IN THE NATIONAL COMPANY LAW TRIBUNAL

MUMBAI BENCH

C.P. No. 82(MB)/2016

Under section 241,-242, 244 of the

Companies Act, 2013.

In the matter of
cvrus Investments Pvt'
lil;"tffi;r,
v /s.

Tata Sons Ltd. & Ors,

. Respondents

Order delivered on 12.07.2018

Coram: Hon'ble Mr. B.S.V. Prakash Kumar, Member (Judiclal)

Hon'ble 14r. V. Nallasenapathy, Member (Technical)

For the Petitioners: Mr. C. Aryama Sundaram, Sr. Adv.

Ms. Rohini Musa, Adv.
Mr. Somasekhar Su ndaresa n, Adv.
Mr. Apurva Diwanji, Adv.
Mr. Ruzbeh Mitry, Adv.
Ms. Sonali Jaitley, Adv.
Mr. Manik Dogra, Adv.
Mr, Rohan Jaitley, Adv.
Mr. Gurjan Shah, Adv.
Mr. Parag Sawant, Adv.
Mr. Akshay Doctor, Adv.
Mr. Abhishek Venkataramanan, Adv.
Mr. Dhawal Kothari, Adv.
Mr. Ravi Tyagi, Adv.
Mr. Shubhanshu Gupta, Adv.
Ms. Sorya Kapoor, Adv.
Ms. Rini Badoni, Adv.
 NATIONAL COMPANY LAW TRIBUNAL. MUMBAI BENCH

C.P. No. 82(MB)/2016

Mr. Debash ish Chouhan, Adv.

- i/b Desai & Diwanji,

For the Respondents: Dr. Abhishek Manu Singhvi, Sr. Adv. -R1
Adv,
Mr. S.N. Mookherjee, Sr. -R2
Mr. Ravi Kadam, Sr. Adv. -R3
Mr. Zal Andhyarujna, Adv.
Mr. Prateek Seksaria, Adv,
Ms. Ruby Singh Ahuja, Adv.
Mr. Dhruv Dewan, Adv.
Mr. Nitesh Jain, Adv.
Mr. Arjun Sharma, Adv.
Mr. Rohan Batra, Adv,
Ms. Reena Choudhary, Adv.
Mr. Tahira Karanjawala, Adv.
14 r. Arjun Pall, Adv.
Mr. Avishkar Singhvi, Adv.
Mr. Sahil Monga, Adv.
Mr. Anupam Prakash, Adv.
Mr. Jeet Karia, Adv.
Ms. Ayusmita Sinha, Adv.
Ms. Shivangi Agarwal, Adv.
Ms. JuhiMathur, Adv.
- i/b Shardul Amarchand Mangaldas & Co.

Mr. Shailesh Paria, Adv.

Ms, Sishika Rajadhyaksha, Adv.
- i/b Economic Laws Practice (R5 & R7)

Mr. Mohan Parasaran - Sr. Adv.,

Mr. Sandip Sarkar - Sr. Adv,,
Mr. Chidananda - Adv.,
Mr. Ashwin Kumar-Adv.,
Ms. Shruti Sardesai - Adv.,
Mr. Jehangir Mistry - Adv.,
Ms. Namrata Parikh - Adv.

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- i/b M/s. Mulla & Mulla & Ganjie Blunt & Caroc
(R6, t4, 76-22)

Mr. Janak Dwarkadas, Sr. Adv. a/w

Mr. Sharan Jagtiani, Adv.
Mr. Jehangir Jeejeebhoy, Adv.
Mr. Kaiwan Kalyaniwalla, Adv.
Ms. Shireen Pochkhanawalla, Adv,
Mr. Nirav Barot, Adv.
- i/b Manekshah & Sethna -R11

Per B. S. V. Prakash Kumar, Member (Judicial)

ORDER

Order pronounced on 09.07.2018

It was Monday, 24.10.20L6, like any other day, but to

Bombay House - Tata Sons Ltd registered office, it is not the same,
It is the day that caused inflection to the annals of the company. In
more than 100 years' history of the company, change of guard
happened only six times.

2. On 24.10.2016, Tata Sons Ltd. (in short "the company/Tata

Sons/TS") held Board Meeting with several agenda items including
agenda of "any other item", where under, Chairman of the
Company, Mr. Cyrus Pallonji Mistry (hereafter called "Mr. Cyrus")
was removed from the position of Chairman of the company under
the head of "any other item", without being given 15 days
prescribed notice to Mr. Cyrus, which propelled the petitioners -
Companies of Pallonji family having above 1Bo/o equity of the
company - to file this Company Petition against the company,
Mr. Ratan Tata (Chairman Emeritus of the Company-R2),
Mr. Noshir, the Trustees of Tata Trusts and various other persons
on 19,12.2016 alleging that the Respondents other than the
company (R-1) and R-11 (Mr. Cyrus), conducted/conducting the
affairs of the company in oppressive manner and prejudicial against

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the interest of the petitioners, the company and the public, hence
sought various reliefs as mentioned in the company petition and
affidavits subsequently filed by them under the head of oppression
and mismanagement (sections 241-244) of the Companies Act
2013 ,

3, The petitioners have petitioned to this Tribu nal asking to

seasoning of Tata Sons functioning, which keeps seasoning our
daily food with Tata Salt. Irony is salt also at times needs salt to be
seasoned. One revelation out of it is, problem is problem, pain is
paln, no matter how big it is, today the company/ mother of many
other group companies and champion of successfully surviving for a

century, passing through troubled waters. Let us see, what could be

the answer to its problem.

