Courtroom No.1 of the Mumbai Bench of NCLT has seen a lot more than it probably thought it would..The oppression and mismanagement suit filed by Cyrus Mistry’s investment entities under Sections 241 and 244 of the Companies Act, 2013 (Act) was held not maintainable by the Bench..Based on the NCLAT order, arguments for grant of waiver followed. These arguments were presented by the petitioners’ counsel Aryama Sundaram on March 7 and a response to the waiver arguments were presented by Tata’s on yesterday i.e. March 17..Abhishek Manu Singhvi, arguing Counsel for Tata Sons, took nearly four long hours to painstakingly convince the Bench as to why the waiver should not be allowed..Following ten points briefly sum up the arguments presented by Singhvi:.1. Form no. NCLT.9.The NCLT (Amendment) Rules, 2016 provide for the amended Form no. NCLT. 9; a form which is required to be filed with the NCLT for a waiver application..This form, as many others, is required to be filed ‘along with’ the main petition and not after. Therefore, he argued that the waiver cannot be an ‘afterthought’ and ought to be filed along with the main petition in December itself..2. The 244 proviso.In reference to the proviso (to Section 244), which allows grant of waiver, he referred to case law(s) suggesting that a proviso ‘cannot swallow’ the main rule. It was argued (in the precedents) that provisos will have to be read in the manner that allows government (power to grant waiver in the old act vested with the central government) to depart from the main provisions, in compelling and exceptional cases only..Singhvi also argued that the NCLAT order, in Para 42, provided for grant of waiver on ‘strong grounds’ only. In the present case, he argued that, apart from the use of mere (unjustified) adjectives, no strong grounds have been made out..3. Petitioners are not remediless.A point which was reiterated numerous times during the course of the arguments..Singhvi continuously kept arguing that it was not the petitioner’s case that they are rendered ‘remediless’. Answering a ‘juristic point’ only, Singhvi said that assuming the Articles of Association (Articles) are against the interest of the company and in the event the petitioners are less than 10%, Section 9 of Civil Procedure Code, 1908 is not compromised by Section 244 of the Act..Sundaram was quick to point out that Section 430 of the Act ousts jurisdiction of any civil courts for matters pending before the NCLT..Singhvi, then, pointed out to the ‘second facility’ which may be a ‘potential possible action’ for the petitioners i.e. ‘class action suit’ under section 245 of the Act; bearing in mind the thrust laid on ‘class of members’ by the petitioners..4. Complaint against ‘whom’, by ‘who’?.It was further argued that majority of the allegations don’t relate to Tata Sons in the first place; most of which are against companies that aren’t even subsidiaries of Tata Sons. Even for the ones that are subsidiaries, precedents were presented to suggest that acts of oppression in any subsidiary cannot be brought against using holding company as the instruments..Secondly, many of the allegations are in the nature of ‘directorial allegations’ by Cyrus Mistry in his capacity as a director. It must be remembered that the relief provided under the provisions of the Act is when the ‘affairs of the company’ are conducted in a manner prejudicial to any ‘members’. These acts, must be continuous acts of oppressions on shareholders (and not directors)..5. An anticipated rebuttal.It was anticipated that the petitioners may argue that Section 242(2)(h) of the Act, permits directorial dispute to be raised; a section that allows for remedy against directors. Singhvi argued that this (possible) argument will cause great mischief and dilute the principles laid down in S.P Jain vs. Kalinga Tubes..6. Articles – Veto.Sundaram had vehemently opposed the oppressive ‘veto’ provisions contained in the Articles, which allow trust-nominated directors to override any decision taken by the board. Singhvi informed that, these veto provisions complained of, neither have ever been used, nor have they caused any prejudice to the petitioners – then why complaint about it?.Singhvi further argued that not more than 1/3rd of the directors on the board of Tata Sons can be nominated by the trusts, so how can they be oppressive when the independence lies in remaining 2/3rd?.Also, if Tata trusts hold 66% in Tata Trusts, a veto isn’t necessary to begin with, since they anyway have a clear majority..7. Consent to amendment of Articles .Two principle amendments made in the years 2000 and 2014 to the Articles were voted in the affirmative by the petitioners’ representatives themselves. There is no reason why subsequent complaints can be made in that regard..8. No reasons for grant of waiver.Singhvi argued that the waiver petition presented by the petitioners makes no reference to reasons as to why ‘waiver’ must be granted but merely imports the arguments on merits..9. Mistry’s letters to Ratan Tata.Recent letters written by Cyrus Mistry to Ratan Tata were read out; letters which sought his guidance on several matters. In this regard, Singhvi argued that a decision by the board to oust Mistry had suddenly turned him against someone who was once a ‘hero in his eyes’..10. Limitation.As pointed out in Tata’s response to the main petition, most of the allegations are barred under the Limitation Act, 1963..Next hearing is scheduled for April 4, when (hopefully) arguments on the point of waiver will conclude.
