The National Company Law Tribunal today heard arguments from the trustees of the two Tata trusts – Ratan Tata Trust and Sir Dorabji Tata Trust – that collectively hold over 66 percent of the shareholding in the company.
The counsels representing the trusts requested the NCLT to consider allowing buyout of the Mistry firms’ shareholding even if their oppression and mismanagement plea doesn’t stand, on grounds that this would be in the interest of Tata Sons.
“We want you to dismiss the petition on the whole, but an alternative remedy is to allow buyout of Mistry firms’ shares,” the trusts’ counsel Zal Andhyarujina said before the tribunal.
The Mumbai NCLT which began hearing the petition in November after the appellate tribunal granted the Mistry firms waiver from the 10 percent shareholding requirement to pursue oppression and mismanagement charges against Tata Sons. The matter has been heard extensively over the last two weeks.
Today, Senior Counsel Mohan Parasaran, Senior Counsel Sudipta Sarkar and Advocate Zal Andhyarujina argued on behalf of the trustees of the two trusts that comprise the largest shareholder of Tata Sons.
Here’s a summary of today’s arguments.
Conversion To Public Ltd. Company
Parasaran raised the issue of whether conversion of Tata Sons from a public company to a private company can be challenged by petitioners at all. It was a private limited company when Mistry firms invested and the Articles of Association have also remained broadly the same since their investment, he argued. Can the petitioners now raise these as grounds for oppression, he asked.
Sarkar also argued in favour of the conversion adding that if it weren’t for the law deeming Tata Sons as a public limited company, the firm would have retained its private status. Given that the Companies Act, 2013 allows for only two category of companies, that is, private and public, if a majority of the shareholders agree to such conversion, it should not be prevented, he said.
Article 75
Sarkar then raised the issue of Article 75. Mistry firms had sought that this Article be deleted completely. Articles of Association of a company form the rules and by laws that govern the company and bind the shareholders. Article 75 of Tata Son’s constitution says that if 75 percent of the shareholders of the company agree, a shareholder may be compelled to sell its shares. This implies that at any time, the Mistry firms could be forced to sell their shareholding if the majority shareholders so decide. Mistry firms collectively hold around 18 percent in the company.
Sarkar argued that these provisions have existed for over 50 years since Mistry firms have held shares in the company. The firms only raised issues with these in 2016 once their representative was removed as chairman and director.
He also stressed that provisions of these very Articles were relied on by Mistry firms in 2002 when they intended to transfer approximately 7 percent of their shareholding.
“Shadow Directors” Allegations Against Ratan Tata And NA Soonawala
Andhyarujina defended the allegations of interference against Soonawala and Tata. The Mistry firms had alleged violation of corporate governance principles by stating that the board of Tata Sons acts at the behest of trustees, specifically Ratan Tata and NA Soonawala. Andhyarujina said that there were numerous examples where board seeks out advice from third party advisers and it would be in the interest of the company to seek the advice of such experienced and reputed persons, who themselves have experience in managing the affairs of the company. He argued that there is no instance where the board changed their mind because of these alleged “shadow directors”