4, Companies come and go just as men come and go, but on

Indian soil, a few companies have survived these many long years,
Out of them, Tata is again unique for having its promoter
shareholders (now Tata Trusts) been spending all its might solely
for the benevolence of the society, I don't compare this empire with
any other empire, because empires come and gone, but this
company, despite problems like this, remains survived till date, I
wish and hope it will further grow because growth of it is also the
growth of this nation.

5. Another uniqueness of this case is, perhaps no other Tribunal

might have heard any case as many days as this fledgling Tribunal
heard it - hearing went on for more than one month almost on
daily basis from morning to evening, on the top of it, the
petitioners' Senior Counsel Mr. Aryama Sundaram and Mr. Cyrus
(R11) Senior Counsel Mr. lanak Dwaraka Das, the Respondents
side Senior Counsel Dr. Abhishek Manu Singhvi, I\4r. Sudeepto
Sarkar, Mr. S N Mookerjee, Mr. Ravi Kadam, Mr. Mohan Parasaran,
and the counsel Mr. Zal Andhyarjuna, put their heart and soul in
enlightening this Bench on every shade of the law on oppression
and mismanagement by navigating us through English and Indian
law. The counsel Mr. Somashekhar Sundereshan appeared on

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behalf of the petitioners, finally pepped up with his tone and tenor
argument in addition to the arguments of the petitioners' senior
counsel Mr. Aryama Sundaram. All have done excellently well giving
a chance to have clarity on facts as well as law relating to
oppression and mismanagement. Of course, lot of time has been
consumed not only in hearing but also in writing this order,
inasmuch as this Bench is bound to answer at least arguments
either side placed.

6, Passing through this experience, we wish to

place, without
making any comment, opening lines of the judgment of Honorable
Justice Chinnappa Reddy in Life Insurance Corporation of
India vs. Escorts Ltd. and Ors. (SCC) I 1986 264, are as
follows:

"1. Problems of high finance and broad fiscal policy which

truly are not and cannot be the province of the court for the
very simple reason that we lack the necessary expeftise and,
which, in any case, are none of our business are sought to be
transformed into questions involving broad legal principles in
order to make them the concern of the court. Similarly, what
may be called the 'political' processes of 'corporate
democracy'are sought to be subject to Investigation by us by
invoking the principle of the Rule of Law, with emphasis on
the rule against arbitrary State action. An expose of the facts
of the present case will reveal how much legal ingenuity may
achieve by way of persuading courts, ingenuously, to treat
the variegated problems of the world of finance, as litigable
public- rig ht-q uestions. Courts of justice are well-tuned to
distress signals against arbitrary action. So corporate giants
do not hesitate to rush to us with cries for justice. The court
room becomes their battle ground and corporate battles are
fought under the attractive banners of justice, fair-play and
the public interest. We do not deny the right of corporate
giants to seek our aid as well as any Lilliputian farm laboreror
pavement dweller though we certainly would prefer to devote
more of our time and attention to the latter. We recognize

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that out of the dust of the battles of giants occasionally

emerge some new principles, worth the while. That is how the
law has been progressing until recently. But not so now.
Public interest litigation and public assisted litigation are
today taking over many unexplored fields and the dumb are
finding their voice.

2. In the case before us, as if to befit the might of the

financial giants involved, innumerable documents were filed in
the High Court, a truly mountainous record was built up
running to several thousand pages and more have been
added in this Court. Indeed, and there was no way out, we
also had the advantage of listening to learned and long
drawn-out, intelligent and often ingenious arguments,
advanced and dutifully heard by us. In the name of justice,
we paid due homage to the causes of the high and mighty by
devoting precious time to them, reduced, as we were, at
times to the position of helpless spectators, Such is the
nature of our judicial process that we do this with the
knowledge that more worthy causes of lesser men who have
been long waiting in the queue have blocked thereby and the
queue has consequently lengthened. Perhaps the time is ripe
for imposing a time-limit on the length of submissions and
page-limit on the length of judgments. The time is probably
ripe for insistence on brief written submissions backed by
short and time-bound oral submissions. The time is certainly
ripe for brief and modest arguments and concise and chaste
judgments. In this very case we heard arguments for 28 days
and our judgment runs to 181 pages and both could have
been much shortened. We hope that we are not hoping in
vain that the vicious circle will soon break and that this will be
the last of such mammoth cases. We are doing our best to
disentangle the system from a situation into which it has been
forced over the years by the existing procedures. There is
now a public realization of the growing weight of the judicial
burden. The cooperation of the bar too is forthcoming though

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in slow measure. Drastic solutions are necessary. We will find

them and we do hope to achieve results sooner than
expected. So much for sanctimonious sermonizing and now
back to our case."

