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2017 (9) TMI 1500 - AT - Companies LawOppression & Mismanagement - maintainability of petition preferred by appellants under Sections 241 and 242 of the Companies Act - whether the appellants qualify the condition of holding minimum 1/10th of the Issued Share Capital of the 1st Respondent Company? - Proposition on behalf of the appellants on the issue of maintainability - application for waiver subject to the question whether (proposed) application under Section 241 relates to oppression and mismanagement Held 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. 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 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 company. On the other hand, the value of the preference share holding would be only ₹ 291 crores, who do not carry voting rights other than in the exceptional circumstances found in Section 47(2) of the Companies Act 2013. The interest of the appellants to the extent of one lakh crores of the overall value of the company whose valuation being in the region is about six lakhs crores, is another factor, which we have kept in our mind to answer the application for waiver in favour of the appellants. Prima facie, it appears that with regard to affairs of the other Tata Group Companies, namely Tata Steel Limited, Tata Motors Limited, Tata Teleservices Limited, The Tata Power Company Limited, Air Asia (India) etc., the 1st respondent company has some control and therefore, at the stage of waiver it cannot be held that the matter relates to other companies or third company. This is another exceptional factor, we have noticed in this case, which merit waiver in favour of appellants to file an application under Section 241. In so far as (proposed) petition under Section 241 is concerned, the plain reading of the same will show that the allegations relate to oppression and mismanagement ; it cannot be stated to be a frivolous application. We find that some of the allegations as made by appellants and highlighted by the learned counsel for the 11th respondent as noticed in the preceding paragraphs, are of recent year 2016. We are not expressing any opinion with regard to merit of such allegation, but have only noticed the allegations. Taking into consideration the aforesaid facts and exceptional circumstances of the case as apparent from plain reading of the (proposed) application and as some of them relate to oppression and mismanagement , qua 1st respondent company and its member(s), we are of the view that the appellants have made out a case for waiver to enable them to apply under Section 241. The Tribunal by impugned judgement having failed to notice the aforesaid facts and factors, as it decided the application for waiver taking into consideration the prima facie case / merit of the case, the said order cannot be upheld. We, accordingly, set aside the impugned order passed by the Tribunal and grant waiver to appellants to enable them to file application under Section 241. The case is remitted to the Tribunal to register the (proposed) 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.
Issues Involved:
1. Maintainability of the petition under Sections 241 and 242 of the Companies Act, 2013. 2. Waiver of the requirements specified in Section 244(1) of the Companies Act, 2013. Detailed Analysis: 1. Maintainability of the petition under Sections 241 and 242 of the Companies Act, 2013: The appellants, shareholders of Tata Sons Limited, filed a petition alleging 'Oppression & Mismanagement' under Sections 241, 242, and 244 of the Companies Act, 2013. The Tribunal held that the petition was not maintainable as the appellants did not meet the qualification under Section 244, holding less than 1/10th of the 'Issued Share Capital' of the company. The key question was whether the term "issued share capital" in Section 244 includes both equity and preference share capital. The Tribunal and the Appellate Tribunal upheld that "issued share capital" refers to both equity and preference share capital, aligning with the interpretation in "Northern Projects Ltd. v. Blue Coast Hotels and Resorts Ltd." and affirmed by the Supreme Court. Thus, the appellants, holding only 2.17% of the total issued share capital, did not qualify to file the petition. 2. Waiver of the requirements specified in Section 244(1) of the Companies Act, 2013: The appellants sought waiver under the proviso to Section 244(1), which the Tribunal initially dismissed. The Appellate Tribunal held that while deciding an application for waiver, the Tribunal should not delve into the merits of the case but should consider whether the application pertains to 'oppression and mismanagement' and if exceptional circumstances exist. The factors to be considered include: - Whether the applicants are members of the company. - Whether the application pertains to 'oppression and mismanagement.' - Whether similar allegations were previously decided. - Whether there are exceptional circumstances justifying the waiver. The Appellate Tribunal found that: - The appellants, holding significant equity interests, had substantial stakes in the company. - The Articles of Association of Tata Sons Limited provided the company control over other Tata Group companies. - The allegations in the proposed application were related to 'oppression and mismanagement' and were not frivolous. Given these factors, the Appellate Tribunal granted the waiver, allowing the appellants to file the application under Section 241. The Tribunal's decision to deny the waiver was set aside, and the case was remitted to the Tribunal to register and decide the application on merit within three months. Conclusion: The Appellate Tribunal dismissed the appeal regarding the maintainability of the petition but allowed the appeal concerning the waiver, directing the Tribunal to admit and decide the application on merit.
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