institutionalizing of a governance framework involving Tata Tru....
X X X X Extracts X X X X
X X X X Extracts X X X X
....spondent'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 a view to dilute these standards, an attempt was made to conve....
X X X X Extracts X X X X
X X X X Extracts X X X X
....icle 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 amply demonstrated from the record. In fact, various instances of its a....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 acquisition of 'Welspun's' business by Tata Power per se did not require any sharehol....
X X X X Extracts X X X X
X X X X Extracts X X X X
....udicial 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 from the Registrar of Companies and the Tribunal on its conduct as a public company....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 disparaging observations and findings, as highlighted and referred below, seen in juxtaposi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....all 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 affirmative vote. Therefore, Article 121 if read with Article 104A of the Articles of Association, it cannot be held to be arbitrary. 54. It was further s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hat 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 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 par....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 'Executive Chairman' of 'Tata Sons Limited' (1st Respondent Company) was contrary to and a blatant breach of Article 118 of Articles of Association in as much as no selectio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s 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 Respondent) as the Chairman of 'Tata Sons Limited' (1st Respondent Company). However, as the record shows, this decision was approved by 7 out of the 9 Directors of 'Tata Sons....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e 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 Board's Resolution dated 24th October, 2016 to remove Mr. Cyrus Pallonji Mistry- (11th Respondent) as Chairman is not ultra vires Article 105 of Articles of Association of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o 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 case, not only was there a historical lack of performance but there was a complete loss of confidence regarding Mr. Cyrus Pallonji Mistry's- (11th Respondent) ability to lead the c....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 his functions in a manner that best serves the interest of the company and allays the apprehension that a nominee director, will always be only a mouthpiece of his nominator. 88. Accor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ondent) 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 Project. As a promoter of the 'Tata Power Company Limited' ('Tata Power'), 1st Respondent (Tata Sons) was practically left in the dark about such a significant transaction which was agreed by Tata Power whi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ind 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:- 98. Chapter XVI of the Companies Act, 2013 relates to "prevention of oppression and mismanagement". Section 241 deals with "application to Tribunal for relief in cases of oppression" etc. Section 242 is 'Powers of Tribunal....
X X X X Extracts X X X X
X X X X Extracts X X X X
....res 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 to property made or done by or against the company within three months before the date of the application under this section, which would, if made or done by or against an individual, be deemed in his insolvency to be a fraudulent preference; (h) removal of the managing director, manager or any of the directors of the company;....
X X X X Extracts X X X X
X X X X Extracts X X X X
....akh 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 under Sections 241 and 242 of the Companies Act, 2013 is dependant on two factors, namely- (i) whether the affairs of the company have been or are being conducted in a manner 'prejudicial' or 'oppressive' to any member or members or 'prejudicial to public interest' or 'in a manner prejudicial to the interests of the company'; and (ii) that to wind up the company would unfairly prejudice such member o....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 who complain that the affairs of the company are being conducted in a mariner oppressive to any member or members (including any one or more of themselves) may apply to the Court for an order under this section, provided such members have a right so to apply in virtue of Section 399. (2) If, on any application under sub-section (1), the Court is of opinion- (a) that the company affairs are being conducted in a ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rity 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 prejudice of the minority shareholders-and in which just and equitable grounds would exist for the making of a winding up order.... but in which the 'alternative' remedy provided by Section 210 by way of an appropriate order might well be open to the minority shareholders with a view to bringing to an end the oppressive conduct of the majority. (5) The power conferred on the Court to grant a remedy in an appropriate case appears to envisage a reasonably wide ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on 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 the majority shareholders, continuing up to 