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TMI Blog2017 (9) TMI 1500X X X X Extracts X X X X X X X X Extracts X X X X ..... ates, Mr. S.N. Mookherjee, Senior Advocate with Mr. Dhruv Dewan, Mr. Nitesh Jain, Mr. Sayak Maity, Mr Arjun Sharma, Mr. Rohan Batra, Mr. Kostubh Devnani and Ms. Reena Choudhary, Advocates, Mr. Sandeep Sethi, Senior Advocate with Mr. Nikhil Rohatgi and Mr. Rajiv Kumar, Advocates, Mr. Mohan Parasaran, Senior Advocate with Mr. Saswat Patnaik, Mr. Aditya Panda, Mr. Ashwin Kumar D.S. and Ms. Aditi Dani, Advocates JUDGMENT SUDHANSU JYOTI MUKHOPADHAYA, J. This common judgement disposes of two appeals against two different orders, passed in one Company Petition. 2. The appellants Cyrus Investments Pvt. Ltd. and Sterling Investment Corporate Pvt. Ltd., both shareholders of 1st Respondent Company - Tata Sons Limited, preferred Company Petition No. 82 of 2016 before the National Company Law Tribunal, Mumbai (hereinafter referred to as 'Tribunal') under Sections 241, 242 and 244 of the Companies Act, 2013 alleging continuing act of 'Oppression & Mismanagement' of members of 1st Respondent along with an application seeking Interim Relief. 3. On 22nd December 2016, the Tribunal passed a consent order. During the pendency of the same, the 1st Respondent issued notice on 5th J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pril 2017 dismissed the application for waiver preferred by appellants and, thereby dismissed the Company Petition. Against the orders dated 6th March 2017 and 17th April 2017, these respective appeals have been preferred. 8. The question for determination in these appeals are:- (a) whether the petition preferred by appellants under Sections 241 and 242 of the Companies Act is maintainable? In other words, whether the appellants qualify the condition of holding minimum 1/10th of the 'Issued Share Capital' of the 1st Respondent Company, and (b) In case the 1st question is decided in negative against the appellants, then whether the appellants have made out a case of waiver of all or any or the requirements specified in Clause 1(a) of Section 244 so as to enable the appellants (the members) to apply under Section 241. Proposition on behalf of the appellants on the issue of maintainability:- 9. According to Mr. Sundaram Learned Senior Counsel for the Appellant, the Companies Act, 2013, itself has created and recognises classes of members. It has in this regard also made significant departures from the Companies Act, 1956. The relevant Sections that clearly recognize clas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 241, creates a different set of class of members, as enumerated herein below: - a. Not less than one hundred members of the company; b. Not less than one- tenth of the total number of members; and c. Any member or members holding not less than one-tenth of the issued share capital of the company. 13. Therefore, according to Learned Counsel for the appellants, the words "share capital" as found in Section 244, would have to be read in conjunction with Section 241, and thus the reference to "share capital" in Section 244 ought to be read qua the "class of members" sought to be protected by the Statute, under section 241. Moreso, when different classes of members are recognized by the Companies Act, 2013, inter alia in Chapter IV which deals with share capital. Therefore, (a) and (b) looks are the member(s) or the holder of the share but for (c) the relevance is the nature of the holding. 14. According to Learned Senior counsel, the reference to "Issued share capital" in Section 244 has to only refer to the "relevant share capital" otherwise it would lead to an absurdity that holder of shares who are completely disinterested in an action, or even have a conflicting interest t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18. Referring to Section 43 which relates to 'Kinds of Share Capital' with Equity and Preference, Section 47 which deals with voting rights of two classes of shareholders, Section 48 which relates to variation of shareholders' rights and Section 49 'Calls on shares of same class too be made on uniform basis", it was submitted that unlike Section 87 of the Companies Act 1956, which restrained the voting rights of equity shareholders to equity share capital and a preference shareholders to preference share capital. It was contended that Section 47 of the Act 2013, grants the right to vote on every resolution placed before the company. The voting rights of a preference shareholders continued to be restrained to those resolutions placed before the company which directly affect the rights attached to such preference shares, except in the case of default by the company in payment of dividends as enumerated in second proviso. 