TMI Blog2017 (9) TMI 1500X X X X Extracts X X X X X X X X Extracts X X X X ..... d share capital of the Company, which will be also not less than 3 to 4 members, none of the 49 shareholders can file an application under Section 241 alleging 'oppression and mismanagement'. It will remain only in the hands of major shareholders, namely Mr. Ratan Naval Tata or Mr. Narotam S. Sekhsaria, who only have right and their prerogative to file such application. One or the other minority shareholder cannot be asked or directed to form a group of 10% of the member(s) that means six person(s) in the present case, as it will be dependent on the prerogative of the other member(s). We are of the view that this is one of the exceptional and compelling circumstances, which merit the application for 'waiver' subject to the question whether (proposed) application under Section 241 relates to 'oppression and mismanagement'. Appellants have pleaded and not disputed by respondents is that the valuation of the company being in the region of at least 'Six lakhs Crores'. The interest of the appellants in the overall value of the company would be over 'one lakh crore'. Therefore, the interest of the appellants in the overall value of the company is 1/6th of the total value of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roposed) application under Section 241, admit the same and after notice to the parties decide the application on merit uninfluenced by impugned orders preferably within three months. - Company Appeals (AT) No.133 and 139 of 2017 - - - Dated:- 21-9-2017 - MR. S.J. MUKHOPADHAYA, J. For The Appellant : Mr. C.A. Sundaram and Mr. Arun Kathpalia, Senior Advocates with Ms Rohini Musa, Shri Manik Dogra, Mr. Rohan Jaitley, Mrs Sonali Jaitley Bakhshi, Mr. Jaiyesh Bakhshi, Mr. Ravi Tyagi, Mr. Shubhanshu Gupta and Ms. Sanya Kapoor, Advocates for For The Respondent : Dr. Abhishek Manu Singhvi, Mr. Rajiv Nayar, Mr. Amit Sibal and Mr. Darpan Wadhwa, Senior Advocates with Mr. R.N. Karanjawala, Ms. Ruby Singh Ahuja, Mr. Gaurav Mitra, Ms. Tahira Karanjawala, Mr. Anupn Prakash, Ms. Eesha Mohapatra, Mr. Avishkar Singhvi, Mr. Sameer Rohatgi, Mr. Aditya Shankar, Mr. Arjun Sharma, Mr. Arvind Chari, Mr. Sidharth Sharma, and Mr. Siddharta Kalita, Mr. Mukul Rohatgi, Senior Advocate with Mr. Dhruv Dewan, Mr. Nitesh Jain, Mr. Sayak Maity, Mr Rohan Batra, Mr Arjun Sharma, Ms. Reena Choudhary and Mr. Kostubh Devnani, Advocates, Mr. S.N. Mookherjee, Senior Advocate with Mr. Dhruv Dewan, Mr. Nitesh J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held during final hearing, the Tribunal should decide the question of maintainability first and if answer is in negative against the appellants, then to decide the question of waiver and thereafter if waived, to decide the merit. 5. Again during the pendency of the petition, an Extra Ordinary General Meeting was convened by 1st Respondent on 6th February 2017 and removed the 11th Respondent from the Board of Directors. The aforesaid act was also challenged by appellants by Amendment Petition as carried out on 10th February 2017. 6. The Tribunal heard the matter on the issue of maintainability and then passed impugned order dated 6th March 2017 holding that the Company Petition at the instance of appellants is not maintainable. The Tribunal held that the appellants do not have qualification under Section 244, as they hold less than 1/10th of the 'Issued Share Capital' of the Company. The Tribunal then decided to proceed on the question of waiver in terms of proviso to Section 244. 7. After hearing the Learned counsel for the parties on the question of waiver, Learned Tribunal by second impugned order dated 17th April 2017 dismissed the application for waiver preferr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dial mechanism that comes into play when the events contemplated by Section 241 arises qua persons specified in the said Section and Section 244 stipulates the entitlement of such persons to approach the Tribunal. Therefore, these Sections are a self- contained code dealing with the subject of Oppression and Mismanagement. 11. In support of the contention, it was contended that the applications are for the separate classes of members to Section 244. Section 241(a) specifically mandates the protection of the rights and interests of the following: - a. Public interest; b. A member (being the Petitioner before the Tribunal); c. Another member or members; and d. The company itself. 12. On the other hand, according to him, Section 241(b) mandates the protection of the interests of the following, as a result of a material change in management/control of the company, an alteration in the Board of Directors or in the ownership of the Company's shares: - a. The Company; b. The members of the Company; or c. Any class of members of the Company. Section 244, on the other hand, while providing for the right to apply under section 241, creates a different s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the Legislature by the use of the term issued share capital was an aggregate of the equity and preference share capital of a company, the Legislature would have provided some kind of an indicator with respect to this. This is more so, when in just the preceding words, while referring to the strength of members to qualify as being eligible, the Legislature thought it fit to use total , while dealing with not less than one-tenth of the total number of its members. . therefore, it has to be presumed that the Legislature, being conscious of the different kinds of share capital, chose to not describe the issued share capital as