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 confidence between the majority shareholders and the minority shareholders would not be enough unless the lack of confidence springs from oppression of a minority by a majority in the management of the company's affairs, and such oppression mu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ies 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 profitable one and profits used to be distributed among the directors in the shape of fees, no dividends being declared. On being removed as a director by the votes of two other directors, the appellant petitioned for an order under section 210. Allowing an appeal from the judgment of the Court of Appeal, it was held by the House of Lords that the words 'just and equitable' which occur in section 222 (f) of the English Act, corresponding to our section 433 (f), were not to be construed ejusdem generis with c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 confidence between the majority shareholders and the minority shareholders would not be enough unless the lack of confidence springs from oppression of a minority by a majority in the management of the company's affairs, and such oppression must involve at least an element of lack of probity of fair dealing to a member in the matter of his proprietary rights as a shareholder. It is in the light of these principles that we have to consider the facts.....with reference to section 397". (Page 737) At pages 734-735 of the judgment i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he 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 Ratan Tata Trust so long as the Tata Trusts hold in aggregate at least 40% of the paid-up Ordinary share capital, for the time being, of the Company. Explanation: the words "jointly nominated" used in this Article shall mean that the Sir Dorabji Tata Trust and the Sir Ratan Tata Trust shall together nominate the authorized representative. In the case of any difference, the decision of the majority of the Trustees in the aggregate of the Sir Dorabji Tata Trust and the Sir Ratan Tata Trust shall prevail." The aforesaid provision shows that no quorum at a general meeting of the sha....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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, proposed business and investment initiatives and a comparative analysis of similarly situated holding companies, and any alterations to such strategic Plan. (b) an annual business plan structured to form part of the strategic plan, that should include proposed investments, incurring of debts, debt to equity ratio, debt service coverage ratio, projected cash flow of the Company and any alterations to such annual business plan" (c) the incurring or renewal of any debt or other borrowing by the Company, which debt or borrowing causes the cumulative outstanding debt of the Company, to exceed twice its net worth or which debt/borrowing is incurred/ renewed at a time when the cu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 Directors nominated under Article 104B. The aforesaid provision makes it clear that the nominated Director of 'Tata Trusts' are in the direct control of 'Tata Companies', Group Companies or its subsidiaries. 113. Article 121A (g) relates to shareholding of the 'Tata Trusts' in the company or the rights conferred upon the 'Tata Trusts' by the Articles of the Company, which are required to be resolved by the 'Board of Directors' in which nominated Directors of 'Tata Trusts' have affirmative vote (veto power). 114. Therefore, no decision can be taken to reduce the shares of the 'Tata Trusts', in terms of Article 75, as referred below, till 'Tata Trusts' decide to reduce its shares. 115. Aforesaid provisions sho....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tions 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 of the Company, may pass appropriate order in terms of Section 242. 120. According to the Appellants, nominated members of 'Tata Trusts' including Mr. Nitin Nohria (7th Respondent) who are empowered with affirmative vote, since 2012, have taken decisions which are 'prejudicial' to the interest of the Company adversely affecting the interest of the members, including the minority members (Appellants). Such acts are 'prejudicial' and 'oppressive' to the members, including the minority shareholders (Appellants). 121. In favour of such allegations, the following 'prejudicial' and 'oppressive' acts have been highlighted: a. Board with the affirmative vote of nominated members of 'Tata Trusts' granted Rs. 600 crores for procurement 'manage....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 asked Mr. Cyrus Pallonji Mistry- (11th Respondent) as to how the matter to be dealt with relating to on-going product development expenses on a product over five years when Mr. Cyrus Pallonji Mistry- (11th Respondent) has not deflected but he went on to develop on that product. It was also stated that there are several justifications for expenditure which should be considered as unacceptable and no effort was made to show how product volume, product wise, on the basis of documentation alone would be difficult for a Board member to approve. (ii) By an e-mail dated 28th February, 2014, Mr. Cyrus Pallonji Mistry- (11th Respondent) informed Mr. Ratan N. Tata (2nd Respondent) relating to affairs of 'Docomo' which have suddenly taken a very rigid stance with respect to the put option. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nee 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. Soonawala (14th Respondent) expressed the need for an appropriately structured mechanism or process for communication between the Company ('Tata Sons Limited') and the Trustees for consultation/ approval of all issues as required under the amended Articles of 'Tata Sons Limited'. (viii) The letter from Mr. Cyrus Pallonji Mistry- (11th Respondent) dated 18th February, 2015 to Mr. N.A. Soonawala (14th Respondent) shows that Mr. Cyrus Pallonji Mistry- (11th Respondent) expressed the need to understand the process of consultation and stage at which the decision making the Trusts would be involved and asked as to who would convey the views of the 'Tata Trusts'. 126. Aforesaid correspondences show that Mr. Cyrus Pallonji Mistry- (11th Respondent) was unaware and not in a position to understand as to how decisions are take....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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. Abhishek Manu Singhvi, learned Counsel appearing on behalf of 1st Respondent Company ('Tata Sons Limited') and Contesting Respondents submitted that the aforesaid refusal constrained the nominated directors to bring the motion to replace Mr. Cyrus Pallonji Mistry- (11th Respondent) in the Board meeting held on 24th October 2016. It is accepted that there was no such agenda before the Board nor any document was circulated relating to performance of Mr. Cyrus Pallonji Mistry's- (11th Respondent) with any of the Directors, including the independent Directors. Even no intimation was given to Mr. Cyrus Pallonji Mistry's- (11th Respondent) and other Directors. 132. This is also apparent from the proceedings of the Board of Directors dated 24th October, 2016 held between 2.00 P.M to 3.00 P.M, which reads as follows: "MINUTES OF T....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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. This proposal was seconded by Mr. Venu Srinivasan and the following resolution was put to vote: 1. Election of Mr. Vijay Singh as Chairman for the Board meeting. "RESOLVED THAT Mr. Vijay Singh be and is hereby elected as the Chairman of the Board of Director of the Company for the purpose of this Board Meeting." Mrs. Farida Khambata abstained from voting on this resolution. Mr. C.P Mistry recorded his objections by stating his view that it was not legal for the resolution to be taken up. All the other directions voted in favour of the resolution and the resolution was carried by the requisite majority. 2. Resolution to include additional matters on the Agenda Mr. Vijay Singh (as chairman of the meeting) proposed inclusion of matters that were not on the Agenda Circulated to the Board of Director on October 15, 2016, and which Mr. Vijay Singh proposed should be taken up first. Accordingly, he moved the....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 Mistry as executive Chairman, which was seconded by Mr. Ajay Piramal. "Resolved that in accordance with the applicable provisions of the companies act, 2013 as amended from time to time (the "act' the rules framed under the act, and the memorandum and article of association of the company, Mr. Cyrus P. Mistry be replaced and released with no residual executive powers or authority and with immediate effect, as Chairman of the Board and from every committee of the Board (including but not limited to the Nomination and Remunerations committee) for the reasons discussed at the meaning of the Board. However, it is clarified that the Board resolves that Mr. Cyrus P. Mistry shall notwithstanding his ceasing to be the chairman of the company continue to be a director of the company. "RESOLVED FURTHER THAT any and all powers of attorney and / or other authorizations which permit or enable Mr. Cyrus P. Mistry to represent the company or to take any decisions or actions on behalf of the company are hereby revoked ....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... Ratan N. Tata Director Identifications No.00000001) be and is hereby appointed as Additional Director on the Board of Director of the Company." 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. 7. Election of Mr. Ratan N. Tata as interim Chairman Mr. Vijay Singh proposed the following resolution for appointment of Mr. Ratan N. Tata as interim Chairman which was seconded by Mr. Ajay Piramal. "RESOLVED THAT Mr. Ratan N. Tata, Additional Director (Director Identifications Number 00000001) be and is hereby elected as Interim Chairman of the Board of Director of the Company and be appointed on all committees of the Board, with immediate effect and until a new Executive Chairman is selected and appointed in terms of the companies act, 2013 and the articles of association of the company. Mr. C.P Mistry recorded his objections to moving the resolution by stating his view that it was not legal for the resolution to....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s important for the group to move forward in a sameless manner as one can. He also said that Mr. C.P Mistry's choice on whether he would like to continue as Non Executive Director of Tata Sons Ltd. having been removed from his executive role. Mr. C.P Mistry said he would continue on the Board. Mr. Amit Chandra thereafter asked if the meeting should be adjourned to consider this, Mr. Cyrus P. Mistry enquired if anything was planned for issuing the press announcement. Mr. Hussain queried about Mr. Mistry continuing in the role of the Chairman of other Tata Companies since, if not, it was stated that the matter had to be reported to the stock exchanges. As regard his directorship on Tata Sons Ltd. Mr. Tata said that to a great extent. It would be Mr. Mistry prerogative. As regard other Tata Companies, Mr. Mistry responded by saying that he shall decide on the same and revert. Mrs. Khambata asked whether the decisions taken at the meeting could be announced immediately since Mr. C.P Mistry had said he should have been given advance notice of his removal. Mr. Amit Chandra said that he was not carrying the opinions which he said were given by eminent lawyers and ex - supreme ....