MUMBAI: In a relief to Cyrus Mistry and family firms, the National Company Law Appellate Tribunal (NCLAT) on Friday asked Tata Sons not to force the former to sell their shares till further notice.
The Bench said it would decide over the issue of conversion of Tata Sons to a private company later during the pendency of appeal. Mistry and firms have been seeking status quo and they cannot be forced to sell shares, the Bench said.
Last year, Tata Sons converted itself from a public limited entity into a private firm, limiting Mistry and family firm’s ability to sell stakes to outsiders. A public limited company allows shareholders to legally sell stakes to anyone, but in private entities, shareholders cannot sell stakes to outsiders.
The matter is listed for next hearing on September 24, 2018. A two-member bench headed by NCLAT chairperson Justice S J Mukhopadhaya admitted Mistry’s appeal and directed Tata Sons and other respondents to file their reply within 10 days.
The National Company Law Tribunal (NCLT) bench had earlier ruled that Mistry was ousted as the Tata Sons’ Board and its majority shareholders lost confidence in him. It also held that the Board was competent to remove the executive chairperson of the company.
Under the Companies Act 2013, an order of NCLT can be challenged before the NCLAT. Mistry, who was the sixth chairman of Tata Sons, was ousted from the position in October 2016.
It may be noted that on August 14, NCLAT had reserved an order over the interim relief sought by Mistry and family, who challenged the NCLT order dismissing the plea challenging Mistry’s removal as chairman of Tata Sons.
Mistry, in his plea, had argued that his removal was not in accordance with the Companies Act and that there was rampant mismanagement of affairs across Tata Sons.
He also alleged that Tata Trust chairperson Ratan Tata and trustee N Soonawala interfered with the day-to-day operations of the group companies, they acted as shadow directors, and all of the above caused massive revenue loss for the group.
Hands bound
Last year, Tata Sons converted itself from a public limited entity into a private firm, limiting Mistry and family firm’s ability to sell stakes to outsiders.
A public limited company allows shareholders to legally sell stakes to anyone, but in private entities, shareholders cannot sell shares to outsiders.