Bom HC | Imputations against Nusli Wadia being part of statutory Notice under S. 169 Companies Act, held were not defamatory; issue of process against Ratan Tata and Ajay Piramal quashed

Bombay High Court: A Division Bench of Ranjit More and Bharati H. Dangre, JJ. quashed the order passed by the Additional Chief Metropolitan Magistrate whereby he had issued process against the petitioners including veteran industrials Ratan Tata and Ajay Piramal. The process was issued in the case instituted against them by the billionaire businessman Nusli Wadia for the offence of defamation.

Backdrop

At the relevant time, Ratan Tata was the Interim Chairman of Tata Sons Ltd. and the other petitioners were its Directors. Notably, Tata Sons is a promoter of the three operating companies relevant herein — Tata Chemicals, Tata Motors and Tata Steels — of which Nusli Wadia was an Independent Director. On 24-10-2016, the erstwhile Chairman of Tata Sons, Cyrus Mistry, was removed by the Board of Directors of Tata Sons. Pursuant thereto, the IndependentnDirectors of Tata Chemicals met at the Bombay House whereafter they issued statements affirming their confidence in the erstwhile Chairman, Cyrus Mistry, and his Board. According to Tata Sons, it was Nusli Wadia’s attempt to galvanize the Independent Directors and that he did not conduct himself independently and acted as an interested party. Thereafter, Tata Sons decided to convene Extraordinary General Meeting of the shareholders of Tata Chemicals seeking, inter alia, removal of Nusli Wadia as its Independent Director. A Special Notice was also issued under Section 169(2) read with Section 115 of the Companies Act, 2013 which became the bone of contention between the parties. At the conclusion of the Extraordinary General Meeting, Nusli Wadia was removed from the office of Independent Director.

The Special Notice, the complaint, and the impugned order

According to the petitioners, the narration contained in the Special Notice issued under Section 169(2) read with Section 115, was a statutory requirement before taking action of removal of a Director. The said Notice contained averments that Nusli Wadia was acting in concert with Cyrus Mistry against the interests of Tata Chemicals. Whereas, according to Nusli Wadia, the said Special Notice containing the allegations was per se defamatory and no due diligence was shown by the petitioners by ascertaining whether the allegations were true or false before issuance of the said Notice containing the imputation. Consequent thereto, Nusli Wadia filed a complaint complaining that the petitioners individually and collectively committed an offence of defamation and were responsible for committing the offence under Section 500 (punishment for defamation) read with Section 109 (punishment for abetment) of the Penal Code. On this complaint, the Magistrate passed the impugned order recording a finding that the complainant made out a case against the accused persons and hence, he issued process against the petitioners.

Discussion

After perusing relevant statutory provisions, the High court was of the view that the impugned statement was to be referred to in the background in which it was made, namely, an act or conduct of the Independent Director who is sought to be removed by the Company who is empowered to remove its Director after following the procedure prescribed under Section 169 of the Companies Act, 2013. The Court was of the opinion that it was not necessary to assess or judge the truthfulness of the allegations. It was stated: “The imputation contained in the Special Notice cannot be viewed independent of the purpose for which it is included in the Special Notice and if the petitioners have adopted a legal course permissible to be adopted under the framework of the statute governing it, we do not think the allegations can be termed as per se defamatory.” It was noted that the statutory scheme itself contemplates that the notice should be accompanied by a brief statement of information and facts that would enable the members to understand the meaning, scope and implication of the items and business to be transacted in the meeting and to take decision thereof. Further, removal of Nusli Wadia was on of the agenda of the notice and it was accompanied by a brief statement why such removal was required — the statement which was impugned as defamatory. The court was of the view that imputations being part of the Special Notice which was statutory in nature, the same could not be termed defamatory.

Held

In view of the discussion mentioned above, it was held that the impugned order passed by the Magistrate was without application of mind and could not be sustained. Resultantly, the impugned order was quashed and the petition was allowed. [Ratan N. Tata v. State of Maharashtra, 2019 SCC OnLine Bom 1324, decided on 22-07-2019]

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