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... Chidambaram and (iii) Former Solicitor General Mohan Parasaran, for purpose of recording the name, in the minutes. Mr. C.P Mistry requested that the press release proposed to be issued by the Company be discussed prior to release. This was agreed. The meeting then concluded with a vote of thanks to the Chairman of the meeting at 3 pm. Chairman Mumbai 17.11.2016" 133. The proceedings of the meeting dated 24th October, 2016 and the facts as stated by Dr. A.M. Singhvi, learned counsel for the Company show: (i) Mr. Ratan N. Tata (2nd Respondent) was determined to remove Mr. Cyrus Pallonji Mistry (11th Respondent) prior to the meeting of the Board and asked Mr. Cyrus Pallonji Mistry to step down. (ii) Mr. Ratan N. Tata (2nd Respondent) during the course of the meeting mentioned that there was a need to recognize what Mr. Cyrus Pallonji Mistry (11th Respondent) had done over the last 4 years. He specifically stated that "it was important for the group to move forward in a seamless manner as one can". (iii) The majority shareholders of 'Tata Trusts' represented by Mr. Ratan N. Tata (2nd Respondent) were knowing that advance notice was required for his rem....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d of Tata Sons decided to change its chairman. Some have shared concerns following the decision, while many have asked questions about the future course of the group and its companies and operations. We understand and appreciate that a period of change like this can lead to a sense of uncertainly and would like to put forward some facts so that the decision is seen in the desired perspective. 1. Tata Sons related matters The Directors of Tata Sons are primarily concerned with the results of Tata Sons and their duty to all its shareholders, particularly, the Tata Trusts, who hold 66% of the equity capital. The following points are being made in this context - a. Mr. Cyrus P. Mistry has been the Executive Vice Chairman (for one year) and Executive Chairman for nearly four years now a period long enough to show results in Tata Sons Itself, which was his primary executive responsibility. b. For assessing the results during his tenure, it would indeed be appropriate to exclude the income (i.e dividend) from Tata Consultancy Services (TCS) because Mr. Mistry does not really contribute materially to TCS's management and TCS has needed no funds from Tata Sons for its g....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n alternative candidate, the Committee decided to recommend Mr. Mistry partly because of his recorded views and plans and also his associations with the group. After four years, it is unfortunate that hardly any of his major views on the management structure (which had impressed the Committee favorably) have been implemented. In fact, even the then existing structure of the group which had stood the test of a long period of nearly 100 years by the visionary founders and generations of Tatas seem to have been consciously dismantled so that now the operating companies are drifting farther away from the promoter company and their major shareholder (except for periodic presentations) through systematically reducing the effective control and influence of the promoter. Tata Sons has historically exercised control over its group companies through its shareholding and commonality of senior Directors (apart from the Chairman) which had acted as a binding force in the group for many years and which has enhanced the credibility and creditworthiness of the group companies. We now have an unacceptable new structure where the Chairman alone is the only common Director across several companies....
X X X X Extracts X X X X
X X X X Extracts X X X X
....huge losses, increasing high debt levels and declining share in their respective markets. There are a few other companies which are also having different problems- and are these also to be excused as legacy issues? Even with no turn-around in these major problem areas, the only action taken was to write-off huge amounts against these companies - which is no solution because the problem companies continue to exist with their continuing losses and high debt and only the shareholders suffer from these write-offs. The media is fed with the total group figures over the past four years as evidence of the progress but it is not highlighted that these aggregate figures which show a good picture are largely (if not only) due to the excellent performance on all parameters of just two companies, namely; TCS and Jaguar and Land Rover (JLR) which is a wholly-owned U.K. subsidiary of Tata Motors. There is no-complaint about these good legacies. These two jewels in the Tata crown were also inherited by the new Chairman from the previous Chairman, Mr. R. N. Tata, who was also responsible for the acquisition of JLR by Tata Motors in 2008-09 and personally worked with the then management of Ta....