19. In support of the contention that different meaning of same expression expressed in different sections cannot be given, Learned Senior Counsel for the appellants relied on decision of Hon'ble Supreme Court in "Kaviraj Pandit Durga Dutt Shyar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as:- "30. delineating with the concept of class, referred to Palmer's Treties on Company Law, observed: - "What constitutes a class The court does not itself consider at this point what classes of creditors or members should be made parties to the Scheme. This is for the company to decide, in accordance with what the Scheme purports to achieve. The application for an order for meetings is a preliminary step, the applicant taking the risk that the classes which are fixed by the Judge, usually on the applicant's request, are sufficient for the ultimate purpose of the section, the risk being that if in the result, and we emphasise the words 'in the result', they reveal inadequacies, the Scheme will not be approved. If e.g. rights of ordinary shareholders are to be altered, but those of preference shares are not touched, a meeting of ordinary shareholders will be necessary but not of preference shareholders. If there are different groups within a class the interests of which are different from the rest of the class, or which are to be treated differently under the Scheme, such groups must be treated as separate class for the purpose of the Scheme. Moreover, when t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ended that the purpose of Section 244 being to ensure that speculative actions of an insignificant percentage of shareholders are discouraged and thereby stop mischievous litigation, it is relevant that in the Respondent No.1 company, the valuation of the company being in the region of at least 6 lakh crores, the interest of the Petitioners in the overall value of the Company would be over 1 lac crores. The value of the preference shareholding would only be Rs. 291 cores and not to carry voting rights other than in the exceptional circumstances found in Section 47(2), of the 2013 Act. 26. According to appellants, a construction that results in hardship, serious inconvenience, injustice, absurdity or anomaly or which leads to inconsistency or uncertainty and friction in the system which the Statute purports to regulate has to be rejected and preference should be given to that constructions which avoids such results. 27. In support of the contention, reliance was placed in "Surjit Singh Kalra v. Union of India and Another - [1991] 2 SCC 87" wherein Hon'ble Supreme Court held :- "19. For the above reasons, we hold that the expression "goods" occurring in the words "for use by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uilding enjoys immunity from any action in respect of the same. That it appears, could not be a proper construction particularly in this case in view of the specific language used in the latter part of sub-section (1) of Section 478 of the Act set out hereinbefore. Keeping in background the facts of this case and the said provisions, in our opinion, the action taken by the Corporation was warranted by the provisions of the Act. Therefore it cannot be said that the notice issued by the Municipal Corporation was unauthorised or illegal. In that view of the matter, the judgment and order of the High Court of Gujarat impugned in this case must be set aside on this aspect of the matter and the appeal is thus allowed and the respondent's suit dismissed. We express no opinion on the other point of delegation. The parties will bear, in the facts and circumstances of the case, their own costs throughout." 29. Hon'ble Supreme Court decision in "Krishan Kumar v. State of Rajasthan and Others, [1991] 4 SCC 258"was referred to suggest that new scheme by reference to clause as brought into section 241 cannot be ignored as an insignificant change. 30. For the purpose of interpretation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enactment, court will avoid construction which is unworkable or impracticable, inconvenient, anomalous or illogical, as noticed below : "35.Bennion on Statutory Interpretation has mentioned law to the same effect under Section 312 and has observed that there is a presumption that absurd result is not intended and in Section 314 it has been observed that the court has to avoid an inconvenient result while interpreting a provision. It was stated that it can be presumed that Parliament intends that while construing an enactment the court will avoid a construction that is unworkable or impracticable, inconvenient, anomalous or illogical as the same is unlikely to be intended by Parliament. In Rosali V. v. TAICO Bank [(2009) 17 SCC 690 : (2011) 2 SCC (Civ) 626] , this Court referring to Halsbury's common sense construction rule held that it is a well-settled principle of law that common sense construction rule should be taken recourse in certain cases." 32. Therefore, according to Learned counsel for the appellants for harmonious construction of Sections 241 and 244 will need to be read together and are not mutually exclusive inasmuch as though conditions and parameters as contai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... except 11th Respondent) 36. On behalf of the respondents, the main argument was advanced by Mr. Abhishekh Manu Singhvi, Senior Advocate on behalf of the 1st Respondent Company - Tata Sons Limited. 37. Referring to Section 241 of Companies Act 2013, Learned Senior Counsel submitted that in the case of a company having share capital, the following three categories of members have the right to approach the NCLT for the purpose of making an application under Section 241 of the 2013 Act. (i) Not less than 100 members of the company or, (ii) 1/10th of the total number of members; or (iii) Member(s) holding not less than 1/10th of the issued share capital of the company. 