#TataMistry: wrapping up waiver arguments at NCLT, order reserved for April 17 [Read Summary]

Yesterday, final arguments for grant of waiver were heard at court room no.1 of the Mumbai Bench of NCLT, in the case of Cyrus Investments Pvt Ltd. & Anr. Vs. Tata Sons & Ors..The oppression and mismanagement suit filed by Cyrus Mistry, was held non-maintainable u/s 244 of the Companies Act, 2013 (Act). Mistry has now sought a waiver under the same section so that the petition can be heard on merits..The case of waiver pretty much hinges on the principle of demurrer. As reiterated, on multiple occasions by Janak Dwarkadas as well as Aryama Sundaram, all the facts that constitute the company petition ought to be treated as ‘gospel truth’ for the purposes of granting the waiver only. And till the time the waiver is granted, a meritorious assessment of these contents is not required under the law..Mohan Parasaran had argued, on behalf of trustees that, this is a peculiar case and the tribunal cannot close its eyes to the pleadings of the parties since a grant of waiver requires ‘justifiable grounds and acceptable material’..Abhishek Manu Singhvi argued that the petitioner’s arguments suffers from ‘three demurrer infirmities’, namely,.Allegations made only in directorial capacity;All the allegations are barred by limitation and;Majority of the companies mentioned in the petition are not even subsidiaries of Tata Sons..Here are three points argued yesterday which will determine the outcome of the proceedings at the NCLT:.Nature or proviso.Ravi Kadam argued that section 241 (application for oppression and mismanagement) carves out the exception to the democratic process of the corporate functioning. And the proviso to Section 244 (that allows NCLT to waive application requirements) is an added exception to the rule provided for under Section 241..‘An exception to an exception’, he argued, should be interpreted strictly so as to not enlarge the scope of the enactment as it continues to remain subordinate to the main provision. And therefore, this waiver can only be granted in ‘special circumstances’..It was Sundaram’s argument that the proviso to Section 244 is actually a power given to the tribunal to ‘condone’ any requirements or any shortcomings in the company petition, which would also include acts barred by limitation; a relief which cannot be granted while hearing maintainability..Singhvi refuted that this interpretation of bar on eligibility being a ‘procedural one’ is erroneous in as much as it would create a ‘havoc on the law’..Relevant facts for considering a waiver application.As per Sundaram’s submissions, three questions need to be answered while considering a waiver application:.Whether the petitioner has an insignificant or substantial interest?What are the issues raised and what is the most appropriate jurisdiction u/s 241?Is the cause raised of ‘substantial importance’ to the petitioners or to any (class of )members or in public interest?.This further required a revisit of the ‘class of members’ argument by Sundaram, and the ‘substantial interest’ that the petitioners hold in Tata Sons, which has been valued at more than rupees one lac crores. And on this basis, the remedy ought to be furthered rather than curtailed..Singhvi submitted that at least one of the following factors need to be met with for granting a waiver:.Whether the petition makes out a case of supervening national interest/ or public interest;Whether the complaining shareholder would be remediless if the waiver is not granted;Where lack of maintainability is itself attributable to an alleged act of oppression..The petitioners, Singhvi argued, have failed to meet all three tests and especially, on the second one. By their own admission, they have referred to the NCLT as the ‘most appropriate authority’ without contending that they will be rendered remediless..While Section 430 does bar the jurisdiction of the civil courts for matters that fall under the jurisdiction of the NCLT, he argued that this is not a case which falls under the jurisdiction of the NCLT to begin with, so the gates under Section 9 of the Civil Procedure Code are open..7/11.Sundaram referred to Order 7 Rule 11 of the Civil Procedure Code and the case of Saleem Bhai & Ors. vs. State of Maharashtra & Ors. wherein it was held that the pleas taken in the Written Statement would be wholly irrelevant if there exists a ‘cause of action’, as does here..Singhvi was quick to point out that this would be applicable only in case where an application under Order 7 Rule 11 was filed, thereby dismissing this argument..The case of Amalgamations Limited vs Shankar Sundaram was also discussed in length by both sides. Presented by Singhvi to show that, acts of a subsidiary cannot be part of an oppression/mismanagement suit filed by the Parent..More so relevant, in this case where the acts complained of are in fact of non-subsidiaries mostly..While the order on waiver has been reserved for the 17th of this month, a passing remark by BSV during the proceedings could have indicated he’s not convinced with the waiver application, when he asked,.“What are these special circumstances? No one has answered that.”