NCLAT allows waiver plea of Mistry's two firms

NCLAT allows waiver plea of Mistry's two firms”

The change in legal status of the company would restrict Tata Sons' shareholders such as Mistry's Pallonji group, which holds 18.4 per cent equity shares in the company, from selling the shares to external investors. NCLAT however upheld the dismissal by NCLT of the Mistry plea on grounds of maintainability. The appellate tribunal accepted the plea for waiver of a condition under the 2013 Companies Act that had precluded it from filing such a complaint against Tata Sons.

Mumbai: Tata Sons, the promoter of the $105 billion cars-to-software group, on Thursday won shareholders' nod to convert itself into a private limited company, limiting in effect Cyrus Mistry family's ability to sell their stake to outsiders.

The petition filed by investment companies Cyrus Investments Pvt Ltd and Sterling Investment Corporation Pvt Ltd of Mr. Mistry alleged mismanagement and oppression of minority shareholders by Tata Sons, Ratan Tata and the directors of the holding company of the diversified conglomerate. "We will continue to pursue complete transparency of group for shareholders gain", it added.

The litigation was initiated after Mistry's removal as chairman of Tata Sons on 24 October past year.

Following the order, the Mistry firms can now move the NCLAT, Mumbai to make a case of oppression and mismanagement.

The shareholders' approval to Tata Sons becoming a private company was the latest blow to ousted Tata Sons Chairman Cyrus Mistry, who ran a relentless campaign in the runup to the annual general meeting (AGM) to get the proposal vetoed.

There are more than 10 individuals including former employees who own preference shares in the holding company. A petitioner is required to hold at least one-tenth of the issued share capital of a company or represent 10 percent of the total number of members to take up such a case at the NCLT.

Last week, a Tata Sons spokesperson had stated: "The reinstatement of Tata Sons as a private company was considered by the board to be in the best interest of the company". But Tata Sons had pointed out that issued share capital included preference shares and that Mistry firms thus had only 2.17 per cent, way short of the minimum 10 per cent.

A report in the Economic Times said that the firm going from public to private will hurt Mistry the most as it will substantially reduce the powers of its shareholders.

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