38. In a manner of speaking, the aforesaid three categories are akin to three types of entry passes for entering the portals of Tribunal for the purposes of making an application under Section 241 of the 2013 Act. If any petitioning member (or members, where there are more than one) possess any of the entry pass, it will have a right to make an application under Section 241 of the 2013 Act. Conversely, member(s) not satisfying any of the eligibility criterion does not have the right to make an application under S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d/treated as "relevant issued share capital" on the basis that the concept of "class of members" occurring in Section 241(1)(b) is liable to be imported into Section 244(1) of the 2013 Act. In other words, the argument taken both before the Tribunal and this Appellate Tribunal is that 1/10th of the issued share capital of a company must be reckoned separately for equity and preference shareholders, such that it will be sufficient for section 244(1) if - petitioning members holding only equity shares hold 1/10th of the issued equity share capital and conversely petitioning members holding only preference shares hold 1/10th of the issued preference share capital. 43. According to Learned Senior Counsel for the 1st Respondent it is not clear from the construction of Section 244(1) propounded by the Appellants how "relevant issued share capital" is to be computed in cases where petitioning member(s) hold both equity and preference shares. However, leaving that aside for the present, the central issue in the present appeal is whether, in computing the criteria of "one-tenth of the issued share capital of the company", the cumulative of equity and preference share capital is to be looke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CC 577; Commissioner of Sales Tax, U.P. Lucknow v. Parson Tools and Plants [1975] 4 SCC 22; V.L.S. Finance Ltd. v. Union of India [2013] 6 SCC 278 and Raghunath Rai Bareja v. Punjab National Bank [2007] 2 SCC 230. 53. Mr. Mukul Rohtagi, Learned Senior Counsel who appeared on behalf of the 2nd Respondent while taken similar plea further submitted that the language of Section 244(1) of the Companies Act, 2013 is clear and explicit. It is therefore, liable to be construed literally. Right from Companies Act 1956, it is well settled that the term 'Issued Share Capital' used in Section 399 of the said act comprised both the issued equity and preference share capital. [Ref. Northern Projects Ltd. v. Blue Coast Hotels and Resorts Ltd., (2009) 148 Comp Case 279; M/s. Northern Projects Ltd. v.. Blue Coast Hotels & Resorts Ltd. & Ors. SLP No. 12753/2008; J.P. Srivastava & Sons (P) Ltd. v.. Gwalior Sugar Co. Ltd.' (2005) 1 SCC 172]. 54. According to him, Section 244(1) of the Companies Act, 2013 employs the same expression "issued share capital" which was appearing in Section 399 of the old act. Hence, the legislative intention to retain the meaning of "issued share capital" as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 244 of the 2013 Act. Neither the locus provisions nor the eligibility provisions make any reference to "class of membership". That being the case, no question arises of reading the expression "issued share capital" as "relevant share capital", depending on the class of member applying for the relief. Instead the legislature where it thought fit to give a particular class of members a right, it has expressly provided for the same. (See Sections 48(2) & 236 (1) of the 2013 Act) 57. Similar was the arguments advanced by Mr. Mohan Parasaran, Learned Senior Counsel on behalf of the 6th Respondent and the other respondents. Relevant Provisions of the Companies Act, 2013. 58. To decide the issue, it is desirable to refer Section 241 and Section 244 of the Companies Act, 2013, Chapter XVI of the Act relates to "oppression and mismanagement', Section 241 deals with application to Tribunal for relief in cases of oppression etc., which reads as under: "241. Application to Tribunal for relief in cases of oppression, etc. (1) Any member of a company who complains that- (a) the affairs of the company have been or are being conducted in a manner prejudicial to public interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... member. (2) Where any members of a company are entitled to make an application under subsection (1), any one or more of them having obtained the consent in writing of the rest, may make the application on behalf and for the benefit of all of them." 60. Bare perusal of Section 244 makes it clear that in this case the Company having a share capital, only following categories of Members can apply: - (i) Minimum one hundred members of the company or one-tenth of the total number of its members, whichever is less and (ii) Any member or members (jointly) holding not less than one-tenth of the 'issued share capital' of the company. 61. It is also obvious on a bare reading of Sections 241 and 244 of the 2013 Act, that while clause (a) and (b) of subsection (1) of Section 241 deal with the subject matter of the grievances which can be raised in a petition, Section 244(1) deals with locus/eligibility of the member who can raise such grievances. The subject matter of the complaint bears no connection with the eligibility of the member applying to the Tribunal except that a member seeking to make a grievance of the subject matter contained in Section 241 is required to first s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y member can make a complaint that any other member is being oppressed. In other words, it is not necessary that only member who is the object/target of oppression has the locus to maintain a complaint; any other member(s) can so do on this behalf. 