being, the total , the sum or even the whole of the issued share capital of the company. If it was the intention of the Legislature to make the terms issued share capital as used in Section 43 applicable to Section 244, in the absence of a definition to the said terms, the Legislature would have given some indication in this regard. Such drafting cannot be referred to as simply an omission on the part of the Legislature, owing to the fact, that the very same Legislature makes use of the very same term, where it thought fit to do so. 18. Refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a separate class not only with respect to identity in the Company (as contained in the Register of Members as also Section 48, pertaining to the variation of shareholders' rights) but also with respect to the actual running of the operations of the Company (as contained in Section 47). Such treatment of unequal's as equals would as well offend the doctrine of equality as enshrined in Article 14 of the Constitution. An interpretation that would run against such principles of equality by treating unlikes as likes ought to be eschewed. 21. It was also submitted that preference and Equity shares are mutually exclusive classes. Preference being debt not intended to be part of issued share capital in Section 244 when a class has to be restricted, the principle has to be founded on homogeneity and commonality of interest. It must be seen that dissimilar classes with conflicting interests are not put in one compartment to avoid any kind of injustice. 22. Reliance was also placed on decision of Hon'ble Supreme Court in Infrastructure Leasing and Financial Services Limited v. BPL Limited - 2015(3) SCC 363, wherein Hon'ble Supreme Court noticed the concept of class ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m in others provisions of the Statute:- i. Section 43-share capital ii. Section 49-Call on shares of same class to be made on uniform basis iii. Section 92- Annual Return iv. Section 117- Resolutions and Agreements to be filed v. Section 230-234-Power to compromise and make arrangements. 24. According to learned counsel for the appellants there will be a position of absurdity if the Tribunals' interpretation of issued share capital used in Section 244 is accepted, it would lead to an absurd situation, in as much as, if such yardstick is used for the Respondent No.1 Company it would require a holding of at least 81% in the equity of a company to be eligible to maintain an action under Section 241. When the very section is to protect against oppression and/or mismanagement of a minority and as per the amended Section 241(1) (b), class of members has been specifically included the intent would clearly be to protect even such class and a meaning cannot be attributed to Section 244 which would militate totally there against. In the instant case, even the majority equity shareholders who holds 66% of the equity would not be eligible to maintain such an action. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the intention of the legislature must be given effect to as expressed in the language of the provisions. Where the language is explicit, no problem arises. Even where the usual meaning of a language falls short of the whole object of the legislature, a more extended meaning may be given to the words if they are fairly susceptible of it. The construction must not, however, be strained to include cases plainly omitted from the natural meaning of the words. It has been said very often that it is the duty of a judge to make such construction of a statute as shall suppress the mischief and advance the remedy (see in this connection the observations of Maxwell on The Interpretation of Statutes, 10th Edn., p. 68, under the heading Beneficial Construction ). If we keep in mind the purpose of these regulations and the object of these regulations, i.e. regulating the building construction in a municipal statute, it appears that it will be anomalous result if it be said that if a building is constructed illegally or in an unauthorised manner, action can only be taken against the person who is doing the unauthorised act or illegal act but after the construction of the building is passed over ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... convenience is to be caused that interpretation has to be avoided. Cases of individual hardship or injustice have no bearing for enacting the natural construction. The relevant discussion at pp. 132-33 and 140-42 is extracted hereunder: (a) Hardship, inconvenience, injustice, absurdity and anomaly to be avoided In selecting out of different interpretations 'the court will adopt that which is just, reasonable and sensible rather than that which is none of those things' (Holmes v. Bradfield Rural District Council [(1949) 2 KB 1: (1949) 1 All ER 381 (DC)] , All ER p. 384) as it may be presumed 'that the legislature should have used the word in that interpretation which least offends our sense of justice'. (Simms v. Registrar of Probates [1900 AC 323 (PC)] , AC p. 335.) If the grammatical construction leads to some absurdity or some repugnance or inconsistency with the rest of the instrument, it may be departed from so as to avoid that absurdity and inconsistency. (Grey v. Pearson [(1857) LR 6 HL Cas 61 : (1843-60) All ER Rep 21] , HLC p. 106.) Similarly, a construction giving rise to anomalies should be avoided xxx . 31. In the said case, the Hon'bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a Class of members as being a separate category. 