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2020 (1) TMI 433 - AT - Companies LawPrayer for amendment in the Judgment dated 18th December, 2019 - Conversion of Private Company into Public Company on the basis of average annual turnover - benefit under Section 43A (2A) of Companies Act - HELD THAT - Section 43A (2A) while empowers a 'Public Company' to become a 'Private Company' on or after commencement of the Companies (Amendment) Act, 2000 by informing the matter to the Registrar for substitution of the word 'private company' with the word 'public company' in the name of the company upon the register and certificate of incorporation issued to the company and its memorandum of association but under Section 43A (4) such 'private company' which has been made public company by virtue of the said provision, will continue to be a 'public company' until it has, with the approval of the Central Government and in accordance with the provisions of the said Act, again become a 'private company'. For the purpose of appreciation, in terms of Section 43A (4), as referred to by the Registrar of Companies, the 'Tata Sons Limited' which was a 'Private Company' has becomes a 'Public Company' by virtue of the provision aforesaid shall continue to be a public company, having not taken any approval from the Central Government and in accordance with the provisions of the said Companies (Amendment) Act, 2000 to become a 'Private Company'. n terms of Section 465 of the Companies Act, 2013, all provisions of the Companies Act, 1956 stand repealed except provisions of Part IX A of the Companies Act, 1956 which applies mutatis mutandis to a Producer Company in a manner as if the Companies Act, 1956 has not been repealed until a special Act is enacted for Producer Companies - Section 43A (2A) was inserted in the year 1975 in Companies Act, 1956 as amended in the year 2000 stood repealed by enactment of the Companies Act, 2013. In place of the old provision of Section 43A for 'conversion of the company' and 'conversion of Articles of Association', now Section 18 and Section 14 of the Companies Act, 2013 are applicable. The stand taken by Mr. Sanjay Shorey, Director Prosecution, Ministry of Corporate Affairs, who appeared on behalf of the Registrar of Companies, Mumbai that in absence of any prescription by the Central Government under any Rule in terms of Section 2(66), for the purpose of Section 2(68) ('private company'), the paid up share capital should be read as zero . However, such submission cannot be accepted as there cannot be a 'Private Company' or 'Public Company'. For the said reason, in amended Section 2(68), it is specifically mentioned that as may be prescribed by the Central Government (i.e. under the Rules in terms of Section 2(66)) - the prayer for amendment in the Judgment dated 18th December, 2019 is rejected. No ground is made out to amend the Judgment dated 18th December, 2019 in absence of any factual or legal error apparent on the body of the aforesaid Judgment - There is a typographical error at Paragraph 171 wherein un-amended Section 2(68) has wrongly been typed which has been ordered to be corrected. Application dismissed.
Issues Involved:
1. Legality of the conversion of 'Tata Sons Limited' from a 'Public Company' to a 'Private Company.' 2. Actions taken by the Registrar of Companies in relation to the conversion. 3. Compliance with Section 14 of the Companies Act, 2013. 4. Interpretation and applicability of Section 43A of the Companies Act, 1956. 5. Validity of the removal of Mr. Cyrus Pallonji Mistry as Executive Chairman. 6. Exercise of powers under Article 75 by the Board of Directors of 'Tata Sons Limited.' Detailed Analysis: 1. Legality of the Conversion of 'Tata Sons Limited' from 'Public Company' to 'Private Company': The Appellate Tribunal noted that 'Tata Sons Limited' was initially a 'Private Company' but became a deemed 'Public Company' under Section 43A (1A) of the Companies Act, 1956, effective from February 1, 1975. The Tribunal observed that the conversion back to a 'Private Company' was done hurriedly without following the legal procedure under Section 14 of the Companies Act, 2013. The Tribunal declared the conversion illegal, stating that it was prejudicial and oppressive to minority members and depositors. 2. Actions Taken by the Registrar of Companies: The Tribunal found that the Registrar of Companies acted against the provisions of Section 14 of the Companies Act, 2013, in converting 'Tata Sons Limited' back to a 'Private Company.' The Tribunal declared the actions of the Registrar illegal and ordered the company to be recorded as a 'Public Company.' The Registrar was directed to correct the records accordingly. 3. Compliance with Section 14 of the Companies Act, 2013: The Tribunal emphasized that the conversion of a company from a 'Public Company' to a 'Private Company' requires compliance with Section 14, which involves altering the articles by a special resolution and obtaining approval from the Tribunal (NCLT). It was noted that 'Tata Sons Limited' did not follow this procedure, rendering the conversion invalid. 4. Interpretation and Applicability of Section 43A of the Companies Act, 1956: The Tribunal discussed Section 43A (2A) and (4) of the Companies Act, 1956, which allowed a 'Public Company' to become a 'Private Company' with the approval of the Central Government. The Tribunal noted that 'Tata Sons Limited' did not obtain such approval, and therefore, it continued to be a 'Public Company.' The Tribunal also pointed out that Section 43A (2A) was repealed by the Companies Act, 2013, and replaced by Sections 18 and 14. 5. Validity of the Removal of Mr. Cyrus Pallonji Mistry as Executive Chairman: The Tribunal declared the removal of Mr. Cyrus Pallonji Mistry as Executive Chairman of 'Tata Sons Limited' illegal and set aside the proceedings of the Board of Directors' meeting held on October 24, 2016. Mr. Mistry was restored to his original position as Executive Chairman and Director of 'Tata Companies' for the rest of his tenure. 6. Exercise of Powers Under Article 75 by the Board of Directors: The Tribunal directed that the Board of Directors and shareholders of 'Tata Sons Limited' should not exercise their power under Article 75 against the appellants and other minority members, except in exceptional circumstances and in the interest of the company. Any exercise of such power should be preceded by recorded reasons and intimation to the affected shareholders. Conclusion: The Tribunal rejected the prayer for amendment in the Judgment dated December 18, 2019, and dismissed both Interlocutory Applications. The Tribunal clarified that there were no aspersions cast on the Registrar of Companies, Mumbai, and corrected a typographical error in Paragraph 171 of the Judgment.
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