#TataMistry- Read NCLAT’s order [Hint: Mistry did not ‘lose’ after all]

The National Company Law Appellate Tribunal (NCLAT) has uploaded a detailed order providing reasons for dismissing Cyrus Mistry’s appeal against all three orders passed by the National Company Law Tribunal (NCLT) in the case of Cyrus Investments Pvt. Ltd. & Anr. vs. Tata Sons Ltd. & Ors..Chairperson Justice (Retd.) SJ Mukhopadhaya, after hearing the arguments on February 3, passed a simple order ‘dismissing’ the appeal..Little did we know that he would inconspicuously grant Mistry what he wanted..The appeal filed in NCLAT involved two broad issues i.e. restraining Tata Sons from removing Mistry as Director and, deciding the preliminary issue of maintainability of the petition in NCLT..And this appeal was filed right after Mistry’s counsel Aryama Sundaram refused to argue the case on merits at the NCLT, till the time the tribunal passed an order on the issue of ‘maintainability and/or waiver’..This demand was based on Sundaram’s interpretation of Proviso 1 to Section 244(1) of the Companies Act, according to which a decision on ‘maintainability and/or waiver’ served as a prerequisite for hearing the merits of any oppression/mismanagement proceedings..This argument, put forth by Sundaram before the NCLAT, did not hold water, or at least it appeared so. Justice Mukhopadhaya in open court pointed out to the incorrectness of this interpretation since several cases involved mixed questions of facts, thereby not allowing maintainability to be decided prior to the main hearing. This point has also been reiterated in the NCLAT Order in Paragraph 41..The NCLAT Order, in that regard, quotes the relevant text from a Supreme Court judgment in the case of National Council for Cement and Building Materials Vs. State of Haryana, which reads as follows,.“The Court observed that all issues whether preliminary or otherwise, should be decided together so as to rule out the possibility of any litigation at the interlocutory stage. To the same effect is the decision in Workmen v. Hindustan Lever Ltd.”.But in a drastic departure from the above-mentioned principle, Paragraph 42 of the NCLAT Order says that,.“……However, we are of the opinion that during the final hearing the question of maintainability should be decided first and if it is answered in negative, against the appellants, the question of waiver of the petition be decided if any strong ground has been made out to claim exception under proviso to sub section (1) of Section 244. In case, aforesaid issues are decided in favour of the appellants, then the Tribunal can decide the case on merit.”.This is also a departure from the comments passed by Justice Mukhopadhaya during the hearing when he questioned Sundaram’s waiver application for his lack of confidence in maintainability..Secondly, Paragraph 39 of the order makes a reference to the Supreme Court judgment mentioned by Abhishek Manu Singhvi at the NCLAT, which upholds the inherent powers of the majority shareholders to democratically elect/remove the director. However, Para 44 of the NCLAT Order states that,.“The case is remitted to Tribunal to dispose of the Company Petition on merit after hearing the petition uninfluenced by any of the observation made in the impugned orders dated 22nd December 2016, 18th January 2017 and 31st January 2017. It will be open to the appellants to file a petition for amendment and may argue on the question of removal of 11th respondent, if he is removed by the decision of the EGM during the pendency of the Company Petition. .In case the question of maintainability and/or waiver on merit is decided in the favour of the appellants, it is always open to the Tribunal to pass appropriate order restoring the original position of Respondent No. 11 [Cyrus Mistry], was at the time of filing of the Company Petition.”.It is here that the NCLAT has allowed NCLT to reinstate Mistry back to his directorship, (of course) subject to NCLT’s discretion, on fulfilment of ‘maintainability and/or waiver’ requirements, and not based on its findings of ‘oppression and/or mismanagement’..While the appeal may have been dismissed, Mistry in a way got what he wanted. Whether this will trigger an appeal by Tata Sons is yet to be seen..(Read synopsis of the appeal).(Read the order below)