67. Apart from all the above, it is important to point out that wherever the parliament though it fit to refer to "class" or "issued equity share capital", it has done so expressly. For instance, Section 236 of the 2013 Act, which uses the phrase "issued equity share capital" in the context of purchase of minority shareholding. Yet another example is Section 48 of the 2013 Act which pertains to variation of rights of different classes of shareholders and employs the expression "issued shares of that class" 68. On the other end Section 245 of the 2013 Act, which is next to Section 244. While Section 245 provides the remedy of class action, it lays down the same threshold of the number of members as Section 244 and that too, without making any reference to the "class of members" seeking the remedy under Section 245 of the 2013 Act. The consistency as well as the distinction created by the draftsman in the provisions of the 2013 Act ought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xx 37. The court's jurisdiction to interpret a statute can be invoked when the same is ambiguous. It is well known that in a given case the court can iron out the fabric but it cannot change the texture of the fabric. It cannot enlarge the scope of legislation or intention when the language of the provision is plain and unambiguous. It cannot add or subtract words to a statute or read something into it which is not there. It cannot rewrite or recast legislation. It is also necessary to determine that there exists a presumption that the legislature has not used any superfluous words. It is well settled that the real intention of the legislation must be gathered from the language used. It may be true that use of the expression "shall or may" is not decisive for arriving at a finding as to whether the statute is directory or mandatory. But the intention of the legislature must be found out from the scheme of the Act. It is also equally well settled that when negative words are used the courts will presume that the intention of the legislature was that the provisions are mandatory in character." 71. Hon'ble Apex Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and we may say it again that where the legislature clearly declares its intent in the scheme and language of a statute, it is the duty of the Court to give full effect to the same without scanning its wisdom or policy, and without engrafting, adding or implying anything which is not congenial to or consistent with such expressed intent of the law-giver; more so if the statute is a taxing statute. We will close the discussion by recalling what Lord Hailsham [ At p. 11, Pearl Berg v. Varty, (1972) 2 All ER 6] has said recently, in regard to importation of the principles of natural justice into a statute which is a clear and complete Code, by itself : "It is true of course that the courts will lean heavily against any construction of a statute which would be manifestly fair. But they have no power to amend or supplement the language of a statute merely because in one view of the matter a subject feels himself entitled to a larger degree of say in the making of a decision than a statute accords him. Still less is it the functioning of the courts to form first a judgment on the fairness of an Act of Parliament and then to amend or supplement it with new provisions so as to make it co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d all calls and other sums due on their shares. If different meaning of "Relevant Issued Share Capital" given, then in that case, the persons having only equity shares will claim that it should be read as "Issued Equity Share Capital" and those who have only "Preference Share Capital", they will claim to read it as "Issued Preference Share Capital" and third group having both Equity and Share Capital will claim that it should be read as "Issued Equity and Preference Share Capital". As the submission as made on behalf of the Appellants will only cause ambiguity to the provision of Section 244 causing anomaly and absurdity, it will also change the normal interpretation as given to Section 399(1) of Companies Act, 1956, which is para materia same to Section 244(1) of the Companies Act, 2013. 82. It is well settled that where legislative intent is clear, it is the duty of the courts to give full effect to the same without scanning its wisdom or policy, and without engrafting, adding or implying anything which is not consistent with the legislative intent. In a given case, the court can only iron out the fabric but it cannot change the texture of the fabric. (See Nasiruddin v. Sita Ram ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n other words, these sections can be used as tools of interpretation of the said expression. 25. The expression "issued share capital" can have no doubt about it when considered in relation to other provisions of the Act. Inserting the word "equity" after the word "issued" and before the words "share capital" will be adding a word which the Legislature clearly did not intend and to interpret it further as "legally valid issued share capital" would be doing violence to the section. The court cannot read anything into a statutory provision which is plain and unambiguous. Interpreting the expression in a manner suggested on behalf of the appellant will amount to creating a mischief rather than preventing it and thereby leave out a class of shareholders who have subscribed to the capital of the company, i.e., by way of preference shares. It is to be noted that a statute is an edict of the Legislature and the language employed in a statute is the determinate factor of legislative intent. The first and primary rule of construction is that the intention of the legislation must be found in the words used