NCLT was hearing a plea by Cyrus Investments and Sterling Investments, which have been battling Tata Sons since Cyrus Mistry’s ouster as the holding company’s chairman in October 2016. Photo: Indranil Bhoumik/ Mint
Mumbai: The two Mistry family investment firms on Monday argued that the articles of association of Tata Sons Ltd are being misused to oppress minority shareholders and compromise the concept of a board-managed company.
The National Company Law Tribunal (NCLT) was hearing a plea by Cyrus Investments Pvt. Ltd and Sterling Investments Pvt. Ltd, which have been battling Tata Sons since Cyrus Mistry’s ouster as the holding company’s chairman in October 2016.
Their counsel Aryama Sundaram argued that the articles of association oppressed minority shareholders on four grounds. One, the board agenda of Tata Sons and group companies need prior approval of nominee directors of Tata Trusts, the majority shareholders in Tata Sons. Second, an affirmative vote by the trustees is needed to pass board agenda items. Third is a restriction on transfer of shares in Tata Sons and fourth, the articles compromised minority holders’ economic rights.
The Mistry firms are seeking that these oppressive clauses be struck off the articles of association.
“Articles need to be struck down that are oppressive . Affirmative vote to trustees compromises the concept of a board managed company. If two directors are be all and end all, then board management is compromised,” said Sundaram.
A Tata Sons spokesperson declined to comment.
The NCLT Mumbai bench was hearing the investment firms’ plea after they were granted a waiver from the minimum shareholding requirement (of 10%) for suing Tata Sons by the National Company Law Appellate Tribunal (NCLAT) on 21 September. Cyrus Investments and Sterling Investments together own a combined 18.4% of ordinary equity shares of the Tata group holding firm; their holding fell to 2.17% when both equity and preference shares were taken into account.
Sundaram said that the articles made the Tata Sons board a dummy board and was against the minority shareholders, the Companies Act, 2013 and the concept of a board-managed company.
“All decisions cannot be left to two trustees,” Sundaram argued. “If it (Tata Sons) is a large conglomerate then it cannot function as a private limited company and cannot go by principles applicable to small companies.”
Shareholders of Tata Sons on 21 September voted in favour of the Tata group holding firm becoming a private firm. NCLT had ordered for status quo on the conversion last year.