X X X X Extracts X X X X
X X X X Extracts X X X X
....iculated interview with Mr. Mistry published on the Tata group website, one cannot help but feel that there is a very selective reference only to achievements and in the interest of transparency and balance, one feels compelled to highlight some of the areas which emerged over the last four years, which have not keen mentioned at all. 4. Group Indebtedness and Return on Investment - Group Indebtedness has increased by Rs. 69,877 crores to Rs. 225,740 crores over the last four years. Despite huge investments by companies, the returns are not visible in increased profits, though, in all fairness, some major growth projects like the new steel plan at Kalinganagar will show results only in coming years. 5. Market share drop in Tata Motors- There has been a perilous drop in market share in both passenger cars and commercial vehicle areas over the past three years. In passenger cars, In the year ended March 2013, the market share was 13% which now stands at 5% It will be difficult if not impossible to retrieve the market share losses. However, even more concerning, is the market share in commercial vehicles which in March 2013 stood at 60% and now stands at 40+%- the lowest in the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gime (as elaborated above), reflected the corresponding decline in the many operating companies in which Tata Sons holds a significant shareholding. It also reflects a disturbing overdependence-on one single company, i.e. TCS, over a long period-of four years. This was not only disturbing but needed corrective action in the management of Tata Sons. In fact, many practical suggestions made to Mr. Mistry for the benefit of Tata Sons vis-a-vis some of his major investments have often been Ignored. b) Mr. Mistry conveniently forgets that he was appointed as the Chairman of the Tata operating companies by virtue of and following his position as the Chairman of Tata Sons. Therefore, It was fair expectation of Tata Sons that Mr. Mistry would gracefully resign from the boards of other Tata companies on being replaced from the position of the Chairman of Tata Sons, This expectation was in line with convention, past practice as well as the Tata governance Guidelines that were approved and adopted by Tata Sons under the aegis of Mr. Mistry. However, his departure from these requirements and conduct since his replacement as Chairman of Tata Sons demonstrates his absolute disregard of longst....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed to cover up the deficiencies of the rest of the group. In our capacity as the main promoter of the major listed Tata companies and as the largest shareholding group, we have to express our very serious concern on the personal email dated October 25, 2016, from Mr. Mistry, addressed to the Directors of Tata Sons and purportedly to the Trustees of the Tata Trusts and which simultaneously, appeared in full in various newspapers. Here, we are only referring to the shocking statement of five or six major Tata companies having to take potential write downs of $18 billion in future in their assets investments and the following points/ queries need to be raised- a. Has Mr. Mistry, the Chairman, informed the Boards of these companies at any time in the past specifically of the above mentioned potential write-downs? if so, when was this done and why was it not made public as this is clearly a major item of information - apart from disclosing only the write-offs required to be made to date. Surety he could not have discovered' such a large potential liability only a day or two after he was replaced as the Chairman of Tata Sons. Therefore, he must have been aware of this potential ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ense of uncertainty and would like to put forward some facts so that the decision is seen in the desired perspective". 138. If we accept the stand taken by the Contesting Respondents that the removal of Mr. Cyrus Pallonji Mistry (11th Respondent) is directorial in nature, in the interest of Company, in such case, there was no occasion to issue a 'Press Statement' where it is noticed that many across the globe have raised concern in the manner Mr. Cyrus Pallonji Mistry (11th Respondent) was removed. The Company and its Board also understood that such removal may lead to a sense of uncertainty of 'Tata Sons Ltd.' and 'Group Companies' and result in winding up. 139. The allegations as made in the 'Press Statement' dated 10th November, 2016 appears to be an afterthought as the aforesaid matter was not discussed in any of the meeting of the Board of Directors. No records have been placed by the Respondents with regard to the aforesaid loss nor any discussion took place in the Board Meeting of the 'Tata Sons' and Mr. Cyrus Pallonji Mistry (11th Respondent) to suggest that it was of serious concern. The allegations in the 'Press Statement' as not supported by record cannot be accepted....