by the Legislature itself. The question is not what must be supposed and has been in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s rightly pointed out on behalf of the Company sub-section (3) of Section 41 of the Act specifically mentions shares in the electronic form and therefore any reliance placed on the said sub-section to buttress the case of the Appellant appears to be erroneous, misleading and legally incorrect. As rightly pointed out on behalf or the Company, the Depositors Act 1996 was enacted for the purpose of facilitating the transactions of shares in dermat form thereby introducing the paperless transaction in the market and thus it covers the third category of equity shareholders who are neither subscribers as contemplated by sub-section (1) nor whose names are entered in the register of members as contemplated under sub-section (2) of Section 41. Sub-section (3) of Section 41 is therefore only in addition to section 41(1) and Section 41(2) and not in derogation or substitution of the first two sub-sections, it appears that the word 'shareholder' and 'member' is used in the same connotation under the Act, as rightly submitted on behalf of the Company. From the aforesaid discussion, and from whatever angle one looks at the expression "issued share capital" of the Company it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Companies Act, 2013 and the petition without waiver, at their instance is not maintainable. 89. In absence of any merit, we dismiss Company Appeal (AT) No. 133 and affirm the decision of the Tribunal, in so far as it relates to maintainability of the petition under Sections 241 and 242. WAIVER 90. The next question arises for consideration as to whether the application preferred by Appellants merits waiver under proviso to sub-section (1) of Section 244 of the Companies Act 2013 ? Proposition on behalf of the appellants 91. Mr. C.A. Sundaram, Learned Senior Counsel for the appellants submitted that the following factors should be taken into consideration while considering an application for waiver: - a. What is the interest of the appellants in the company? Is it insignificant or substantial ? b. What are the issues raised in the Petition and whether Section 241 is the most appropriate jurisdiction to deal with the same ? c. Is the cause raised of substantial importance to the appellants or to any class of members or to the company itself or in public interest ? 92. According to him if it is found that the Appellants' interest in the company is substantial; the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ought to be gone into in detail. 96. According to appellants, if the waiver application is sought to be rejected on the ground that it does not make out a case under Section 241, then the only test to be applied for rejection at this stage would be those found in Order VII Rule 11, CPC, and what is to be looked into is only as to whether the Petition on the fact of it, if taken as absolutely correct makes out a cause of action to maintain the suit. (Refer:-Saleem Bhai and Others v. State of Maharashtra and Others - 2003 (1) SCC 557). 97. Learned counsel for the appellants relied on Hon'ble Supreme Court decision in "Ali M.K. and Others v. State of Kerala and Others" - 2003 (11) SCC 632 , wherein Hon'ble Supreme Court held that "The normal function of a proviso is to accept something out of the enactment or to qualify something enacted therein which but for the proviso would be within the purview of the enactment." Stand taken by Respondents, except Respondent no.11. 98. Mr. Abhishek Manu Singhvi, Learned Senior Counsel for the 1st Respondent company highlighting the background of sub-section (1) of Section 244 of the Act and submitted that the eligibility requirements ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legations in the petition: (a) pertain to the affairs of the company with respect to which the petition has been filed? (b) do not concern continuing acts of oppression but instead call into question 'past and concluded' transactions or transactions which are ex facie time barred under Section 433 of the Act? (c) are not directorial complaints or complaints for the loss of office which are not related to the rights of the petitioners as shareholders? In addition, in view of the settled legal position that exercise of jurisdiction by the Tribunal under Section 241 is equitable in nature, conduct of the petitioners who approach the Tribunal seeking waiver should always be above board. Consequently, petitioners should be disentitled to waiver under the Waiver Proviso if: (d) the petitioner(s) have approached the Tribunal with 'unclean hands', for instance by deliberately suppressing material facts; or, if it appears that the litigation is not a bona fide shareholder dispute but is actuated by malice and/or intended to achieve an oblique purpose; or initiated by a publicity driven petitioner. (e) The petitioners are ex facie estopped from raising the allegati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recluded from agitating his grievance before ordinary civil courts. 