Case BriefsHigh Courts

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]

Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Tribunal (NCLT): The petitioner’s who held over 18% equity shares in Tata Sons Ltd., were propelled to file the company petition against Tata Sons Ltd., Ratan Tata (Chairman Emeritus) and others. The petition arose consequent to the incident on 24-10-2016 wherein the Co.  Board meeting, Cyrus Mistry (Chairman) was removed from his position without giving 15 days notice. The petitioners alleged that the respondents conducted the affairs of the Co. In an oppressive manner which was prejudicial to the interest of the petitioners, the Co., and the public.

As per the petition, the factum of oppressive, arbitrary and prejudicial mismanagement lies in bleeding of Corus acquisition and overpriced take over, doomed Nano car project, Ratan Tata’s relationship with C. Sivasankaran (owner of Sterling Infotech Ltd.), DoCoMo Arbitration, and unjust investment of Ratan Tata at the cost of the Co., aviation industry misadventures, removal of Cyrus Mistry as Chairman of the Co., loss to the Co., in purchase of shares of Tata Motors. It was alleged that over time Tata Trusts directors had become the handmaiden of Ratan Tata and his lieutenant Noshir A. Soonawala (Vice Chairman, Tata Sons Ltd.); they had become a ‘Super Board’. They were alleged to control the Trusts Nominee Directors and thereby suppress the minority shareholders, the petitioners. It was further alleged that respondents acted as per Ratan Tata’s bidding, violating the Articles of Association. A grievance was also made against ‘legacy hotspots’. On the premise of these allegations modification in AoA was prayed for, along with demand to appoint an administrator to look after day-to-day affairs of the Co.; appointment of a retired Supreme Court Judge as non-executive Chairman, direction to the board not to remove Cyrus Mistry from the post of Chairman, restriction on the role of Soonawala, investigation into the affairs of the company, etc.

The Tribunal, in order to decide the petition, took upon an arduous task of visiting the history of Tata’s and the development of their corporations. In its 368-pages judgment, the Tribunal discussed each and every point raised by the petitioners and reached a conclusion that the petition was liable to be dismissed. The findings of the Tribunal are summarized (inter alia) hereinafter:

  • Board of Directors are competent to remove the Executive Chairman, the recommendation of Selection Committee was not required.
  • Removal of Cyrus Mistry was because he leaked company information to the Media, IT authorities, etc.
  • No merit was found on the purported legacy issues.
  • None of the articles of the AoA were oppressive against the petitioners.
  • Majority (shareholders) Rule has not taken a back seat with the introduction of Companies Act 2013. They are never in conflict with each other. Corporate democracy is genesis and corporate governance is species.

Finding no merit in the issues raised by the petitioners, it was held that all the affairs of the company being conducted as per AoA which fully complied with the Companies Act. Further, no merit was found on the role attributed to the Ratan Tata and other Trustees of Tata Trust. Accordingly, basing its decision on the reasons as summarized above, the Tribunal dismissed the appeal. [Cyrus Investments (P) Ltd. v. Tata Sons Ltd., CP No. 82 (MB) of 2016, dated 12-07-2018]