34. According to the Learned Senior Counsel for the Appellants, Section 241 is a beneficial provision included in the interest equity, justice and good conscience in order to protect the minority shareholders of a company. It is imperative that such beneficial provision be given a liberal construction and not be restricted to eliminate a class that would otherwise fall with the category of classes to be protected under such beneficial legislation/provision. 35. It was further contended that the decision of 'Northern Projects Limited. v. Blue Coast Hotels and Resorts Ltd. and Others' relied upon by Tribunal have to be read in conjunction with the earlier Act (Companies Act 1956) and its Sections bearing in mind that new Act (Companies Act 2013) including Section 244, has not been considered. Even if the plain meaning of Issued Share Capital in Section 244 is accepted to be inclusive both classes of share capital and interpretation ought to be given that would render statute workable and would not frustrate the very provision. Learned counsel also distinguished the judgement relied upon by the Tribunal while passing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lus preference) with an aggregate face value of ₹ 335 crores, the Appellants collectively hold only equity shares with an aggregate value of ₹ 7.44 crores, which translates into only 2.17% of the total issued share capital. Thus, according to Respondents, ex-facie, the Appellants do not meet any of the threshold requirements under Section 244(1) of the 2013. 41. Mr. Abhishek Manu Singhvi, Learned Senior Counsel for the 1st Respondent contended that the Appellants made a bold and misleading assertion that they were fully entitled to maintain the Company Petition since they held 18.37% equity shares of the 1st Respondent Company. This was averred despite the fact that the Appellants held only 2.17% of the issued share capital of the 1st Respondent Company. According to him, the argument now being made that the express class of members occurring in Section 244(1) was not even urged in the Petition. 42. It was also submitted that the respondents in their replies pointed out that appellants were holding much less than 1/10th of the issued share capital of the 1st Respondent Company. Faced with this quandary, the Appellants called upon the Tribunal to construe Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h equity and preference share capital. 47. According to Learned Senior Counsel for the 1st Respondent, the stand of the appellants that the phrase class of members in Section 241(1)(b) should be read into Section 244(1) of Act 2013 is fully untenable. 48. It was also submitted that wherever the parliament thought it fit to refer to class or issued equity share capital , it has done so expressly. For instance, Section 236 of Act 2013 which uses the phrase issued equity share capital in the context of purchase of minority shareholding. Another example is Section 48 of the 2013 Act which pertains to variation of rights of different classes of shareholders and employs the expression issued shares of that class . 49. Reliance was placed on the decision of Hon'ble Supreme Court in Employees State Insurance Corporation v. TELCO, [1975] 2 SCC 835 . 50. Learned Senior Counsel also contended that if appellants' interpretation is accepted, it would wreak havoc and would be akin to driving a coach. 51. According to respondents' language of Section 244 being clear and unambiguous, the rule of literal interpretation should be applicable to its interpretation. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioner of oppressive to a member other than the petitioner, who may belong to a class of a member, to which the petitioner does not belong; The Appellants have not indicated what the relevant issued share capital will be in each of these cases. Indeed, they cannot as the intention of the legislature and the words of Section 244 of the 2013 Act does not suggest that issued share capital would vary on a case to case basis. (ii) The inspiration on the part of the Appellants to suggest such a construction is based on the expression any class of members appearing in the latter half of Section 241 (1)(b) of the 2013 Act. This argument fails to take note of the fact that Section 241 (1)(a) of the 2013 Act does not contain the expression any class of members . Both under Section 241(1) (a) (b), the eligibility criteria is the same i.e., the criteria prescribed under Section 244 of the 2013 Act. That being the case, the expression class of members cannot have any effect on the construction of the expression issued share capital occurring in Section 244(1) of the 2013 Act. 56. According to him Section 241 of the 2013 Act gives locus to a member make a complaint to the National ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f apply to the Tribunal for an order under this Chapter. 