Tata Sons must seek NCLT nod for conversion to pvt firm: Mistry to SC

Topics Tata Sons | NCLT | Cyrus Mistry

In its petition to the Supreme Court, the Mistry family objected to Tata Sons becoming a private company, as it will impede sale of their 18.4 per cent shares in the company.
Tata Sons, the holding company of the Tata group, must apply to the National Company Law Tribunal (NCLT) for conversion into a private company in accordance with the Companies Act of 2013, the Mistry family argued before the Supreme Court on Tuesday.

“After the new Companies Act came into force, if a public company wants to become a private company then it must apply to the NCLT for reconversion to private company,” CA Sundaram, counsel for the Mistry family, told the court. 

As Tata Sons became a deemed public company, it should follow the procedure for reconversion, he said. “There is no provision under the Companies Act for such conversion overnight. Article 121 was being interpreted in a way that went beyond the scope of the Act. By the stroke of a pen at midnight, when the application of stay was filed in the NCLT, the name ‘private’ was added before the name,” he said. 

In 2000, the articles of association of Tata Sons was restated and replaced with a new set of articles and was approved by a special resolution of the shareholders. Certain special rights of Tata Trusts were incorporated, which include the right to nominate up to a third of the directors (Article 104B) and those nominated directors having the right of an affirmative vote (Article 121). 

In its petition to the Supreme Court, the Mistry family objected to Tata Sons becoming a private company as it will impede the sale of their 18.4 per cent share in the firm. With a private company structure, TSL shareholders can sell shares only with the company’s permission, thus, making it difficult for the Mistrys to sell shares. The Mistrys’ plan to pledge the shares to financial institutions was also objected to by Tata Sons.


The Supreme Court is hearing an appeal filed by the Tata group against an order by the National Company Law Appellate Tribunal (NCLAT) last December reinstating Cyrus Mistry as Tata group chairman, while terming his successor N Chandrasekaran’s appointment as illegal.

A bitter legal and public battle between the two sides erupted when Mistry was removed from the Tata Sons board as its chairman in October 2016. While the NCLT Mumbai sided with the Tatas, the NCLAT did not. During the hearing on Tuesday, Sundaram also argued how the Article 121A of association of Tata Sons was used by Tata Trusts to undermine the board.  

In its order in December 2019, the NCLAT had said Article 121A cannot be used by Tata Trusts to demand pre consultation with the trusts. “Our argument is that Tata Sons should be a board managed company and not a family company,” Sundaram said.

Tata Trusts owns 66 per cent stake in Tata Sons and its chairman Ratan Tata was consulted by trust directors before every decision by Tata Sons, the Mistrys had said.

Sundaram said the new companies Act had even institutionalised the role of independent directors to protect the interests of minority shareholders like the Mistrys in Tata Sons.

The hearing will continue on Wednesday.


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