104. According to Learned Senior Counsel, the legislative intent seems to be precisely to the contrary, i.e. members satisfying the eligibility criteria of Section 244(1) have an exclusive forum in the form of the Tribunal for matters under Section 241 and members who don't satisfy such criteria (except members who are given waiver under the Waiver Proviso) have to approach ordinary civil courts. In essence, Section 430 operates as a bar on the jurisdiction of civil courts only against members who satisfy Section 244(1) and not with respect to other members who do not. In this regard the decision of the High Court of Calcutta in The Asansol Electric Supply Co. Ltd. v. Chunnilal Daw (1970) 75 CWN 704 was relied upon. 105. Learned counsel for the 1st Respondent submitted that the application preferred by the appellants are hit by several of the exclusionary tests. The following facts were highlighted: - (i) Allegations do not pertain to the affairs of Tata Sons It was submitted that majority of the allegations in the Petition do not pertain to affairs of Tata Sons and instead relate to affairs of five compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e shareholder action. In fact, the Petition is a vindictive action filed to espouse 11th Respondent's cause after he was removed as Executive Chairman. This action has been filed to get even with the Tata Trusts and the board of directors of Tata Sons by 11th Respondent as a former disgruntled employee. In particular, the tone and tenure of the allegations in the Petition make it clear that the same is targeted against 2nd Respondent and 14th Respondent. Other facts have also been highlighted. (v) Acquiescence/Waiver/Estoppel Learned Senior Counsel for the 1st Respondent submitted that the petition is barred by acquiescence/waiver/estoppel. In view of the fact that though the Petition alleges certain articles of association of Tata Sons have been used as tools of oppression and a license to interfere by the trustees of the Tata Trusts, the Appellants have suppressed the fact that they or 11th Respondent had voted in favour of the amendments to the articles which they now challenge. There is not a single document/correspondence on record from the Appellants which demonstrates that the Appellants have at any point of time raised any grievances with respect to the matters comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ibrahim Khan" [2013] 9 SCC 221 and "Bed Raj v. State of Uttar Pradesh" AIR 1955 SC 778. 108. Mr. Mukul Rohtagi, Learned Senior Counsel for the 2nd Respondent submitted that a bare reading of the petition preferred by Appellants before the Tribunal demonstrates that the present Petition is malafide and an afterthought filed at the behest of 11th Respondent, who chose not to become the petitioner before Tribunal. The real trigger for filing the Petition is the removal of 11th Respondent from the position of Chairman of 1st Respondent on 24.10.2016. The mala fide nature of the Petition is evident from the fact that it raised allegations which are stale, belated and several decades old. Pertinently, 11th Respondent was a director of 1st Respondent Company since 2006 and thereafter, was the Chairman of 1st Respondent Company since 2012. Nothing prevented 11th Respondent from taking steps to put the affairs of 1st Respondent Company in order if the same were being conducted prejudicially to the interests of the 1st Respondent or in a manner allegedly oppressive to the Appellants. However, the Petition is completely silent on any steps taken by 11th Respondent to this effect. 109. It w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egations not pertaining to the Corus acquisition, the Nano Project, removal of 11th Respondent as director from various operating companies, transactions with Mr. Sivasankaran, award of contracts to Mr. Mehli Mistry and alleged misappropriation of funds in Air Asia, are all allegations which are made in respect of other operating companies and are not related to the affairs of 1st Respondent Company. Pertinently, none of the companies (Tata Motors Ltd., Tata Steel Ltd. etc.) in relation to whose affairs, the allegation of mismanagement has been raised have been made parties to the Petition. 114. It was also contended that Vague and unsubstantiated allegations has been made pertaining to the sharing of information with 2nd and 14th Respondents, the sale of the Colaba flat, the award of contracts to Mr. Mehli Mistry, the alleged misappropriation of funds in Air Asia and the alleged use of the Articles of Association of 1st Respondent Company as tools of oppression are all vague allegations which have simply been made in the Petition without furnishing any material particulars. 115. Similar plea was taken by the Learned Counsel for the rest of the respondents except 11th Respondent. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fy the making of a winging-up order on the ground that it was just and equitable that the company should be wound up. (b) That the Applicant has no other remedy in common law to redress or vent his grievances. 118. Similar argument was advanced by Mr. Mohan Parasan, Learned Senior Counsel for the Respondent Nos. 6, 14,17,18, 20 to 22. Case of 11th Respondent 119. Learned Counsel for the 11th Respondent while supported the case of the appellants, highlighted some of the acts of 'oppression and mismanagement' on the part of the 1st Respondent Company giving three examples. 120. In regard to allegation of Mr. C.Sivasankaran, it was stated that Siva Group owes a sum of Rs. 694 crores, pursuant to the Inter-Se Agreement between Siva, 1st Respondent and Tata Teleservices Ltd. This is towards the shares of Tata Teleservices Ltd. that DoCoMo had acquired from the Siva Group with a put option on 1st Respondent. 