59. From sub-section (1) of Section 241 it is clear that any member of a company who complains of 'Oppression and Mismanagement' may apply to the Tribunal, provided such member has a right to apply under Section 244, for an order under the said Chapter, which reads as follows: - Section 244--(1) The following members of a company shall have the right to apply under section 241, namely: - (a) in the case of a company having a share capital, not less than one hundred members of the company or not less than one-tenth of the total number of its members, whichever is less, or any member or members holding not less than one-tenth of the issued share capital of the company, subject to the condition that the applicant or applicants has or have paid all calls and other sums due on his or their shares; (b) in the case of a company not having a share capital, not less than one-fifth of the total number of its members: Provided that the Tribunal may, on an application made to it in this behalf, waive all or any of the requirements specified in clause (a) or clause (b) so as to enable the members to apply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e seen from a different perspective as well- breaking section 241(1)(b) in two parts. In the first part, class of shareholders has been used to denote the entities by whom or in whose interest, the change in management or control is being effected. This bears no connection with the eligibility test in Section 244(1) of the 2013 Act. The second reference to the expression class of members is found in the latter part fo the provision in the context of the entity which is likely to be affected or prejudiced by such change. The use of word 'class' here is to denote the group or commonality of shareholders who are being affected because of certain acts of mismanagement and oppression. Again, no causal link is drawn with the eligibility criteria. Consequently, it is clear that there is no correlation between the use of the expression class in Section 241(1)(b) and the eligibility requirements in Section 244(1) of the 2013 Act. 65. Even the core premise of Appellants' contention i.e if there is oppression against only one class of shareholders (preference or equity) shareholders of that class ought to be entitled to ventilate that particular class' grievance and f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... avoided because it may result in harsh consequences. It is only in case of ambiguity, the court may interpret the provision and held : 35. In a case where the statutory provision is plain and unambiguous, the court shall not interpret the same in a different manner, only because of harsh consequences arising therefrom. In E. Palanisamy v. Palanisamy [(2003) 1 SCC 123] a Division Bench of this Court observed: (SCC p. 127, para 5) The rent legislation is normally intended for the benefit of the tenants. At the same time, it is well settled that the benefits conferred on the tenants through the relevant statutes can be enjoyed only on the basis of strict compliance with the statutory provisions. Equitable consideration has no place in such matters. xx xx 37. The court's jurisdiction to interpret a statute can be invoked when the same is ambiguous. It is well known that in a given case the court can iron out the fabric but it cannot change the texture of the fabric. It cannot enlarge the scope of legislation or intention when the language of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... know v. Parson Tools and Plans, Kanpur- 1975(4) SCC 22', Hon'ble Apex Court noticed the rule of literal interpretation and held : 16. If the legislature wilfully omits to incorporate something of an analogous law in a subsequent statute, or even if there is a casus omissus in a statute, the language of which is otherwise plain and unambiguous, the Court is not competent to supply the omission by engrafting on it or introducing in it, under the guise of interpretation, by analogy or implication, something what it thinks to be a general principle of justice and equity. To do so would be entrenching upon the preserves of legislature [ At p. 65 in Prem Nath L. Ganesh v. Prem Nath L. Ram Nath, AIR 1963 Punj 62, Per Tek Chand, J.], the primary function of a Court of law being jus dicere and not jus dare. 23. We have said enough and we may say it again that where the legislature clearly declares its intent in the scheme and language of a statute, it is the duty of the Court to give full effect to the same without scanning its wisdom or policy, and without engrafting, adding or implying anything which is not congenial to or consistent with such expressed intent of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without any change while pari materia similar qualifying condition incorporated in Section 244(1). The locus/eligibility of the members who can raise such grievances, having remained constant since last 57 years, the mere change of subject matter of such complaint cannot give rise to a different interpretation of the provision. 80. If the argument advanced on behalf of the appellants that Issued Share Capital should be read as relevant issued and subscribed capital , it can be interpreted in different way, leading to ambiguity and absurdity, which interpretation is not permissible as it will cause mischief. 81. It is to be noticed that Issued Share Capital automatically means the Issued and Subscribed Share Capital . The provision of Section 244 also makes it clear that it should be a paid up share capital as applicants have to show that they have paid all calls and other sums due on their shares. If different meaning of Relevant Issued Share Capital given, then in that case, the persons having only equity shares will claim that it should be read as Issued Equity Share Capital and those who have only Preference Share Capital , they will claim to read it as Issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er class of shares, namely, equity shares. There must be two kinds of shares for one to be preference. This class is given preferential treatment over the other. Section 85 of the Act deals with kinds of share capital and sub-section (1) of section 85 defines preference share capital and sub-section (2) defines equity share capital. Sub-section (1)(a) of section 87 of the Act deals with voting rights of equity shareholders and sub-section (2)(b) deals with voting rights of preference shareholders. Having regard to the provisions of sections 85, 86 and 87 of the Act, the expression issued share capital in section 399(1) of the Act can only refer to and refer only to the share capital which could be issued, i.e., both equity and preference share capital and therefore the expression issued share capital refers to both preference and equity share capital of the company. In other words, these sections can be used as tools of interpretation of the said expression. 