Inclusiveness of minority shareholder principle of company law: Mistry counsel

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In a rejoinder to arguments placed by Tata Sons’ lawyers before the Mumbai bench of the National Company Law Tribunal, senior counsel representing Cyrus Mistry’s family firms, CA Sundaram, said inclusiveness of the minority shareholder is a principle of company law. He read a judgement of the Madras High Court, in which the court had said that even without a written agreement and even in a listed firm, decades of directorship would entitle an ousted director be re-appointed by the other shareholder group. He told NCLT that the court in that case had ruled that in a case of oppression the test is not one of legality but of justice and equality. “Perfectly legal actions can be used to oppress and inflict inequity and the tribunal can intervene”, he argued. The Mistry group is seeking deletion of Article 121 in the Tata Sons articles of association that enable directors nominated by the trusts to reject any and every decision of the board of directors of Tata Sons.

Arguing that affirmative rights are usually given to nominee directors of minority shareholders on limited matters, while the Tata Trusts-nominated directors are the majority and have a veto on every matter before the board of directors, Sundaram said Tata counsels’ endorsement of the articles of association of Bharti Airtel is an excellent precedent for the Mistrys. “In Bharti, the protective veto rights are given to the minority investor and not the Mittals,” he said. “By two directors having the power to say no to every decision, and the Tata Trustees using this as the reason to demand pre-approval from them before anything is taken to the board of directors, the very purpose of the existence of Tata Sons board of directors has been eroded”, he said.

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