7, With this introduction, before going into details of the

petition, we believe it is empirical to know who the petitioners are
and who the respondents are, and also about the directors of the
company and other non-respondents intermittently appear, so that
while reading the pleadings and discussion, there would not be any
need to the reader to go back and forth has and when new
character comes in, One out of order in chronology of introduction
is the company is explained first, then the petitioners, because the
ground and background on which warring groups played out is, the
com pa ny.

L One stop gap before coming to characters appear in this case

is about Tata Family, which for the first time introduced indigenous
industries in our country as early as in late 17th Century, not only
that, thereafter they have become so selfless by dedicating the
industries and organizations to the cause of the society. It is not my
writing that reflecting the greatness of this family -the statues
appearing in various places of Mumbai say what they are, with one
click, you will also come to know lot of inspiring philanthropic
history about this family. When the history is not disputed,
consistency is there in that history for more than 30 years, I believe
it could be treated, not exactly as document falling under section
90 of Indlan Evidence Act, but can be taken as document of like
nature to get correct perspective of the dispute. It goes without
saying that totality of the facts and their background gives firm
footing to arrive to an objective conclusion with right reasoning. For
this reason alone, we have started this journey right from the
beginning to understand what Tatas are, and what their objectives
are. I must be frank enough to say that this info is taken from
Britannica and Wiklpedia, of course this history is given in bits and
pieces in the replies and arguments advanced by the Respondents
side, to my remembrance, this history has not been all through

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disputed by the petitioners, yet I have taken utmost responsibility

in giving these details, because it is, as it is, not born out of
pleadings. The situation necessitated us giving the background of
Tatas to get a flavor of the values with which this family cherished
and to see whether Tatas do something to have personal gain for
enrichment?

9. We all knew that oppression and mismanagement issues are

not to weigh up the validity and invalidity of the actions complained
of, it is more about the unfairness and prejudice intended to cause
harm to the interest of the members of the company, as to
companies are concerned, their sole objective being to earn profits,
interest can be understood as economic interest of the members.
So to understand the applicability of this doctrine of prejudice, we
have to go step by step through the elements of this doctrine within
the ambit given u/s 241 of the Companies Act 2013.

10. Tata family, industrialists and philanthropists who founded

ironworks and steelworks, cotton mills, and hydroelectric
power plants that proved crucial to India's industrial development.
It is important to know about this family, because as I said earlier,
the case of oppression and mismanagement is largely dependent on
the doctrine of fairness, regardless of legalities. Since fairness or
unfairness comes from the mind of a person, it is relevant to note
who they are, what they are and how they are throughout the
history of the company to test the impugned actions on the anvil of
this backgrou nd.

11, Tatas are a Parsi priestly family originally came from the
former Baroda state (now Gujarat). The founder of the family
fortune was Jamsetji Nusserwanji Tata (1839-1904). He joined his
father's export trading firm in 1B5B and helped in establishing its
units in Japan, China, Europe, and the United States. In 1872, he
concentrated on cotton manufacturing, founding mills at Nagpur in
1877 and, later, at Bombay and Coorla. His enterprises were noted
for efficiency, for improved labor-protection policies, and for the
introduction of finer grades of fiber. He also introduced the

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production of raw silk to India and planned for the Bombay-area

hydroelectric power plants that became the Tata Power companies
after his death. In the journey of his life, Sir Jamsetji established
Empress Mills in the year 1.874, it is for the first time this company
has set very high standards for worker benefits and welfare with
the facilities such as sanitary hutments and filtered water for
workers, which was that time unheard of even in the west. By
seeing such a humanitarian concern, a famous English poet namely
William Blake, wrote "Jamsetji was a century ahead of his times
ensuring the welfare of his work force." In 1886 itself, Jamsetji
launched various schemes such as Free Medical help, crdches and
primary classes for children of mill workers, he introduced
gratuitous pension fund, provident fund, maternity benefit
allowance and a compensation funds for accidents for all
employees. This man in his journey in the year 1BB9 being stirred
by speech of Lord Reay donated half of his fortune to build
University, in the year 1891, he started endowment scheme to
support promising students from all over India for going abroad for
studies. The first J N Tata scholar was Freny KR, sent to Edinburgh
for advance studies thereafter, former president K.R. Narayan,
renowned Scientist Raja Ramanna, Jayant Narlikar and Raghunath
Mushalkar, like many. If we keep saying, there won't be end for it.

