MUMBAI: The Bombay High Court on Monday quashed proceedings initiated by a local court against Tata Sons' former chairman Ratan Tata, its current chief N Chandrasekaran and eight directors in a criminal defamation case filed by Nusli Wadia.
Last year on December 15, a magistrate court in the city had issued notices to Ratan Tata and the others in the criminal defamation case filed by Wadia.
Wadia filed the defamation case in 2016 after he was voted out of the boards of some Tata Group companies, and claimed that Tata and others made defamatory statements against him after they removed Cyrus Mistry on October 24, 2016 as the group chairman of Tata Sons.
Tata and others then approached the high court seeking to quash and set aside the proceedings initiated against them.
A division bench of Justices Ranjit More and Bharati Dangre on Monday quashed the proceedings, noting that prima facie there was no case of defamation made out.
The bench said there was complete non-application of mind by the magistrate while issuing process (notices) against the petitioners.
"The magistrate has committed haste in issuing the process without conducting an inquiry into the allegation of the complainant, considering other relevant material, to satisfy himself whether there was sufficient ground for initiating the proceedings against the accused," the court said.
"We are satisfied there is no prima facie case of defamation in the present case as there was no intent on the part of the petitioners to cause harm to the reputation of the respondent nor can we discern any actual harm caused to his reputation since the element of mens rea (intention) is absent," the court said.
The magistrate, on December 15 last year, had recorded a finding that the complainant (Wadia) has made out a case against the accused persons and hence issued process (notice) against them for offences punishable under Section 500 (defamation) of the Indian Penal Code.
The magistrate's order noted that the allegations were serious in nature and that the statements made by the accused persons were derogatory in nature.
In its order on Monday, the high court bench noted that a director of a company is expected to not involve himself in a situation in which he may have a direct or indirect interest that conflicts or possibly may conflict with the interest of the company.
"If the company is of the opinion that the said director has acted in such a manner and has issued a statement which is contrary to the interest of the company and may cause harm and uses it as a ground for his removal then we are of the view that the action is in exercise of the provision of the Companies Act, the court said.
It said the Act contemplates the special notice dated November 10, 2016 that was circulated to the shareholders of the relevant Tata companies must be accompanied by a statement of information and facts that would enable the members to understand the meaning, scope and implication of the business to be transacted in the meeting and to take decision thereof.
"The special notices were prepared and submitted in the name of Tata Sons and petitioners being directors or officers of the group cannot be held to be vicariously liable and no malice can be attributed to the petitioners since the power under Section 169 of the Companies Act has been exercised by Tata Sons Ltd, a corporate entity," the court said.
"We, therefore, do not find any justification in the metropolitan magistrate issuing process to the petitioners and holding that the imputation contained in the special notice is per se defamatory," the bench said.
The court further held that the special notice was only limited to the Board of Directors of the holding company and the shareholders of these companies, and hence it cannot be said that it was widely circulated in public.