As the Tata-Mistry battle keeps intensifying, it may be good idea to update the scorecard every time a favourable order is passed for either one..When last week Judicial Member B.S.V Prakash Kumar of the National Company Law Tribunal (NCLT) passed an order ‘dismissing’ Mistry’s contempt petition, it was a very brief and ambiguous pronouncement, until the final order came out..The contempt petition filed by Mistry on 11 January of this year, was against Tata Sons for issuance of a requisition notice under Section 169 of the Companies Act, 2013 for convening of an extraordinary general meeting (EGM) for removal of Mistry as a director. The contempt petition was dismissed with liberty to file affidavit within three days from the date of the order, to be heard along with the main hearing, as scheduled..Justifying it’s order, the NCLT critiqued the practice of filing additional applications time and again, believing that ‘additional affidavit’ has ‘started working well in the place of amendment application to take in subsequent facts into consideration, and to file reply affidavit from other side’, thus allowing the bench to directly consider those facts at the time of hearing..It is in this regard that the importance and exigency of the matter in question, has been kept in mind. And the NCLT has, at least this time, stuck to its guns by being ‘expeditious’ in disposing off matters. As was noted by Judicial Member Prakash Kumar during the first hearing of the matter,.“This case is not just a question of the integrity of Tata Group, but of the integrity of the Nation”.And this time, the order has further taken note of the urgent need to reduce corporate litigation in this country, allowing organisations to devote their time efforts to develop the business..The contempt petition and the arguments, which were mostly based on a flawed interpretation of the interim order, or an attempt to slow down the process was rightly dismissed by the NCLT. As pointed out earlier, the interim reliefs that were foregone by the petitioners in return of a ‘consent order’, which prohibited either of the parties from ‘filing any interim application or initiating any action or proceedings’, ultimately turned out to be the crux of this subsequent dispute. The reasoning for dismissing has been best explained in the latest order,.“If this Bench was of the view to pass interim reliefs in favour of the Petitioners, it would not have suggested the Petitioner counsel to elect either to argue on the Petition or to take directions for completion of the pleadings. Had it been satisfied to pass interim orders, this Bench ought to have heard the Respondent’s side as well and would have also heard them before passing such orders. It should also be kept in mind that it was suggested to the Petitioner’s counsel, not to the Respondent’s; therefore, it could not even be imagined that the Respondent’s side would agree to pass a blanket order against them without even opening their mouth to reply to the arguments of the other side, hence it is inconceivable to any prudent man to assume that a consent order was passed against R1 not to take up issues to meet the requirements of the company or even about the removal of R11. When a battle of senior counsels appear on either side, can it be assumed that one side directly agreed for consent order even without giving their reply submissions?”.In its order, the NCLT observed the four ingredients that constitute a contempt petition (and that each ingredient depends on the previous one in that very order. Thus the second ingredient would be considered only if the first one qualifies),.Valid court order against respondents,Knowledge of the order by the respondents,Ability of the respondent to render compliance and,Wilful disobedience of the order..The question of whether there was even a valid court order against the respondents was completely dismissed, thus eliminating the necessity of delving into the remaining three ingredients..Because, the interim order restrained either of the parties from ‘filing any interim application or initiating any action or proceedings’ in relation to the ‘subject matter’, which in fact does not encompass within itself the functioning of the conglomerate and the actions that it takes from time to time..Setting a strong precedent for similar future litigation, the NCLT held that ‘subject matter’ in relation to a Company Petition, speaks about the issues raised in the Company Petition i.e. over the alleged actions said to have taken place before filing the Company Petition, which in this case did not include convening of an EGM for the ouster of Mistry from his directorship..The intention of the said order was rather ‘to free the parties from further litigation’..Ironically, the exact wordings which Mistry’s lawyers relied on for initiating this contempt petition seem to have backfired, being seen as words which were meant to prevent an action of this very nature..On an unrelated note, it would be great if the NCLT could do a final round of proof-reading of its orders next time onwards..(Read the order here)