25. The expression issued share capital can have no doubt about it when considered in relation to other provisions of the Act. Inserting the word equity after the word issued and before the words share capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned Single Judge by recording the following observations: - The appellant's contention that only persons holding equity shares can be members of the Company in terms of Section 41(3) of the Act needs to be considered only to be rejected. As rightly pointed out on behalf of the Company Originally Section 41 of the Act provided for two categories of members, namely a person who is a subscriber to the memorandum of association in terms of sub-section (1) of Section 41 and secondly a person whose name is entered in the register of members in terms of Section 4192) of the Act. As rightly pointed out on behalf of the Company it appears that sub-section (3) was brought on the Statute book w.e.f. 20.9.1995 to meet the requirements of the equity shareholders holding shares in the electronic form and thereby a third category was added by the introduction of the Depositors Act, 1996. As rightly pointed out on behalf of the Company sub-section (3) of Section 41 of the Act specifically mentions shares in the electronic form and therefore any reliance placed on the said sub-section to buttress the case of the Appellant appears to be erroneous, misleading and legally incorrect. As righ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r under challenge does not call for interference under Article 136 of the Constitution. The special leave petition is accordingly dismissed. 86. The reasons assigned by Hon'ble Supreme Court, not only constitute the declaration of law under Article 141 of the Constitution of India but is also binding on all courts, including this Appellate Tribunal. 87. From the aforesaid discussion, while we hold that the expression Issued Share Capital as mentioned in Section 244(1) of the Companies Act, 2013 only refer to both 'Equity Share' and Preferential Share Capital of the company and similar finding having given by the Tribunal, we uphold the order dated 16th March, 2017. 88. As admittedly, the Appellants have less than 1/10th of the Issued Share Capital of the company (2.17%), we hold that the Appellants do not qualify under Section 244(1) to file a petition under Section 241 of the Companies Act, 2013 and the petition without waiver, at their instance is not maintainable. 89. In absence of any merit, we dismiss Company Appeal (AT) No. 133 and affirm the decision of the Tribunal, in so far as it relates to maintainability of the petition under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent rights and obligations from the preference shareholders. While so, the substantial interest of the Appellants in this distinct class of members, which class is vitally interested in the subject litigation, whose issues may not be of any relevance to the separate class of preference shareholders, would be the most relevant consideration. The Appellants holding 18.37% of the equity shareholding having a present market value of more than ₹ 1 lakh crores would have a substantial interest in the Company and not an insignificant one. 95. It was further submitted that it is not for the Tribunal to go into the relative merits and demerits since to do so would be a decision on the merits of the case whereas the Tribunal is at present, is only considering the question as to whether the case ought to be heard at the behest of the Appellants. If the decision of the Tribunal amounts to deciding the merits of the case, then the merits ought to be gone into in detail. 96. According to appellants, if the waiver application is sought to be rejected on the ground that it does not make out a case under Section 241, then the only test to be applied for rejection at this stage would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e negative prescriptions to evaluate if, in light of settled law, the allegations in the petition disclose a cause of action falling within the scope of Section 241. For convenience, these tests can be referred to as 'exclusionary tests' or 'cause of action' tests as they would exclude cases which do not disclose a cause of action. (b) Apart from not being hit by any exclusionary tests, the petition should also meet certain positive prescriptions, or inclusionary tests, which merit the grant of the special privilege of waiver to the petitioners. 101. Exclusionary Tests, according to Learned Senior Counsel for the 1st Respondent company are as follows: - The first enquiry should be to see if the case made out in the petition falls within the contours of Section 241. A case which does not ex facie disclose a cause of action under Section 241 cannot merit the grant of waiver. For this purpose, the Tribunal should examine whether the allegations in the petition: (a) pertain to the affairs of the company with respect to which the petition has been filed? (b) do not concern continuing acts of oppression but instead call into question 'past and concluded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e complaining shareholder would be entirely remediless if waiver is not granted. In other words, the complaining shareholder(s) has no forum before which he could agitate his grievances apart from the Tribunal by way of a petition under Section 241. In particular, this would be in cases where it is only the Tribunal which can grant the effective remedy to the petitioners such as reduction of share capital consequent to a buy-back of securities by the company. 