X X X X Extracts X X X X
X X X X Extracts X X X X
....'Tata Trusts' which resulted in no confidence on Mr. Cyrus Pallonji Mistry (11th Respondent) 145. Apart from the e-mails, as discussed earlier, with regard to Tata Companies, following facts emerge from other e-mail: "Bidding for spectrum by Tata Teleservices Limited ("TTSL") and editing the Board note (i). In Email dated 23rd May, 2016 from 11th Respondent to 2nd Respondent with a copy marked to 14th Respondent it is recorded that because the Trustees were not convinced on the strategy of TTSL going forward, 11th Respondent had to change an item that was to be placed for approval before the Board of 1st Respondent, into an item that was noted to be "only for Information". (ii). Email dated 7th June, 2016 marked to 11th Respondent is from the company secretary of 1st Respondent, wherein it is recorded that 2nd Respondent had objections to any investment proposal for TTSL being taken to the Board of 1st Respondent. The email also documents that the Trustees particularly 2nd Respondent and 14th Respondent even made changes to the Board Agenda Item and note to the Board regarding investment in spectrum for TTSL. This clearly shows that without the pre-clearance of 2nd....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... presence of Trustee Nominee Directors) had discussed and approved funding requirements of Tata Motors on 30th September, 2013 and the same was reflected in the cash plan of 1st Respondent; b. A presentation on the need for a rights issue by Tata Motors was also presented to the Board of 1st Respondent, where the Trust Nominee Directors were present; c. Agenda and minutes of meetings of 1st Respondent were sent to the 2nd Respondent as "Chairman Emeritus"; d. 14th Respondent (a Trustee) views were also sought by senior officials, of Tata Motors and thereafter the matter was taken to the Board of Tata Motors. (vii). Email dated 31st January 2015 from 11th Respondent to a Trust Nominee Director 7th Respondent wherein 11th Respondent raises concerns about maintaining the integrity of the Board decision making process. 11th Respondent asked: "the question one will have to ask is then are we going to present all of this to RNT or the Trusts? As an investment company, then what will the Board of Tata Sons take decisions on?". 146. The record suggests that the removal of Mr. Cyrus Pallonji Mistry (11th Respondent) had nothing to do with any lack of performance. On the oth....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Besides, at the level of the Board of Directors of 'Tata Group Companies', the performance of Mr. Cyrus Pallonji Mistry (11th Respondent) has been endorsed and praised by nearly 50 Independent Directors of Group Companies. 151. It is relevant to note that three Directors who also voted for removal of Mr. Cyrus Pallonji Mistry (11th Respondent), including Mr. Amit Chandra (3rd Respondent), who spearheaded the removal proceedings and Mr. Ajay Piramal (5th Respondent) and Mr. Venu Srinivasan (6th Respondent), had been inducted into the Board of 'Tata Sons Ltd.' only on 8th August, 2016 i.e. after the appraisal report of 'Nomination and Remuneration Committee'. They attended just one Board meeting prior to the meeting held on 24th October, 2016. 152. Two of the Directors, Mr. Ranendra Sen (8th Respondent) and Mr. Vijay Singh (9th Respondent), a Trust Nominee Director, who voted for the removal of Mr. Cyrus Pallonji Mistry (11th Respondent), were members of the 'Nomination and Remuneration Committee' which just four months' prior to his removal on 28th June, 2016 praised the performance of Mr. Cyrus Pallonji Mistry (11th Respondent) as Executive Chairman. These two Directors also vo....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... caused loss, as accepted in the press release dated 10th November, 2016. The consecutive chain of events coming to fore from the correspondence referred elsewhere in this Judgment amply demonstrates that impairment of confidence with reference to conduct of affairs of company was not attributable to probity qua Mr. Cyrus Pallonji Mistry but to unfair abuse of powers on the part of other Respondents. 156. The 'Press Statement' of 'Tata Sons Limited' dated 10th November, 2016 facts of which were never discussed by Board is an afterthought of Respondents to put all blame on Mr. Cyrus Pallonji Mistry (11th Respondent). The Board of Directors' majority decision of which is guided by the affirmative vote of the nominated members, have failed to explain as to why the Board failed in its duties and not noticed the loss of any of the 'Tata Companies'. 157. It is not in dispute that 'Shapoorji Pallonji Group' ('Appellants' herein) are the minority shareholders. They are in business with Tata Group i.e.- 'Sir Dorabji Tata Trust' and 'Sir Ratan Tata Trust' for more than four decades. There is mutual understanding and good relationship between them. For the said reason, earlier for a numbe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....spondent) on 24th October, 2016, without any basis, and without following the normal procedure under Article 118, the minority group ('Shapoorji Pallonji Group') (the Appellants), and others have raised no confidence and sense of uncertainty which was the reason for the 'Tata Sons Ltd.' to issue a 'Press Statement'. 163. In the opening sentence of the 'Press Statement' dated 10th November, 2016, it has been accepted that "some have shared concerns following the decision, while many have asked questions about the future course of the group and its companies and operations". The company in its turn has mentioned that "we understand and appreciate that a period of change like this can lead to a sense of uncertainty and would like to put forward some facts so that the decision is seen in the desired perspective". 