121. Other shareholders too were obligors such as 'Tata Power' (Rs. 790 crores), 'Tata Communications' (Rs. 1,058 crores), 'Tata Steel' ( Rs. 152 crores) and Tata Industries (Rs. 543 crores). When 1st Respondent was forced to deposit Rs. 8,450 cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l also confirms that the Board of Directors of 1st Respondent neither sought nor were guided by any legal opinion on the validity of removal in violation of Article 118. 128. According to 11th Respondent, all the purported reasons for his removal have been proffered only after the removal and in these proceedings, and not prior to the removal, even while the Respondents seek to argue that the Petitioners did not find the acts complained of as being oppressive before the removal of 11th Respondent, which argument stands belied by the record referred to above. 129. Directorship linked to shareholding was also highlighted. The directorship of 11th Respondent came to an end on February 6, 2017, when 1st Respondent removed him from the Board of Directors. This is an office held by 11th Respondent's family since 1980. In 2006, 11th Respondent, then aged 39, was inducted as a non-executive director, just two years after his father retired from directorship. 130. 11th Respondent's selection as Executive Chairman in 2012 was through a selection process, done on merits for an executive position whereas his appointment in 2006 as non-executive director was to succeed to his family& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pinion- (a) that the company's affairs have been or are being conducted in a manner prejudicial or oppressive to any member or members or prejudicial to public interest or in a manner prejudicial to the interests of the company; and (b) that to wind up the company would unfairly prejudice such member or members, but that otherwise the facts would justify the making of a winding-up order on the ground that it was just and equitable that the company should be wound up, the Tribunal may, with a view to bringing to an end the matters complained of, make such order as it thinks fit." 135. Sub-section (2) of Section 242 are inclusive Power of Tribunal to pass specific order and direction without prejudice to the generality of the powers under sub-section (1). 136. From the aforesaid provisions (Sections 241 and 242), it is clear that the Tribunal can pass order on an application under Section 241 as it thinks fit with a view to bringing to an end the matters complained of and if it is of the opinion that the company's affairs have been or are being conducted in a manner prejudicial or oppressive to any member or members or prejudicial to public interest or in a manner preju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on to 'grant of Leave', as distinct from 'grant of waiver', as provided under proviso to sub-section (1) of Section 244, which reads as follows: - "244. Right to apply under section 241. ----(1) The following members of a company shall have the right to apply under Section 241, namely: - (a) in the case of a company having a share capital, not less than one hundred members of the company or not less than one-tenth of the total number of its members, whichever is less, or any member or members holding not less than one-tenth of the issued share capital of the company, subject to the condition that the applicant or applicants has or have paid all calls and other sums due on his or their shares; (b) in the case of a company not having a share capital, not less than one-fifth of the total number of its members: Provided that the Tribunal may, on an application made to it in this behalf, waive all or any of the requirements specified in clause (a) or clause (b) so as to enable the members to apply under section 241. Explanation. ---For the purposes of this sub-section, where any share or shares are held by two or more persons jointly, they shall be counted only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of law and facts. The same is also dependent on the cause of action and continuous cause of action, if any. As the merit of the case cannot be deliberated in an application for 'waiver' the Tribunal cannot decide the question whether (proposed) application under Section 241 is barred by limitation or not while deciding the application for 'waiver'. (iii) Allegation pertains to affairs of another Company This is a complicated issue dependent on facts of each case. The allegation of 'oppression and mismanagement' pertains to the related company or a third company is dependent on the facts of the case. For example, on bare perusal of the application, if it appears that the allegation relates to a third company then it is a different issue, but in some cases even third company's issue may have direct relation to the company of which 'oppression and mismanagement' has been alleged. For example, Company 'A' which has substantial shareholding say 50% in another Company 'B', as shareholder and the Company 'A' takes part in the Board's meeting or Extraordinary General Meeting of Company 'B' and takes decisions, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is question of fact which can be decided only at the stage of hearing of application under Section 241. Therefore, we are of the view that such question cannot be decided by Tribunal while considering an application for 'waiver'. 