Cyrus Mistry’s team of lawyers concluded their arguments on waiver application yesterday. Tata’s team will now respond on March 17..The oppression and mismanagement suit filed by Cyrus Investments & Sterling Investments (Petitioners), was held non-maintainable by the NCLT on March 6. NCLT held that the petitioners did not meet the strict criteria of 10% ownership of the issued share capital as envisaged under Section 244(1)(a) of the Companies Act, 2013 (Act)..Therefore, in consonance with the NCLAT order, arguments for waiver were heard after decision on maintainability..Much of yesterday’s arguments by Aryama Sundaram were aimed at preempting Tatas from having a voice in the waiver application filed by Petitioners, a point which was substantiated in the case of SriKrishna Tiles & Potteries vs. CLB & Ors and, Universal Music India Ltd. vs. UOI..Both the cases concluded that the discretion (to grant waiver) that vests with the Central Government (power to grant waiver vested with Central Government in Companies Act, 1956) is to scrutinise if the application is a frivolous one by a ‘disgruntled member’; if answered in the negative, the authority isn’t required to go into the merits, and the respondents needn’t be given a chance to be heard while granting waiver..What is required is the existence of a prima facie case, but what would be ‘prima facie’ in this context? Janak Dwarkadas, appearing on behalf of Cyrus Mistry, explained that prima facie in the given context would be to the extent of enabling the party to proceed on merits and not to the extent of granting any interim relief. This would require the NCLT to simply see if this is a ‘triable case’ and an evaluation of the merits at this stage is not a correct view to take..Somewhere during the course of the arguments, the line between waiver and merit arguments was blurred and arguments on merit spilled over to the waiver arguments, to prove that this was in fact a ‘triable case’..While arguments made for maintainability apply as it is for waiver also, the focus of the arguments tilted towards the alleged abuse of the (amended) Articles of Association (AoA) of the Tata Sons, more particularly Article 121, which gives trust-nominated directors veto rights on every single matter..The said provisions, which although prima facie sought to create an enabling governance framework for securing interests of the trust, were ultimately used, Mistry’s petition says, as a tool by Ratan Tata to control these ‘shadow directors’ who acted as mere puppets..This interference in decision making, also acknowledged by Group General Counsel Bharat Vasani, led to it being felt that guidelines were necessary clarifying the roles of the trustees of Tata Trusts in Tata Sons..On this basis, Sundaram pocketed his request for waiver broadly as:.a) Grievance against the AoA which is against the functioning of the Tata Sons itself;.b) AoA being prejudicial to the complaining class of members i.e. the Petitioners since it allows two persons to dictate terms;.c) Amended AoA is repugnant to the letter and spirit of the Act which brings in higher standards of corporate governance, with emphasis on role of independent directors;.d) As stated by NCLT in its order on maintainability, that Tata Sons is the driving force for and funding machine for various Tata Group companies which has a huge impact on the public at large..What Sundaram sought through all this was the revisiting of the amended AoA, which needs to be re-looked in light of the changed law..While the Petitioners in this case are not ‘fly-by-night’ shareholders, he argued that voting shareholders decide how the company functions and a complaint by a substantial holding of this class of members merits an inspection into the acts that are complained off..Sundaram also argued that the NCLT exercises equity jurisdiction in such cases. He added that only when there’s a conflict between the jurisprudential concept of equity and the statute, will the statute prevail. Since the statute in this case doesn’t provide for any conditions for grant of waiver, it leaves it to the NCLT’s ‘discretion’ which is of wide amplitude, one which is guided by the principles of justice, equity and good conscience and not restricted by any statutory limitations..Janak Dwarkadas’ arguments were vehemently opposed by Abhishek Singhvi since he was representing Cyrus Mistry and not the Petitioners, and no application was filed by him. Singhvi reserved his right to object to his response even though Dwarkadas continued to argue..Dwarkadas reiterated several points but urged the court to not conduct a ‘mini trial’ at this juncture. He added that any response by the Tatas at this stage of the application was uncalled for, since what is required at this stage is the NCLT’s discretion to grant a waiver for both parties to move on to merits. He also added that only two set of members exists in this case, and one is being oppressed by the other, which by itself is reason enough to consider this case.
