MUMBAI: Cyrus Mistry’s family firms failed to make a ‘prima facie’ case and show ’cause of action’ against Tata Sons, the National Company Law Tribunal said in its order dismissing the former chairman’s petition that alleged mismanagement and minority shareholder oppression at India’s largest conglomerate.
Tribunal judges BSV Prakash Kumar and V Nallasenapathy wrote that it was a misfortune that the petitioners could not make out any cause of action in any of the allegations, including Mistry’s removal as chairman, ‘oppressive’ articles of association, the investment by Tata Steel in Corus, continuation of the Nano car project and undermining the status of independent directors.
The judges said some claims were very old, stale or vague. They said the allegations of violations of insider trading rules should be decided by the Securities & Exchange Board of India and not the tribunal.
The judges also wrote in the order that the Mistry family firms’ ownership of 18.37% of shares in Tata Sons can’t on its own be a ground for waiver. Last week, the tribunal dismissed Mistry’s petition and refused to grant a waiver on the minimum shareholding requirement to petition Tata Sons. Mistry’s family firms have appealed against the NCLT’s order in the Appellate Tribunal in Delhi.
Under the Companies Act, a petitioner should hold at least one-tenth of the issued share capital of a company or represent 10% of the total number of members to take up such a case at the NCLT. Mistry fought to get this condition waived, citing public interest and the nature of allegations. Although his firms own about 18.37% of the equity shares in Tata Sons, they have only 2.17% of the total share capital in the form of equity and preference shares.
The Tata Trusts, comprising charitable organisations controlled by Ratan Tata, hold a 66% stake in Tata Sons. The legal battle followed an ugly public spat between Mistry and the Tata Group after he was sacked in October. Both sides accused each other of poor corporate governance practices and business decisions.