L2. To cut it short, after the death of Jamsetji, his younger son
Sir Ratan Tata became the Chairman of the company and made his
father's dream of building Iron and Steel Company reality and that
is the company where Tata family owned 11olo of the total shares of
the Tata Iron and Steel Company. He contributed to aid Mahatma
Gandhi's struggle of giving Indlan a life of dignlty in South Africa,
he is the person set up illustrious Indian Institute of Science as a

Joint venture with Government of India and Government of lvlysore

which has become launching pad and hub of scientific research in
India and Asia. Tata Steel has become the first company to
introduce pioneering labour welfare policy such as medical aid,
formation of works committee, leave with pay, workers' provident
fund and workmen's accident scheme and ex-gratia payment for

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road accidents while attending to duty and these policies over a

period of time has become law in India. He passed away In the year
1890 writing a will "if I have no children, I give rest of the residue
of my property.,. for the advancement of education, learning and
industry in all branches including education in economic, sanitary
sciences and all works of public utility." basing on which, Ratan
Tata Trust is set up in the year 1919 which is today holding 23.55o/o
shareholding in the company and doing yeoman service to provide
livelihood and employment to women from lower income groups
and various prestigious institutions such as Tata Institute of Social
Science, Indian Institute of Science, Delhi School of Economics.
Soon after demise of his younger brother, elder brother Sir Dorabji
Tata became the Chairman of the company. This person in his
lifetime itself set up Tata Memorial Trust in memory of his deceased
wife to aid research on international scale in the field of blood
diseases especia lly leukemia.

13, We must mention a few lines about a man, who makes this
institution as funding machine to the cause of society that is Sir
Dorabji Jamsetji Tata. Like his father, Sir Dorabji believed that one
must make use of the wealth one had acquired for
constructive purposes. So, in less than a year after his wife
Meherbai's death, he donated all his wealth to the Trust, insisting
that it must be used "without any distinction of place,
nationality or creed", for the advancement of learning and
research, the relief of distress and other charitable purposes. He
died three months late r.

L4, The wealth that he turned over to the Trust comprised

his substantial share holdings in the company, Indian Hotels
and allied companies, his landed properties and 27 pieces of
jewellery left by his wife, including the famous lubilee
Diamond, estimated then to be of the value of t7O million.
Today, these would be worth more than ?500 million.

15. As the Trust got formed and the trustees deliberated on

the policy aspects and finalized them, it decided to adopt a

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broad framework-that it should undertake such projects,

which are too large for individuals to handle and that each of
these projects should have a genuine relevance to the
welfare of the country. The Trust is mandated to:

Maintain and support schools, educational institutions and

hospitals

Provide relief in distress caused by the elements of nature

such as famine, pestilence, fire, tempest, flood, earthquake
or any other calamity

Help advancement of learning in all its branches especially

research work in medical and industrial problems

Offer financial aid to the Indian Institute of Science,

Bangalore, by instituting professorships or lectureships or
giving schola rships

Award fellowships in any branch of science or assist students

to study abroad either by payment of lump sums grants or
by payment of periodical sums

Give aid to any other charitable institutions or objects

endowed by the settler in his lifetime, or by the grandfather,
father or both of the settlers.

16. Now this Trust has 27.99o/o shareholding in the company

doing various philanthropic works as mentioned above. The
greatness of this family is they have not limited themselves to
simple charity but for the sake of larger wellbeing of human
society; they have reached out to philanthropic service.

L7. Upon the death of Sir Dorabji in 1932, Sir Naoroji Saklatvala,
one of the founder's nephews, became chairman of the Tata Group.
On his death in 1938, Jehangir Ratanji Dadabhoy Tata (1904-93),
whose father, R.D. Tata, had been a cousin and partner of the
founder, became chairman. J.R.D. Tata founded Tata Airlines

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(1932), which was in 1953 nationalized and split up to form India's

chief domestic and international air carriers: Airlines Corporation
and Air-India, respectively. By late 1950s, Tata Group controlled
the largest single aggregation of Indian industry. J.R.D. Tata was
succeeded as chairman by his nephew, Mr. Tata in 1991.

18. Mr. Tata (R2) aggressively sought to

expand Tata Group,
acquiring such companies as London-based Tetley Tea (2000) and
Anglo-Dutch steel manufacturer Corus Group (2007). In 2008, he
oversaw Tata Motors' purchase of the elite British car brands Jaguar
and Land Rover from the Ford Motor Company. ln 2012, Mr. Tata
retired as chairman and was succeeded by Mr. Cyrus (R11).On
Octobe126, 2016, Mr. Cyrus was dismissed before completion of his
term, and then Mr. Tata took over as interim chairman. In the
process of handing over the reins of the company to new chairman,
in January 2017 Natarajan Chandrasekaran was appointed as the
new chairman of the Tata Group.