164. The language of the Company ('Tata Sons Ltd.') in its 'Press Statement' show that the Company and Contesting Respondents also know that the action taken is 'prejudicial' and 'oppressive' to the interest of the members of the Company and a large number of members, investors and interested parties have raised concern. The 'Tata Sons Ltd.' has accepted that there is sens....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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: Provided further that in computing the aforesaid percentage, account shall not be taken of any share in the private company held by a banking company if, but only if, the following conditions are satisfied in respect of such share, namely: (a) that the share- (i) forms part of the subject matter of a trust, (ii) has not been set apart for the benefit of any body corporate, and (iii) is held by the banking company either as a trustee of that trust or in its own name on behalf of a trustee of that trust; or (b) that the share- (i) forms part of the estate of a deceased person, (ii) has not been bequeathed by the deceased person by his will to any body corporate, and (iii) is held by the banking company either as an executor or administrator of the deceased person or in its own name on behalf of an executor or administrator of the deceased person; and the Re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y be, or may at any time be reduced, below seven. [(1C) Where, after the commencement of the Companies (Amendment) Act, 1988, a private company accepts, after an invitation is made by an advertisement, or renews, deposits from the public other than its members, directors or their relatives, such private company shall, on and from the date on which such acceptance or renewal, as the case may be, is first made after such commencement, become a public company and thereupon all the provisions of this section shall apply thereto: 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.] (2) Within three months from the date on which a private company becomes a public company by virtue of this section, the company shall inform the Registrar that it has become a public company as aforesaid, and thereupon the Registrar shall delete the word "Private" before the word "Limited" in the name of the company upon the register and shall also make t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ned by both the signatories of the return, stating that since the date of the annual general meeting with reference to which the last return was submitted, or in the case of a first return, since the date of the incorporation of the private company, it did not hold twenty-five per cent or more of the paid-up share capital of one or more public companies. Explanation.-For the purposes of this section,- (a) "relevant period" means the period of three consecutive financial years,- (i) immediately preceding the commencement of the Companies (Amendment) Act, 1974, or (ii) a part of which immediately preceded such commencement and the other part of which immediately, followed such commencement, or (iii) immediately following such commencement or at any time thereafter; (b) "turnover" of a company, means the aggregate value of the realisation made from the sale, supply or distribution of goods or on account of services rendered, or both, by the company during a financial year; [(c) "deposit" has the same meaning as in section 58A.] [(10) Subject to the other provisions of this Act, any reference in this section to accepting, after an invitation is made by an advertisement, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ffect of conversion of- (a) a private company into a public company; or (b) a public company into a private company: Provided that where a company being a private company alters its articles in such a manner that they no longer include the restrictions and limitations which are required to be included in the articles of a private company under this Act, the company shall, as from the date of such alteration, cease to be a private company: Provided further that any alteration having the effect of conversion of a public company into a private company shall not take effect except with the approval of the Tribunal which shall make such order as it may deem fit. (2) Every alteration of the articles under this section and a copy of the order of the Tribunal approving the alteration as per sub-section (1) shall be filed with the Registrar, together with a printed copy of the altered articles, within a period of fifteen days in such manner as may be prescribed, who shall register the same. (3) Any alteration of the articles registered under sub-section (2) shall, subject to the provisions of this Act, be valid as if it were originally in the articles." 170. As per Secti....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Company' to 'Public Company'. Therefore, on the basis of definition of 'Private Company' as defined under Section 2(68) of the Companies Act, 2013, there cannot be automatic conversion of a 'Public Company' to 'Private Company'. Similarly, on the basis of definition of 'Public Company' as defined under Section 2(71) of the Companies Act, 2013, there cannot be automatic conversion of Private Company' to 'Public Company'. 174. For alteration of articles including alteration of the Company from a 'Private Company' to a 'Public Company' or 'Public Company' to 'Private Company', steps are contemplated to be taken under Section 14 of the Companies Act, 2013. 175. The Company ('Tata Sons Limited') having become 'Public Company' since long, for altering its Articles as a 'Public Company' into a 'Private Company', it is required to follow Section 14(1) (b) r/w Section 14 (2) (3) of the Companies Act, 2013. 176. Learned counsel for the contesting Respondents relied on General Circular No. 15/2013 dated 13th September, 2013 and Notification dated 12th September, 2013 issued by the Central Government to submit that a Company comes within the meaning of 'Private Company' under Section 2(....