Courtroom No.1 of the Mumbai Bench of NCLT has seen a lot more than it probably thought it would..The oppression and mismanagement suit filed by Cyrus Mistry’s investment entities under Sections 241 and 244 of the Companies Act, 2013 (Act) was held not maintainable by the Bench..Based on the NCLAT order, arguments for grant of waiver followed. These arguments were presented by the petitioners’ counsel Aryama Sundaram on March 7 and a response to the waiver arguments were presented by Tata’s on yesterday i.e. March 17..Abhishek Manu Singhvi, arguing Counsel for Tata Sons, took nearly four long hours to painstakingly convince the Bench as to why the waiver should not be allowed..Following ten points briefly sum up the arguments presented by Singhvi:.1. Form no. NCLT.9.The NCLT (Amendment) Rules, 2016 provide for the amended Form no. NCLT. 9; a form which is required to be filed with the NCLT for a waiver application..This form, as many others, is required to be filed ‘along with’ the main petition and not after. Therefore, he argued that the waiver cannot be an ‘afterthought’ and ought to be filed along with the main petition in December itself..2. The 244 proviso.In reference to the proviso (to Section 244), which allows grant of waiver, he referred to case law(s) suggesting that a proviso ‘cannot swallow’ the main rule. It was argued (in the precedents) that provisos will have to be read in the manner that allows government (power to grant waiver in the old act vested with the central government) to depart from the main provisions, in compelling and exceptional cases only..Singhvi also argued that the NCLAT order, in Para 42, provided for grant of waiver on ‘strong grounds’ only. In the present case, he argued that, apart from the use of mere (unjustified) adjectives, no strong grounds have been made out..3. Petitioners are not remediless.A point which was reiterated numerous times during the course of the arguments..Singhvi continuously kept arguing that it was not the petitioner’s case that they are rendered ‘remediless’. Answering a ‘juristic point’ only, Singhvi said that assuming the Articles of Association (Articles) are against the interest of the company and in the event the petitioners are less than 10%, Section 9 of Civil Procedure Code, 1908 is not compromised by Section 244 of the Act..Sundaram was quick to point out that Section 430 of the Act ousts jurisdiction of any civil courts for matters pending before the NCLT..Singhvi, then, pointed out to the ‘second facility’ which may be a ‘potential possible action’ for the petitioners i.e. ‘class action suit’ under section 245 of the Act; bearing in mind the thrust laid on ‘class of members’ by the petitioners..4. Complaint against ‘whom’, by ‘who’?.It was further argued that majority of the allegations don’t relate to Tata Sons in the first place; most of which are against companies that aren’t even subsidiaries of Tata Sons. Even for the ones that are subsidiaries, precedents were presented to suggest that acts of oppression in any subsidiary cannot be brought against using holding company as the instruments..Secondly, many of the allegations are in the nature of ‘directorial allegations’ by Cyrus Mistry in his capacity as a director. It must be remembered that the relief provided under the provisions of the Act is when the ‘affairs of the company’ are conducted in a manner prejudicial to any ‘members’. These acts, must be continuous acts of oppressions on shareholders (and not directors)..5. An anticipated rebuttal.It was anticipated that the petitioners may argue that Section 242(2)(h) of the Act, permits directorial dispute to be raised; a section that allows for remedy against directors. Singhvi argued that this (possible) argument will cause great mischief and dilute the principles laid down in S.P Jain vs. Kalinga Tubes..6. Articles – Veto.Sundaram had vehemently opposed the oppressive ‘veto’ provisions contained in the Articles, which allow trust-nominated directors to override any decision taken by the board. Singhvi informed that, these veto provisions complained of, neither have ever been used, nor have they caused any prejudice to the petitioners – then why complaint about it?.Singhvi further argued that not more than 1/3rd of the directors on the board of Tata Sons can be nominated by the trusts, so how can they be oppressive when the independence lies in remaining 2/3rd?.Also, if Tata trusts hold 66% in Tata Trusts, a veto isn’t necessary to begin with, since they anyway have a clear majority..7. Consent to amendment of Articles .Two principle amendments made in the years 2000 and 2014 to the Articles were voted in the affirmative by the petitioners’ representatives themselves. There is no reason why subsequent complaints can be made in that regard..8. No reasons for grant of waiver.Singhvi argued that the waiver petition presented by the petitioners makes no reference to reasons as to why ‘waiver’ must be granted but merely imports the arguments on merits..9. Mistry’s letters to Ratan Tata.Recent letters written by Cyrus Mistry to Ratan Tata were read out; letters which sought his guidance on several matters. In this regard, Singhvi argued that a decision by the board to oust Mistry had suddenly turned him against someone who was once a ‘hero in his eyes’..10. Limitation.As pointed out in Tata’s response to the main petition, most of the allegations are barred under the Limitation Act, 1963..Next hearing is scheduled for April 4, when (hopefully) arguments on the point of waiver will conclude.