19. The company is the investment company of the Tata

Group and holds the bulk of shareholding in group companies. It
was established as a trading enterprise in 1868 founded by
Jamshetji Tata with its headquarters at Mumbai. About 660/o of the
equity capital of the company is held by philanthropic trusts
endowed by members of the Tata family. The big two are Sir
Dorabji Tata Trust and Sir Ratan Tata Trust. The company is the
owner of the Tata name and the Tata trademarks, which are
registered in India and several other countries. In the long history
of this company, from 1868 till 2016, it has seen six Chairman who
are as follows:

Jamsetji Tata (1868-1904): The founder of the Tata group

began with a textile mill in central India in the 1870s. His
powerful vision inspired the steel and power industries in
India, set the foundation for technical education, and helped
the country leapfrog from backwardness to the ranks of
industrialised nations.

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Sir Dorab Tata (1904-1932): Through his endeavours in

setting up Tata Steel and Tata Power, this elder son of
iamsetji Tata was instrumental in transforming his father,s
grand vision into reality. It was also under his leadership that
the Sir Dorabji Tata Trust, the premier charitable endowment
of the Tatas, was created, propelling the Tata tradition of
phila nth ropy.

Nowroji Saklatwala (1932-1938): Sir Dorab was

succeeded as chairman of the Group by Sir Nowroji
Saklatwala. In 1938, following Sir Nowroji's demise, 34-year-
old JRD Tata was appointed as the new chairman.

JRD Tata (1938-1991)i The late chairman of the Tata

Group pioneered civil aviation on the subcontinent in 1932 by
launching the airline now known as Air India. That was the
first of many path-breaking achievements that lRD, who
guided the destiny of the Group for more than half a century,
came to be remembered for.

Ratan Tata (1991-2O12): Ratan N Tata was the Chairman

of Tata Sons, the promoter holding company of the Tata
group, since 1991. He was also the Chairman of the major
Tata companies, including Tata Motors, Tata Steel, Tata
Consultancy Services, Tata Power, Tata Global Beverages,
Tata Chemicals, Indian Hotels and Tata Teleservices. During
his tenure, the group's revenues grew manifold, to talling
over $83 billion in 2010-11. Tata also serves on the board of
directors of Fiat SpA and Alcoa. He is also on the international
advisory boards of Mitsubishi Corporation, the American
International Group, JP Morgan Chase, Rolls Royce, Temasek
Holdings and the Monetary Authority of Singapore.

Cyrus Mistry (2012-2O15): The selection of Cyrus lvlistry, a

non-executive director on the Tata Sons board as well as
Managing Director of the Shapoorji Pallonji Group - which has
an 18.37 per cent stake in Tata Sons - instead of the others

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whose names were being bandied had surprised many four

years ago. Some had attributed it to Ratan Tata's push to
lower the average age of senior management in the group.
l\4ostof the other candidates were felt to be either too old or
too low in the hierarchy. Mistry seemed just the right age.

20. Major operating companies under the company are Tata

Consultancy Services, Tata Motors, Tata Steel, Titan, Tata Power,
Tata Global Beverages, Tata Chemicals, Tata Communications, Taj
Hotels Resorts and Palaces and many other companies.

2\. Tata Group presently operates in more than hundred

countries, across 6 continents, collectively employing over 6,60,000
people, with a mission 'improve the quality of life of the
to
communities we serve globally, through long-term stakeholder
value creation based on Leadership with Trust', In 2015-16, the
revenue of Tata Group, taken together, was $103.51 billion. There
are 29 public-listed companies in the Tata Group, with a combined
market capitalization of about $116.41 billion (as on 31 March
2016). The company is the principal investment company and the
promoter to almost all Tata Group companies. Above 660lo of the
issued ordinary share capital of the company is held by
philanthropic trusts, which support education, health, livelihood
generation and art and culture (collectively, the "Tata Trusts").

22. The company has come into existence as Private Limited

company with all characteristics of a private company, ever since it
continued as private limited company until a change came in
statute directing all the companies having more than Rupees one
crore rupees paid-up capital to be public limited companies with
characteristics of private limited company, ever since, this company
has continued as public company governed by section 43 (1A) of
Companies Act 1956 because section 43 (1A) says that though
private limited company has more than one crore rupees, it could
continue as public limited company with all characteristics of private
limited company, therefore without any change to the
characteristics of private limited company, the company continued

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as public limited company holding the characteristics of a private

limited company. After which, when Companies Act 2013 has come
into force in the year 2014, since there is no provision analogous to
section 43 (1A) of Companies Act, 1956, time has come to it to
choose either to become private or public limited company. For
turn-over of one crore rupees envisaged in 1956 Act has not been
reiterated under Companies Act 2013, now it has become evident
under new regime, if
company remains with characteristics of
private company despite paid up capital is more than one crore
rupees, such company under new regime will can become private
company. As this company by virtue of its articles is private limited
company, the company, by saying so, has filed a Petition u/s la(1)
of Companies Act, 2013 for conversion of Public limited company
into private Limited company and the same is pending before this
Bench. Since section 465 of Companies Act 2013 not yet been
notified, further previous provisions have not been declared as
repealed, the company says since it is in all respect private limited
company under new regime, lt has stated that it wants to retain its
original status as private limited company. This is where this
company stands today.