X X X X Extracts X X X X
X X X X Extracts X X X X
....usts' who have affirmative voting right over the majority decision of the Board of Directors and other Directors/ members, acted in a manner 'prejudicial' to the members, including minority members ('Shapoorji Pallonji Group') and others as also 'prejudicial' to the Company ('Tata Sons Limited'). 182. In this background, the Appellants have raised no confidence on the majority shareholders particularly the 'Tata Trusts' which have nominated Directors having affirmative right over the majority decision of the Board and have raised doubt on the Respondents that they may now act in a manner 'prejudicial' and 'oppressive' against the minority shareholders by exercising powers conferred under Article 75 and without any notice or reason, may take over their shares. 183. The facts, as noticed above, including the affirmative voting power of the nominated Directors of the 'Tata Trusts' over majority decision of the Board; actions taken by Mr. Ratan N. Tata (2nd Respondent), Mr. Nitin Nohria (7th Respondent) and Mr. N.A.Soonawala (14th Respondent) and others as discussed above; the fact that the Company ('Tata Sons Limited') has suffered loss because of 'prejudicial' decisions taken by ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e., 'Shapoorji Pallonji Group' and any person on whom both the groups have trust, be appointed as Executive Chairman or Director as the case may be which will be in the interest of the Company and create healthy atmosphere removing the mistrust between the two groups, already developed and has caused global effect as admitted in the 'Press Statement' of the Company. 186. As regards the conversion of the company from 'Public Company' to 'Private Company', as action taken by the Registrar of Companies is against the provisions of Section 14 of the Companies Act, 2013 and 'prejudicial' and 'oppressive' to the minority members and depositors etc., conversion of the 'Tata Sons Limited' from 'Public Company' to 'Private Company' by Registrar of Companies, is declared illegal. 187. In view of the findings aforesaid, we pass the following orders and directions: (i) The proceedings of the sixth meeting of the Board of Directors of 'Tata Sons Limited' held on Monday, 24th October, 2016 so far as it relates to removal and other actions taken against Mr. Cyrus Pallonji Mistry (11th Respondent) is declared illegal and is set aside. In the result, Mr. Cyrus Pallonji Mistry (11th Responden....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion of the Appellants and Mr. Cyrus Pallonji Mistry which may affect them in pending proceedings, if any, and their business. These remarks are not only disparaging but also wholly unsubstantiated by any document on record. An illustrative list of such remarks which the Appellant sought to expunge, is as under: S. No. Disparaging Remarks Against the Appellant Paragraph of the Impugned order 1. It appears that the petitioners and Mr. Cyrus, because of the heart burn they had for Cyrus being removed as Executive Chairman of the company, they tried to steamroller all these business decisions upon Mr. Tata as mismanagement of the affairs causing prejudice to the company, so as to bully the answering Respondents by using Section 241 as a device. Para 237 2. As against this story present on record, could it be conceivable to say that AirAsia decision is fait accompli upon him; all investment to AirAsia has been done by the company in his tenure without being known to Mr. Cyrus. It is fundamental in law that the person privy to a transaction estopped from denying it, but unfortunately today the petitioners and Mr. Cyrus have made all kinds of allegations with impunity flo....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Mr. Cyrus on behalf of Tata Power entered into acquisition of an asset costing around Rs. 9,000 crores even before Tata Sons passing a resolution as mentioned under Article 121A of AoA, which is nothing but bypassing the approval that was to be taken from the board of Tata Sons before entering into any understanding with other parties, the reason behind it is, Tata Sons is an investment company, ultimately money has to go from Tata Sons, that means, acquisition in Tata Power is intrinsically connected to the economic interest of Tata Sons.... Para 543 9. The problem is Mr. Cyrus was taken as Executive Chairman to preside over the Board of Directors, he could not become a sovereign authority over this company... Para 561 10. For Mr. Cyrus started his journey as an Executive Chairman under the impression that he was given free hand or would be given free hand to run the affairs of the company, perhaps caused all these problems because he was obsessed with an idea that he alone would lead the company and others to remain assisting him in running the company. Perhaps since he saw Mr. Tata working as Executive Chairman, he might gone into the mind that he would exercise the ....