103. It was submitted that a plain reading of Section 430 shows that it only bars the jurisdiction of civil courts in respect of suits or other proceedings that the Tribunal or this Hon'ble Appellate Tribunal are empowered to determine by or under the Act. There is nothing in the language of Section 430 which is even remotely suggestive of the fact that a litigant who does not meet the qualifying eligibility criteria under Section 244(1) or a member whose application for waiver has been rejected is altogether precluded from agitating his grievance before ordinary civil courts. 104. According to Learned Senior Counsel, the legislative intent seems to be precisely to the contrary, i.e. members satisfying the eligibil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that the Petition makes substantive allegations around the purported illegal removal of 11th Respondent as the Chairman of Tata sons and thereafter as a director. It is a settled principle of law that directorial complaints cannot constitute a cause of action under under Section 241 of the Act. Reliance was also placed on the decision of Hon'ble Supreme Court in S.P.Jain v. Kalinga Tubes , (1965) 2 SCR 720 and Hanuman Prasad Bagri v.Bagri Cereals Private Limited, (2001) 4 SCC 420. (iv) The Appellants' conduct disentitles them from seeking relief under the equitable jurisdiction of Section 241 It was submitted that the Appellants are companies which are controlled by 11th Respondent and his family. The timing of the filing of the Petition after 11th Respondent's removal as Executive Chairman of Tata sons and his resignation as a director from certain other companies in which Tata Sons is a shareholder, leaves no iota of doubt that the Petition is not a genuine shareholder action. In fact, the Petition is a vindictive action filed to espouse 11th Respondent's cause after he was removed as Executive Chairman. This action has been filed to get even with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... positive prescriptions or the 'inclusionary tests' which would merit the grant of waiver. From bare averments, there is nothing to show even remotely that the Petition concerns a supervening national or larger public interest. The gravity of the consequences which have been explicitly explained to invoke it as a ground for waiver, except a mere bald pleading, nothing has been pleaded and pleading is simply inadequate. 107. Learned Senior Counsel for the 1st Respondent while submitted that Section 241(1)(b) does not form the subject matter of the Petition. It was also contended that the impugned order in so far it relates to waiver is a discretionary order and ought not to be set aside unless perverse, arbitrary or capricious. Reliance was placed on decision of Hon'ble Supreme Court in Wander Limited and Anr. v. Sntox India Private Limited [1990]Supp. SCC 727. Skyline Education Institute India (Private) Limited v. S.L.Vasani [2010] 2, SCC 142, Mohd. Mehtab Khan v. Khushnuma Ibrahim Khan [2013] 9 SCC 221 and Bed Raj v. State of Uttar Pradesh AIR 1955 SC 778. 108. Mr. Mukul Rohtagi, Learned Senior Counsel for the 2nd Respondent submitted that a bare reading ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e allegations made in the Petition would demonstrate that the same are essentially in the nature of a personal onslaught only against 2nd Respondent. According to him, shareholders of a company cannot be permitted to initiate proceedings for feeding private grudges of warring groups. Reliance was made to the judgement of Hon'ble Orissa High Court in N.K.Mohapatra v. State of Orissa , AIR 1994 Ori 301. 112. It was also contended that Appellants have not come to the court with clean hands. The only real cause of action for filing the Petition is the removal of 11th Respondent as the Chairman of 1st Respondent Company. The Petition is nothing but a proxy litigation at the behest of 11th Respondent to agitate his own personal grievance against 2nd Respondent and to malign the reputation of 1st Respondent, where 11th Respondent chose not to become the Petitioner. Instead, the Appellant companies are being used as a front solely for and on behalf of 11th Respondent. 113. It was further submitted that the allegations not pertaining to the Corus acquisition, the Nano Project, removal of 11th Respondent as director from various operating companies, transactions with Mr. Sivasanka ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inciples analogous thereto; (j) The disputes raised and the subject matter thereof are ex-facie barred by some other law and falls within the exclusive domain of some other court/tribunal or forum; 117. In so far as Inclusionary factors (Qualification) is concerned, it was contended that the Onus being on the Applicants to show from their application and/or the petition that the same makes out strong grounds/a compelling/strong prima facie case which entitle them to a waiver. While exercising its discretion, the Tribunal may, inter alia, keep the following considerations in mind: - (a) The allegations made in the application/petition disclose: I. that it is not merely a personal dispute of a shareholder but the acts complained of are prejudicial to the interest of the company and interest of the public; and II. that it in the interest of the company and all its members to pursue the petition; and III. that to wind up the company would unfairly prejudice such member or members, but that otherwise the facts would justify the making of a winging-up order on the ground that it was just and equitable that the company should be wound up. (b) That the Applicant has no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Board of Directors of 1st Respondent. Thereby, the Trustees have complete control of affairs of 1st Respondent and thereby affairs of all other Tata Group Companies. 