23. Shareholding pattern of the company as follows:

Total equity shares 404,142 (?1,000 each)

No of Share-holding
Sh a reholder
shares percentage

--t-
Shapoorji Pa llonj i 108 0.026723

Sterling Investment Corp

37720 9 , 18489
(Shapoorji Pallonji Group)

Cyrus Investments 37720 9 , 18489

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No of Share-holding
Sha reholder
sha res percentage

(Shapoorji Pallonji Group)

Ratan Tata 3 368 0.83337

Sir Dorabji Tata Trust 113067 27.97705

Sir Ratan Tata Trust 952tt 2 3.5 588

Tata I nvestment Corp 326 0.080665

Sarvajanik Seva Trust 396 0,097985

RD Tata Trust BB 3B 2.186855

-,"1

Tata Socia I Welfare Trust 1507 5 3.730725

Tata Ed ucatio n Trust 15075 3.730125

JRD Tata Trust 16200 4.008492

Tata Power 6673 1 .6 51 152

I

Tata GIobal Beverages 17 55 .434253

l

l
Indian Hotels

4500 1.1,t347
(Taj Hotels Resorts and
Pa laces )

Tata I nd ustries 2295 0.56787

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No of Share-holding
Sha reholder
shares percentage

Tata Chemicals t0237 2.533021

Kalimati Investment Co (Now

t2375 3.062043
Tata Steel)

Tata International Ltd 1477 0.365466

Tata lvlotors 12375 3.062043

Piloo Tata 487 0. 120502

Jimmy Naval Tata 3262 0.807742

Vera Farhad Choksey 157 0.038848

limmy Tata t57 O,O3BB4B

Simone Tata 20tt 0.497597

Noel Tata 2055 0.508485

HH Maharawal Virendra Singh

Chauhan
1 0.000247

Raja of Chhota Udepur

MK Tata Trust 2427 0.599047

24. As to the Petitioners 1& 2 are concerned, these companies

holding above 1Bo/o equity share capital of the company. They are
indeed belonging to a reputed construction group called Shapoorji

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Pallonji group. This is also one of the oldest business families in

India entered into construction; one of the testimonies of their
construction is Bombay House itself wherein the company is housed
since long. It is also one of the business groups in India held to
construction business for about a century, over a period, this group
developed into several companies holding various businesses.
These Petitioners have become shareholders in the company in the
year 1965 buying shares from Dinshaw group, though Shapoorji
Pallonji group is not known to the Public like Tatas, they have been
consistently sailing along with the company for more than half a
century without any hitch. Despite no position in the Board has
been provided to these petitioners in the Articles, they continued on
Board since 1980 to 2004, then 2006 - 2016 without any provision
in the Articles. All was well to this group until before Mr. Cyrus was
removed as Executive Chairman of the company. We have not even
come across single Board Meeting or shareholders' meeting where
the Petitioners differing with Trusts in any respect.

25. But today, it

has come to such a pass that the Petitioners
have filed this Company Petition against Mr. Tata, doyen of the
company and the Trusts. So, these Petitioners today stand against
the Trusts saying they have caused prejudice to the interest of
them. In the Company Petition these Petitioners have been stated
as single largest indlvidual group next to the Tata Trusts, partner of
the company but projected as minority shareholders, having a
stake of ?1,00,OOOcrores in a more than one hundred billion-dollar
Company. There can be many ways to project the personality, all
may be right, but the position relevant to this case is, the
Petitioners holding above 1Bo/o shares in the company is a minority
without any special rights in the Articles of Association. These
Petitioners are not the founder members of the company, they have
only come in the year 1965 by acquiring equity of 18.37olo from
erstwhile shareholders, who also had no rights in the Articles of
Association, therefore, the Petitioners can be called as investors
come into the company and has been continuing as equity

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shareholders earning more than ?800crores dividend from this

company till date.

26. With this background, the Petitioners have filed this Company
Petition striking the Respondents on the premise that the
Respondents have conducted the affairs of the company oppressive
against the petitioners and prejudicial to the interest of the
Petitioners.

27. Mr. Tata is the Chairman of the Tata Trusts (comprising Sir
Ratan Tata Trust and Allied Trusts, and the Sir Dorabji Tata Trust
and Allied Trusts). Under his guidance and leadership, the Trusts
have metamorphosed from being reactive charities to India's
premier philanthropic foundations, striving to transform lives of
millions of individuals, through meaningful partnerships wlth like-
minded non-profit organizations, communities, governments (state
and central), corporate and foreign funding organizations.

28. Mr. Tata was the Chairman of the company from 1991 till his
retirement on December 28,2072. During his tenure, the group's
revenues grew manifold, totaling over $100 billion in 2011-12. After
retirement, Mr. Tata has been conferred the honorary title of
Chairman Emerltus of the company, Tata Industries, Tata Motors,
Tata Steel and Tata Chemicals.

