TataMistry: NCLT failed to protect my rights under new Companies Act, Shapoorji Pallonji to NCLAT

Assailing the NCLT Mumbai Bench order upholding Cyrus Mistry’s ouster from Tata Sons, the Shapoorji Pallonji Group today told the National Company Law Appellate Tribunal that NCLT failed to protect its status as a minority shareholder in light of the Sections 241-242 of the new Companies Act of 2013..Senior Advocate CA Sundaram, appearing for the Appellant, Mistry’s Shapoorji Pallonji Group, argued that the scope and ambit of Sections 241-242 of the 2013 Act was wider than Sections 397-398 of the old Act of 1956..Shapoorji Pallonji owns a minority stake in Tata Sons through Sterling Investment Corporation and Cyrus Investments..Today’s proceedings before the NCLAT Bench headed by Chairperson Justice SJ Mukhopadhyaya marked the first day of the day-to-day hearing in Shapoorji Pallonji Group’s appeal against the NCLT order..The new Act, Sundaram argued, provided an additional ground of prejudice to a minority to invoke the provisions with respect to oppression and mismanagement..“Today even if you do not make a case of oppression, you can still make out a case of prejudice… It’s like two concentric circles, overlapping each other.”, he explained..Sundaram further submitted that the object of Sections 241-242 under the new Act was to look after the minority shareholder, which the NCLT overlooked by upholding the actions of the majority..“Basic thrust of the NCLT judgement was – Who are you? You are a minority shareholder.. And forgot that 241 was there to protect me.”.He also brought to the Appellate Tribunal’s notice that the word “prejudice” in Section 241 was not qualified by the phrase “unfair”, unlike the English Law. The scope of Section 241 was, therefore, much wider and granted additional protection to a minority shareholder, he stated..The source of this prejudice, as explained by Sundaram, could be any damage, detriment to one’s claim, right or even legitimate expectation..Therefore, he argued, the test of oppression and mismanagement as laid for the old sections under the 1956 Act would not be applicable to Sections 241-242..Sundaram also argued that the phrase “affairs of the companies” under Section 241 should not be limited to affairs and management of Tata Sons only but must also include the affairs and management of the Tata Group companies as well..Sundaram stated that the Shapoorji Pallonji Group expected that Tata Sons adhered to “high standard of governance”..“It is expected that the supremacy of the Board would not be undermined and that the Board should not act as the spokesperson of the Trustees.”, he stated..Citing the conversion of Tata Sons from a public to a private company and ouster of Mistry from the Chairmanship of Tata Sons, Sundaram argued that the Board has failed to uphold its supremacy and was “subjugated to the interest of Trustees to press the views of the majority“..“Nobody is bellying the legend R-2 (Ratan Tata), but I am only concerned that the company does well.”, Sundaram clarified..Admitting the appeal against Mistry’s removal from the post of Chairman of Tata Sons, NCLAT had earlier this year directed that Mistry’s shares in Tata Sons could not be “forced to sell” while the appeal is pending..The Appellants are being represented by Senior Advocates CA Sundaram and KG Raghavan..Tata Sons is being represented by Senior Advocates Harish Salve, Abhishek Manu Singhvi and Rajiv Nayar. .The matter would be next heard on December 12.