Why NCLT rejected Cyrus Mistry's petitions

18.37% of family-owned firms of Mistry in Tata Sons cannot be a ground for waiver

The 18.37% equity of family-owned entities of Cyrus Mistry in Tata Sons cannot become a ground for waiver, according to the National Company Law Tribunal (NCLT).

"...If really, any such grievance were there to these petitioners, obviously it would become a ground for waiver and their point of substantial equity in the company would help them out, but their equity shareholding of 18.37% in the company on its own cannot become a ground for waiver," NCLT's 2 member bench of V Nallasenapathy and BSV Prakash Kumar said in the order.

The NCLT had ruled in favour of Tata Sons, the flagship company of the over $100 billion salt-to-software conglomerate on April 17, however, the detailed 48-page order is available now.

Cyrus Investments and Sterling Investments have a total of 18.4% ordinary equity shares in Tata Sons. However, these firms held only around 2.17% after taking into account preference shares, due to which they were not qualified to file the petition for a case of allegations of mismanagement and oppression of minority shareholder interests. As per Companies Act, the petitioner should hold one-tenth of the issued share capital or represent 10% of the total members for a case of allegations of mismanagement and oppression of minority shareholder interests to be taken up at NCLT. Mistry's family-owned firms had sought a waiver to this clause so that NCLT can take up the case. Tata Trusts holds a 66% in Tata Sons.

Tata Sons executive chairman N Chandrasekaran said that the order is an endorsement of the Tata Group's ethical and governance standards. "The Tata group, led by Tata Sons, has always been committed to the highest ethical standards and principles of governance. We welcome the NCLT's order, and it is an endorsement of these values and principles.

Tata Sons and the operating companies are focussed on growth to deliver value to our shareholders, and we thank all stakeholders for their continued support," Chandrasekaran said.