145. For the aforesaid reasons we hold that the Tribunal while deciding an application for 'waiver' under proviso to sub-section (1) of Section 244 to enable the members to apply under Section 241 cannot decide the following issues: - (i) Merit of the case (ii) Issues dependent on merit based on claim and counter claim, such as: a. Whether a prima facie case has been made or not b. Whether the petition is barred by limitation, c. Whether it is a case of arbitration, d. Whether allegation relates to/pertains to another company (Third party). e. Whether the allegations are in the nature of directorial complaint. f. Whether the applicants' conduct disentitled them from seeking relief. g. Whether the proposed application under Section 241 is barred by acquiescence or waiver or estoppel. 146. Section 244 of the Companies Act 2013 came into force from 1st June 2016. Prior to the same, eligibility clause was laid down under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arlier provision i.e. sub-section (4) of Section 399 whereunder the Central Government was empowered to permit the ineligible member(s) to file an application for 'oppression and mismanagement' by its executive power. Under proviso to sub-section (1) of Section 244 now the Tribunal is required to decide the question whether application merits 'waiver' of all or any of the requirements as specified in clauses (a) and (b) of sub-section (1) of Section 244 to enable such member(s) to file application under Section 241. Such order of 'waiver' being judicial in nature, cannot be passed by Tribunal, in a capricious or arbitrary manner and can be passed only by a speaking and reasoned order after notice to the (proposed) respondent(s). The basic principle of justice delivery system is that a court or a Tribunal while passing an order is not only required to give good reason based on record/evidence but also required to show that after being satisfied itself the Court/Tribunal has passed such order. To form an opinion as to whether the application merits waiver, the Tribunal is not only required to form its opinion objectively, but also required to satisfy itself on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into consideration by the Tribunal for forming opinion as to whether application merits 'waiver'. ALTERNATIVE REMEDY - SECTION 430 153. One of the question arises as to whether the appellants can avail a remedy in a suit before a Civil Court for alleged act of 'oppression and mismanagement' levelled against the respondents. 154. Section 430 bars Civil Court to entertain any suit or proceeding in respect of any matter which the Tribunal or the Appellate Tribunal is empowered to determine under the Companies Act or any other law for time being in force. The provision reads as follows: "430. Civil court not to have jurisdiction.─No Civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which the Tribunal or the Appellate Tribunal is empowered to determine by or under this Act or any other law for the time being in force and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act or any other law for the time being in force, by the Tribunal or the Appellate Tribunal" 155. Section 241 empowers the Tribunal to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15,075 0.45% 6. R D Tata Trust 8,838 2.19% -0.00% 8,838 0.26% 7. M.K. Tata Trust 2,421 0.60% -0.00% 2,421 0.07% 8. Sarvajanik Seva Trust 396 0.10% -0.00% 396 0.01% 2,66,283 65.89% 2,66,283 7.95% T COMPANIES 9. T Motors 12,375 3.06% -0.00% 12,375 0.37% 10. T Steel 12,375 3.06% -0.00% 12,375 0.37% 11. T Chemicals 10,237 2.53% -0.00% 10,237 0.31% 12. T Power 6,673 1.65% -0.00% 6,673 0.20% 13. IHCL 4500 1.11% -0.00% 4500 0.13% 14. T Industries 2,295 0.57% -0.00% 2,295 0.07% 15 T Global 1,755 0.43% -0.00% 1,755 0.05% 16. T International 1,477 0.37% -0.00% 1,477 0.04% 17. T Investment 326 0.08% -0.00% 326 0.01% 52,013 12.87% -0.00% 52,013 1.55% P. MISTRY 18. Sterling Investment Corp Ltd. 37,122 9.19% -0.00% 37,122 1.11% 19. Cyrus Investment Pvt. Ltd. 37,122 9.19% -0.00% 37,122 1.11% 20. Mr. Pallonji Shapoorji Mistry 108 0.03% -0.00% 108 0.00% 21. Mr. Cyrus Pallonji Mistry 0.00% 20,000 0.68% 20,000 0.60% 74,35 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellants. 165. Article 121 of Articles of Association provides for requirement of a majority of Directors nominated by Tata Trust to approve of every simple decision of 1st respondent company - Tata Sons Limited and reads as follows:- "121. MATTERS HOW DECIDED Matters before any meeting of the Board which are required to be decided by a majority of the Directors shall require the affirmative vote of a majority of the Directors appointed pursuant to Article 104B present at the meeting and in the case of an equality of vote the Chairman shall have a casting vote." 166. Article 121-A lists out matters that have to be taken to the Board of Directors of the 1st respondent company - Tata Sons Limited' which includes all Tata Group Companies, as named below. Thereby, the 1st respondent company has complete control over the decision making and affairs of all the Tata Group Companies, as apparent from the Article 121-A and quoted below:- "121-A. The following matters shall be resolved upon by the Board of Directors: &n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited, Titan Company Limited and Infinity Retail Limited and any other company in which the Company (or its subsidiaries) holds twenty percent or more of the paid up share capital and whose name is notified in writing to the Company by the Directors nominated under Article 104B." 167. Thus, 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. 168. 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. 169. 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 responden ..... X X X X Extracts X X X X X X X X Extracts X X X X
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