125. According to Learned Senior Counsel for the 11th Respondent, the removal of 11th Respondent as Executive Chairman is in direct conflict with Article 118, which requires a committee to be formed. This removal cannot be seen as some isolated act of oppression but is to be seen in the context of and attendant with the various other evidently oppressive action that are evident from the pleadings. 126. Therefore, this is not a directorial dispute about removal of a director, but an oppressive act involving a material change effect by way of removal of the Executive Chairman who was remedying and acting in the interests of 1st Respondent. 127. Further according to 11th Respondent, the Company Secretary of 1st Respondent (23rd Respondent) has admitted that no committee was formed for the removal of the Executive Chairman in terms of Article 118, vide his email dated November 12, 2016. This email also confirms that the Board of Directors of 1st Respondent neither sought nor were guided by any legal opinion on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h change, it is likely that the affairs of the company will be conducted in a manner prejudicial to its interests or its members or any class of members, may apply to the Tribunal, provided such member has a right to apply under section 244, for an order under this Chapter. 133. Sub-Section (2) of Section 241 empowers Central Government to apply, if it is of the opinion that the affairs of the company are being conducted in a manner prejudicial to public interest, which is as follows: (2) The Central Government, if it is of the opinion that the affairs of the company are being conducted in a manner prejudicial to public interest, it may itself apply to the Tribunal for an order under this Chapter. 134. Under sub-section (1) of Section 242, the Tribunal is empowered to pass order on any application made under section 241, as it thinks fit, with a view to bringing to an end the matters complained of, if it forms opinion in terms of clause (a) and (b) therein, and quoted below: - 242. Powers of Tribunal. ─(1) If, on any application made under section 241, the Tribunal is of the opinion- (a) that the company's affairs have been or are being conducte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xxx Provided that the Tribunal shall not grant leave under this clause unless notice of the intention to apply for leave has been served on the Central Government and that Government has been given a reasonable opportunity of being heard in the matter. 139. From the proviso to sub-section (1) of Section 243, it is clear that there is a provision to 'grant of Leave', as distinct from 'grant of waiver', as provided under proviso to sub-section (1) of Section 244, which reads as follows: - 244. Right to apply under section 241. ----(1) The following members of a company shall have the right to apply under Section 241, namely: - (a) in the case of a company having a share capital, not less than one hundred members of the company or not less than one-tenth of the total number of its members, whichever is less, or any member or members holding not less than one-tenth of the issued share capital of the company, subject to the condition that the applicant or applicants has or have paid all calls and other sums due on his or their shares; (b) in the case of a company not having a share capital, not less than one-fifth of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... merit of the case as may pleaded in the (proposed) application under Section 241. As it is dependent on merit of the case, we are of the view that the Tribunal cannot decide the question as to whether a prima facie case has been made out or not while deciding an application for 'waiver'. (ii) Limitation: The question whether an application under Section 241 is barred by limitation is a mixed question of law and facts. The same is also dependent on the cause of action and continuous cause of action, if any. As the merit of the case cannot be deliberated in an application for 'waiver' the Tribunal cannot decide the question whether (proposed) application under Section 241 is barred by limitation or not while deciding the application for 'waiver'. (iii) Allegation pertains to affairs of another Company This is a complicated issue dependent on facts of each case. The allegation of 'oppression and mismanagement' pertains to the related company or a third company is dependent on the facts of the case. For example, on bare perusal of the application, if it appears that the allegation relates to a third company then it is a different issue, bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Conduct of Applicant: The question of deciding the conduct of an applicants to disentitle them from seeking a relief is also based on merit of each case. Therefore, we hold that such issue cannot be decided by the Tribunal while deciding an application for 'waiver'. (vii) Acquiescence/Waiver/Estoppel The question whether (proposed) application under Section 241 is barred by acquiescence or waiver or estoppel is question of fact which can be decided only at the stage of hearing of application under Section 241. Therefore, we are of the view that such question cannot be decided by Tribunal while considering an application for 'waiver'. 