29. Mr. Tata was the chairman of major Tata companies,

including Tata Motors, Tata Steel, Tata Consultancy Services, Tata
Power, Tata Global Beverages, Tata Chemicals, Indian Hotels and
Tata Teleservices. He is also associated with various organizations
in India and overseas. Mr. Tata serves on the board of directors oF

Alcoa and is also on the international advisory boards of I\4itsubishi

Corporation, JP Morgan Chase, Rolls-Royce and the Monetary
Authority of Singapore. He is the Chairman of the Council of
Management of the Tata Institute of Fundamental Research. He
also serves on the board of trustees of Cornell University and the
University of Southern Ca liforn ia.

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30. Mr. Tata joined Tata group in the year 1962, after serving in
various companies of this group, he was appointed as Director-in-
Charge of the National Radio and Electronics Company in 1971. In
1981, he was named as Chairman of Tata Industries; the group's
other holding company, where he was responsible for transforming
it into a group strategy think tank and a promoter of new ventures
in high-technology businesses. The Government of India honored
Mr, Tata with its second-highest civilian award, the Padma
Vibhushan, in 2008. He has also received honorary doctorates from
several universities in India and overseas.

31. 3'd Respondent namely Mr. Amit Ranbir Chandra has

been appointed to the Board of the company on 26.8.2016 as a
nominee of Tata Trusts under Article 1048 of the Articles of
Association of the company before joining as Director in this
Company. He worked in Bain Capital Equity until before 2008, as
head of Global Market and Investment Banking and Managing
Director at DSP Merrill Lynch Ltd. one of the India's leading
investment Bank. He also worked in social sectors for nearly 15
years and he has the privilege of serving many NGOs, now divided
his time between corporate world and social sector. When he was
appointed, his nomination was heartily accepted by Mr. Cyrus,

32. 4th Respondent namely Mr. Ishaat Hussain, Director of

Tata Sons,is one of the few Tata veterans who worked closely with
four chairmen during his 36-year tenure at the group - IRD Tata,
Ratan Tata, Cyrus Mistry and N Chandrasekaran. He said "Every
operating system has hardware and software. In Tata group,
software is ethics and values and hardware is the people. So
whatever be the change, Tata principles cannot change." He retired
after attaining 70 years by znd September 2017.

33, 5th Respondent namely Mr, Ajay Gopikisan Piramal

joined the Board of the company as a Non-Executive Director in
August, 2016. He leads Piramal Group, a conglomerate with a
diversified business interest across pharmaceuticals, financial
institution, information services, real estate and glass. He is also

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the Chairman of Shriram Capital, the holdlng company for financial

services and insurance entities of Shriram Group. He has been
associated with various organizations, namely as Chairman of Board
of Governors of Indian Institute of
Technology, Indore, Board
Member of Pratam (largest NGO in primary education), a member
of the Board of Deans Advisors at the Howard School in Business at
Boston, Member of Central Board of State Bank of India and
member of Alternative Investment Policy Advisory Committee
constituted by SEBI, member of the National Council of
Confederation of Indian Industry and the member of the Hon'ble
Prime Minister Council for Trade and Industry and Board of Trade
constituted by ministry and the member of Hon'ble Prime Minister
task force on pharmaceuticals and knowledge based industry.

34, 6th Respondent namely Mr. Venu Srinivasan is a director

on the board of Tata Sons. He is the chairman of Su nda ra m -Clayton
and TVS Motor Company, one of the largest two-wheeler
manufacturers in India. Mr. Srinivasan has an Engineering Degree
from the College of Engineering, Chennai, and a lYaster's Degree in
Management from Purdue University, USA. In recognition of his
contribution to management, he was conferred with a Doctor of
Management degree by his alma mater, Purdue University, in 2074.
He has held various important positions in the Indian industry

35. 7th Respondent namely, Dr. Nitin Nohria is a non-

executive director of Tata Sons. He is the George F Baker Professor
of Administration and the Dean of the faculty at Harvard Business
School (HBS). He became the tenth Dean of Harvard Business
School on July 1, 2010. He previously served as Co-chair of the
Leadership Initiative, the Senior Assoclate Dean of Faculty
Development and the Head of the Organisational Behaviour unit. He
has taught courses across Harvard Business School's MBA, PhD,
and executive education programmes. His intellectual interests
centre on human motivation, leadership, corporate transformation
and accountability, and sustainable economic and human
performance. He is the co-author or co-editor of 16 books. He was
a visiting faculty member at the London Business School in 1996.

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36. 8th Respondent namely. Mr. Ranendra Sen, also known as

Ronen, is an independent director on the board of Tata Sons. He
has also served on the board of Tata Motors as a non-executive
independent director from 2010 to 20t2. Mr. Sen was India's
Ambassador to the United States from 2004 to 2009. He was also
India's Ambassador to Mexico (1991-92), to Russia (1992-98), and
Germany (1998-2002), and served as High Commissioner to the
United Kingdom (2002-04). From 1986 to 1991, he was Foreign
and Defence Policy Advisor to successive Prime Ministers and had
several assignments as special envoy of the Prime Minister for
meetings with Heads of State or Government.