Cyrus Mistry’s team of lawyers concluded their arguments on waiver application yesterday. Tata’s team will now respond on March 17..The oppression and mismanagement suit filed by Cyrus Investments & Sterling Investments (Petitioners), was held non-maintainable by the NCLT on March 6. NCLT held that the petitioners did not meet the strict criteria of 10% ownership of the issued share capital as envisaged under Section 244(1)(a) of the Companies Act, 2013 (Act)..Therefore, in consonance with the NCLAT order, arguments for waiver were heard after decision on maintainability..Much of yesterday’s arguments by Aryama Sundaram were aimed at preempting Tatas from having a voice in the waiver application filed by Petitioners, a point which was substantiated in the case of SriKrishna Tiles & Potteries vs. CLB & Ors and, Universal Music India Ltd. vs. UOI..Both the cases concluded that the discretion (to grant waiver) that vests with the Central Government (power to grant waiver vested with Central Government in Companies Act, 1956) is to scrutinise if the application is a frivolous one by a ‘disgruntled member’; if answered in the negative, the authority isn’t required to go into the merits, and the respondents needn’t be given a chance to be heard while granting waiver..What is required is the existence of a prima facie case, but what would be ‘prima facie’ in this context? Janak Dwarkadas, appearing on behalf of Cyrus Mistry, explained that prima facie in the given context would be to the extent of enabling the party to proceed on merits and not to the extent of granting any interim relief. This would require the NCLT to simply see if this is a ‘triable case’ and an evaluation of the merits at this stage is not a correct view to take..Somewhere during the course of the arguments, the line between waiver and merit arguments was blurred and arguments on merit spilled over to the waiver arguments, to prove that this was in fact a ‘triable case’..While arguments made for maintainability apply as it is for waiver also, the focus of the arguments tilted towards the alleged abuse of the (amended) Articles of Association (AoA) of the Tata Sons, more particularly Article 121, which gives trust-nominated directors veto rights on every single matter..The said provisions, which although prima facie sought to create an enabling governance framework for securing interests of the trust, were ultimately used, Mistry’s petition says, as a tool by Ratan Tata to control these ‘shadow directors’ who acted as mere puppets..This interference in decision making, also acknowledged by Group General Counsel Bharat Vasani, led to it being felt that guidelines were necessary clarifying the roles of the trustees of Tata Trusts in Tata Sons..On this basis, Sundaram pocketed his request for waiver broadly as:.a) Grievance against the AoA which is against the functioning of the Tata Sons itself;.b) AoA being prejudicial to the complaining class of members i.e. the Petitioners since it allows two persons to dictate terms;.c) Amended AoA is repugnant to the letter and spirit of the Act which brings in higher standards of corporate governance, with emphasis on role of independent directors;.d) As stated by NCLT in its order on maintainability, that Tata Sons is the driving force for and funding machine for various Tata Group companies which has a huge impact on the public at large..What Sundaram sought through all this was the revisiting of the amended AoA, which needs to be re-looked in light of the changed law..While the Petitioners in this case are not ‘fly-by-night’ shareholders, he argued that voting shareholders decide how the company functions and a complaint by a substantial holding of this class of members merits an inspection into the acts that are complained off..Sundaram also argued that the NCLT exercises equity jurisdiction in such cases. He added that only when there’s a conflict between the jurisprudential concept of equity and the statute, will the statute prevail. Since the statute in this case doesn’t provide for any conditions for grant of waiver, it leaves it to the NCLT’s ‘discretion’ which is of wide amplitude, one which is guided by the principles of justice, equity and good conscience and not restricted by any statutory limitations..Janak Dwarkadas’ arguments were vehemently opposed by Abhishek Singhvi since he was representing Cyrus Mistry and not the Petitioners, and no application was filed by him. Singhvi reserved his right to object to his response even though Dwarkadas continued to argue..Dwarkadas reiterated several points but urged the court to not conduct a ‘mini trial’ at this juncture. He added that any response by the Tatas at this stage of the application was uncalled for, since what is required at this stage is the NCLT’s discretion to grant a waiver for both parties to move on to merits. He also added that only two set of members exists in this case, and one is being oppressed by the other, which by itself is reason enough to consider this case.