As the Tata-Mistry battle keeps intensifying, it may be good idea to update the scorecard every time a favourable order is passed for either one..When last week Judicial Member B.S.V Prakash Kumar of the National Company Law Tribunal (NCLT) passed an order ‘dismissing’ Mistry’s contempt petition, it was a very brief and ambiguous pronouncement, until the final order came out..The contempt petition filed by Mistry on 11 January of this year, was against Tata Sons for issuance of a requisition notice under Section 169 of the Companies Act, 2013 for convening of an extraordinary general meeting (EGM) for removal of Mistry as a director. The contempt petition was dismissed with liberty to file affidavit within three days from the date of the order, to be heard along with the main hearing, as scheduled..Justifying it’s order, the NCLT critiqued the practice of filing additional applications time and again, believing that ‘additional affidavit’ has ‘started working well in the place of amendment application to take in subsequent facts into consideration, and to file reply affidavit from other side’, thus allowing the bench to directly consider those facts at the time of hearing..It is in this regard that the importance and exigency of the matter in question, has been kept in mind. And the NCLT has, at least this time, stuck to its guns by being ‘expeditious’ in disposing off matters. As was noted by Judicial Member Prakash Kumar during the first hearing of the matter,.“This case is not just a question of the integrity of Tata Group, but of the integrity of the Nation”.And this time, the order has further taken note of the urgent need to reduce corporate litigation in this country, allowing organisations to devote their time efforts to develop the business..The contempt petition and the arguments, which were mostly based on a flawed interpretation of the interim order, or an attempt to slow down the process was rightly dismissed by the NCLT. As pointed out earlier, the interim reliefs that were foregone by the petitioners in return of a ‘consent order’, which prohibited either of the parties from ‘filing any interim application or initiating any action or proceedings’, ultimately turned out to be the crux of this subsequent dispute. The reasoning for dismissing has been best explained in the latest order,.“If this Bench was of the view to pass interim reliefs in favour of the Petitioners, it would not have suggested the Petitioner counsel to elect either to argue on the Petition or to take directions for completion of the pleadings. Had it been satisfied to pass interim orders, this Bench ought to have heard the Respondent’s side as well and would have also heard them before passing such orders. It should also be kept in mind that it was suggested to the Petitioner’s counsel, not to the Respondent’s; therefore, it could not even be imagined that the Respondent’s side would agree to pass a blanket order against them without even opening their mouth to reply to the arguments of the other side, hence it is inconceivable to any prudent man to assume that a consent order was passed against R1 not to take up issues to meet the requirements of the company or even about the removal of R11. When a battle of senior counsels appear on either side, can it be assumed that one side directly agreed for consent order even without giving their reply submissions?”.In its order, the NCLT observed the four ingredients that constitute a contempt petition (and that each ingredient depends on the previous one in that very order. Thus the second ingredient would be considered only if the first one qualifies),.Valid court order against respondents,Knowledge of the order by the respondents,Ability of the respondent to render compliance and,Wilful disobedience of the order..The question of whether there was even a valid court order against the respondents was completely dismissed, thus eliminating the necessity of delving into the remaining three ingredients..Because, the interim order restrained either of the parties from ‘filing any interim application or initiating any action or proceedings’ in relation to the ‘subject matter’, which in fact does not encompass within itself the functioning of the conglomerate and the actions that it takes from time to time..Setting a strong precedent for similar future litigation, the NCLT held that ‘subject matter’ in relation to a Company Petition, speaks about the issues raised in the Company Petition i.e. over the alleged actions said to have taken place before filing the Company Petition, which in this case did not include convening of an EGM for the ouster of Mistry from his directorship..The intention of the said order was rather ‘to free the parties from further litigation’..Ironically, the exact wordings which Mistry’s lawyers relied on for initiating this contempt petition seem to have backfired, being seen as words which were meant to prevent an action of this very nature..On an unrelated note, it would be great if the NCLT could do a final round of proof-reading of its orders next time onwards..(Read the order here)