145. For the aforesaid reasons we hold that the Tribunal while deciding an application for 'waiver' under proviso to sub-section (1) of Section 244 to enable the members to apply under Section 241 cannot decide the following issues: - (i) Merit of the case (ii) Issues dependent on merit based on claim and counter claim, such as: a. Whether a prima facie case has been made or not b. Whether the petition is barred by limitation, c. Whether it is a case of arbitration, d. Whether allegation relates to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Section 399 whereunder the Central Government was empowered to permit the ineligible member(s) to file an application for 'oppression and mismanagement' by its executive power. Under proviso to sub-section (1) of Section 244 now the Tribunal is required to decide the question whether application merits 'waiver' of all or any of the requirements as specified in clauses (a) and (b) of sub-section (1) of Section 244 to enable such member(s) to file application under Section 241. Such order of 'waiver' being judicial in nature, cannot be passed by Tribunal, in a capricious or arbitrary manner and can be passed only by a speaking and reasoned order after notice to the (proposed) respondent(s). The basic principle of justice delivery system is that a court or a Tribunal while passing an order is not only required to give good reason based on record/evidence but also required to show that after being satisfied itself the Court/Tribunal has passed such order. To form an opinion as to whether the application merits waiver, the Tribunal is not only required to form its opinion objectively, but also required to satisfy itself on the basis of pleadings/evidence on r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tribunal for forming opinion as to whether application merits 'waiver'. ALTERNATIVE REMEDY - SECTION 430 153. One of the question arises as to whether the appellants can avail a remedy in a suit before a Civil Court for alleged act of 'oppression and mismanagement' levelled against the respondents. 154. Section 430 bars Civil Court to entertain any suit or proceeding in respect of any matter which the Tribunal or the Appellate Tribunal is empowered to determine under the Companies Act or any other law for time being in force. The provision reads as follows: 430. Civil court not to have jurisdiction.─No Civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which the Tribunal or the Appellate Tribunal is empowered to determine by or under this Act or any other law for the time being in force and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act or any other law for the time being in force, by the Tribunal or the Appellate Tribunal 155. Section 241 empowers the Tribunal to entertain t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,13,067 3.37% 2. Sir Ratan Tata Trust 95,211 23.56% -0.00% 95,211 2.84% 3. JRD Tata Trust 16,200 4.01% -0.00% 16,200 0.48% 4. Tata Education Trust 15,075 3.73% -0.00% 15,075 0.45% 5. Tata Social Welfare Trust 15,075 3.73% -0.00% 15,075 0.45% 6. R D Tata Trust 8,838 2.19% -0.00% 8,838 0.26% 7. M.K. Tata Trust 2,421 0.60% -0.00% 2,421 0.07% 8. Sarvajanik Seva Trust 396 0.10% -0.00% 396 0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mr. Pallonji Shapoorji Mistry 108 0.03% -0.00% 108 0.00% 21. Mr. Cyrus Pallonji Mistry 0.00% 20,000 0.68% 20,000 0.60% 74,352 18.40% 20,000 0.68% 94,352 2.82% 160. From the aforesaid summary of shareholding we find that except Mr. Ratan Naval Tata (at serial no. 22) having issued shareholding of 31.43% and Mr. Narotam S. Sekhsaria (at serial no. 44), having 17.01% shareholding capital of the company, none of the 49 member(s) are eligible to file an application under Section 241, individually having less than 10% of the shareholding. 161. That means in the context of present case, except that the minority shareholders join together, i.e. either six in numbers or such numbers of members whose joint shareholding will come up to 10% of the issued share capital of the Company, which will be also not less than 3 to 4 members, none of the 49 shareholders can file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tata Group Companies, as named below. Thereby, the 1st respondent company has complete control over the decision making and affairs of all the Tata Group Companies, as apparent from the Article 121-A and quoted below:- 121-A. The following matters shall be resolved upon by the Board of Directors: ** ** ** (g) Any matter affecting the shareholding of the Tata Trusts in the Company or the rights conferred upon the Tata Trusts by the Articles of the Company or the shareholding of the Company in any Tata Company if not already approved as part of the annual business plan; (h) Exercise of the voting rights of the Company at the general meetings of any Tata Company, including the appointment of a representative of the Company under Section 113 (1) (a) of the Companies Act, 2013 in respect of a general meeting of any Tata Company and, in any matter concerning the raising of capital, incurring of debt and divesting or acquisition of any undertaking or bu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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