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Relief to Tata Sons as NCLT rejects Mistry firms' contempt plea

The National Company Law Tribunal on Wednesday dismissed a contempt petition filed by two Cyrus Mistry family companies against Tata Sons and its directors, alleging violation of NCLT directives in taking steps to remove him from the board of Tata Sons.

The bench, however, gave liberty to the Mistry family companies to file an affidavit within three days on the issue of Tata Sons holding EGM on February 6. Pronouncing the operative part of the order, a division bench of NCLT said, “the contempt petition is dismissed.” The bench was of the view that the action of Tata Sons did not amount to contempt of court.

In their petition, Cyrus Investments Ltd and Sterling Investment had also sought injunction against the Tata Sons barring them from “convening or holding of the EGM scheduled for February 6, 2017 or any other date or from transacting any business thereat.”

Though the contempt plea was dismissed, the bench gave liberty to Mistry family companies to file an affidavit within three days on the issue of Tata Sons holding EGM on February 6.

Tata Sons was also asked to file a rejoinder, if any, three days thereafter. NCLT kept this matter for hearing on January 31 and February 1 when the main petition filed earlier by the two Mistry companies against Tata Sons would be heard.

The earlier petition had challenged Mistry’s removal as the chairman of Tata Sons alleging bad practices, oppression and mismanagement in the holding company.

NCLT, on December 22 last year had refused interim relief and posted the main petition for hearing on January 31 and February 1. Today, the tribunal clubbed the issue of holding EGM of February 6 along with the hearing of the main petition.

Meanwhile, the Mistry companies filed a contempt plea with NCLT against Tata Sons alleging that the respondents “committed a breach” of an NCLT order of December 22 by giving a special notice on January 3, 2017, for removal of Mistry as a director of the board of Tata Sons, “in the clear violation of the order”. It sought punishment for Ratan Tata, other directors of Tata Sons and trustees of Sir Ratan Tata Trust and Sir Dorabjee Trust — N A Soonawala, R K Krishnakumar and R Venkatramana — under the Contempt of Court Act which provides for simple imprisonment for a term which may extend to six months or fine of Rs 2,000 or both.

Last October, Tata Sons removed Mistry as its Chairman, nearly four years after he took over the reins of the over USD 100 billion salt-to-software conglomerate.

A Sundaram, counsel for Mistry’s family companies, had argued that removal of Mistry as a director of Tata Sons could have waited. He contended that by calling an EGM to remove Mistry as a director of the company, Tata Sons and others had committed direct violation of the December 22 Tribunal order and its action amounted to “wilful disobedience” of NCLT’s order in an earlier petition filed by Mistry’s family owned companies against Tata Sons.

Sundaram further argued that the move to remove Mistry was against the spirit of the NCLT order which had earlier stated that the respondents will not “initiate any action or proceedings over this subject matter pending disposal of the company petition. The contempt petition contended that the move of Tata Sons to call an extraordinary general meeting on February 6 to remove Mistry as a director violates the undertaking given by its lawyers to NCLT which heard an earlier petition filed by the investment firms on December 22.

The lawyers had assured the Tribunal that no further action would be taken in this matter until the petition was finally heard and disposed of, said the contempt petition. Abhishek Manu Singhvi, counsel for Tata Sons, said the respondents — Tata Sons and its Directors — had not committed any contempt of NCLT by calling an EGM to remove Mistry. Singhvi had argued that Tata Sons had not given any specific undertaking to the Tribunal earlier that Mistry would not be removed as director from the company. Hence, there was no contempt committed by Tata Sons and others.

The Tata Sons’ lawyer further argued that there was nothing implicit in the order of NCLT of December 22 that Mistry would not be removed. He had said that Tata Sons had no option but to remove Mistry from the board because he violated his fiduciary duty to the share-holders by leaking confidential information which was damaging to Tata companies.

He argued that Tata Sons was seeking Mistry’s removal as a director as he was acting in a manner detrimental to the company. However, the NCLT dismissed the contempt petition of Mistry’s family owned companies, saying it does not amount to contempt of court.