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2019 (12) TMI 895 - AT - Companies LawOppression and Mismanagement - case of appellant is that an abiding theme of Respondents’ conduct is the consistent and steady squeezeout of the Appellants’ rights and title to, and interest in, their ownership of 1st Respondent Company in a manner that is lacking in probity and is unfair - conversion from ‘Public Company’ to ‘Private Company’ - HELD THAT:- It is not open to the Respondents to state or allege that loss in different ‘Tata Companies’ was due to mismanagement of Mr. Cyrus Pallonji Mistry (11th Respondent). If that be so, why the nominated Directors who have affirmative voting right over the majority decision of the Board or in the Annual General Meeting of the shareholders allowed the ‘Tata Companies’ to function in a manner which caused loss, as accepted in the press release dated 10th November, 2016. The consecutive chain of events coming to fore from the correspondence referred elsewhere in this Judgment amply demonstrates that impairment of confidence with reference to conduct of affairs of company was not attributable to probity qua Mr. Cyrus Pallonji Mistry but to unfair abuse of powers on the part of other Respondents. The ‘Press Statement’ of ‘Tata Sons Limited’ dated 10th November, 2016 facts of which were never discussed by Board is an afterthought of Respondents to put all blame on Mr. Cyrus Pallonji Mistry (11th Respondent). The Board of Directors’ majority decision of which is guided by the affirmative vote of the nominated members, have failed to explain as to why the Board failed in its duties and not noticed the loss of any of the ‘Tata Companies’. The fact of investment of ₹ 1,00,000 Crores out of ₹ 6,00,000 Crores by ‘Shapoorji Pallonji Group’ to consider the effect of absence of a nominee Director of minority group (‘Shapoorji Pallonji Group’) or a Director who can take care of minority members (group). On the other hand, in terms of Article 104B read with Article 121 and 121A, the nominee Directors of the ‘Tata Trusts’ have control over the meeting of the Board of Directors, having power to annul the majority decision by refraining from exercise of affirmative vote - Even in absence of such right of minority members (‘Shapoorji Pallonji Group’), because of healthy atmosphere and clear understanding between two groups i.e. ‘Tata Group’ and ‘Shapoorji Pallonji Group’ for last 40 years, except for few years in between thereof, one of the persons of ‘Shapoorji Pallonji Group’ was made as the Executive Chairman or Director, which includes Mr. Cyrus Pallonji Mistry (11th Respondent) and his father Mr. Pallonji Shapoorji Mistry. ‘Shapoorji Pallonji Group’, minority shareholders, all the time had confidence on the decision making power of the Board of Directors of the ‘Tata Sons Ltd.’ as amity and goodwill prevailed inter se the two groups. The ‘Tata Sons Limited’ remained silent for more than 13 years and never took any step for conversion in terms of Section 43A (4) of the Companies Act, 1956. Even after enactment of the Companies Act, 2013 which came into force since 1st April, 2014, for more than three years, it had not taken any step under Section 14. Till date, no application has been filed before the Tribunal under Section 14(2) of the Companies Act, 2013 for its conversion from ‘Public Company’ to ‘Private Company’ - In absence of any such approval by the Tribunal under Section 14, we hold that ‘Tata Sons Limited’ cannot be treated or converted as a ‘Private Company’ on the basis of definition under Section 2(68) of the Companies Act, 2013. The Resolution dated 24th October, 2016 passed by the Board of Directors of Company removing Mr. Cyrus Pallonji Mistry (11th Respondent) as the Executive Chairman of the Company (‘Tata Sons’) is declared illegal; all consequential decisions taken by ‘Tata Companies’ for removal of Mr. Cyrus Pallonji Mistry (11th Respondent) as Directors of such companies are also declared illegal. The impugned Judgment dated 9th July, 2018 passed by the National Company Law Tribunal, Mumbai, is set aside - Remarks made against the Appellants, Mr. Cyrus Pallonji Mistry and others stand expunged. Both the appeals are allowed - appeal allowed.
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