37. 9th Respondent namely, Mr, Vijay Singh, a retired IAS

officer of Madhya Pradesh cadre (1970 batch), is a non-executive
director of Tata Sons. He has handled several important
assignments both in Madhya Pradesh and at the Centre during his
37-year career. At the Centre, the positions he held included
Director, Department of Culture; Joint Secretary and Financial
Adviser in the Ministry of Health; Additional Secretary and Financial
Adviser in the Ministry of Chemicals and Fertilisers; and Additional
Secretary in the Ministry of Information and Broadcasting. He
became Chief Secretary of the Madhya Pradesh government in
October 2004 and served there until January 2006. Thereafter, he
served as Secretary to the Government of India in the Department
of AYUSH and later in the Department of Road Transport and
Highways, before becoming Defence Secretary in August 2007. He
served as a Member of the Union Public Service Commission until
April 2013.

38, loth Respondent namely, Ms, Farida Dara Khambata is a

director on the board of Tata Sons.

39. 11th Respondent namely, Mr. Cyrus Pallonji Mistry, aged

48, was made the Chairman of the company in December 2072
after its previous Chairman, Ratan Tata, formally retired. He was
the sixth chairman of the group and the only the second chairman
who did not carry the Tata name, after Nowroji Saklatwala. Before

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this, he was the Managing Director of the Shapoorji Pallonji Group.

He was also on the board of Tata Sons. He is the youngest son of
construction tycoon Pallonji Mistry, who also owns a significant
stake in the group. He is a graduate of civil engineering from
Imperial College of London, and has a Master of Science in
Management from the London Business School, He was removed as
the Chairman of Tata Sons in October, 2016.

40, 12th Respondent namely, Mr. Ralf Speth joined the board
of Tata Sons as an Additional Director on October 25, 2016. He is
also the Chief Executive Officer of Jaguar Land Rover, which has
seen a remarkable turnaround since he took charge on February
18, 2010. Following a Degree in Economics Engineering from
Rosenheim University, Germany, he earned a Doctorate in
Engineering. He is also an Industrial Professor at the University of
Warwick. In the course of his career, he worked as a business
consultant for a number of years before joining BMW in 1980. He
moved to Ford's Premier Automotive Group when BMW sold Land
Rover to Ford in 2000. After a stint as Head of Global Operations at
the German International Industrial Gases and Engineering
Company Linde Group, he returned to Jaguar Land Rover when the
Tata group acquired the company.

4L. l3th Respondent Mr. N. Chandrasekaran, aged 53, is

Chairman of the board of Tata Sons, the holding company and
promoter of more than 100 Tata operating companies with
aggregate annual revenues of more than US $100 billion. He joined
the board of Tata Sons in October 2016 and was appointed
Chairman in January 2017.

42. 14th Respondent namely, Mr. Noshir, A. Soonawala (at

some places referred as "Noshir" and at some places as
"Soonawala", a Commerce Graduate from the University of
Bombay and a Chartered Accountant from the Institute of
Chartered Accountants of India, serves as Member of Group
Corporate Centre at The Tata Group, Deputy Chairman of Tata Tea
Ltd. and Vice Chairman of Tata Sons Limited. He served as Finance
 NATIONAL COMPANY LAW TRIBUNAL, MUMBAI BENCH

c.P. No. a2(MB)/2016

Director of Tata Sons Limited from 1968 to June 2000. Having

worked with the iCICI, the World Bank and the International
Finance Corporation, Washington, Mr. Soonawala has wide
exposure in the field of Finance. He has 40 years' experience of
financial management and business management. He started his
career as a Senior Project Officer (finance) with ICICI and was
deputed to the Development Banks in Ghana and Nigeria to assist
and advise them on their organization and methods of project
appraisal and project financing and in 1965 through the World
Bank, to assist development banks in Africa. He also serves as a
Member and Trustee of several trusts such as the Sir Ratan Tata
Trust, Bai Hirabai l. N. Tata Navsari Charitable Institution, Navajbai
Ratan Tata Trust, J, R. D, Tata Trust, R. D, Tata Trust, Sir Dorabji
Tata Trust and the Sarvajanik Seva Trust.

43, 15th Respondent namely, J.N. Tata: Trustee of Sir Ratan

Tata Trust.

44. 16th Respondent namely, Mr. K.B. Dadiseth, aged 73, Mr.
Dadiseth serves as a Trustee of the Ratan Tata Trust and also
serves as an independent director on the boards of Britannia
Industries Limited, Piramal Healthcare Limited, Siemens Limited,
The Indlan Hotels Company Limited and Godrej Properties Limited.
He is also on the boards of ICICI Prudential Life Insurance, ICICI
Prudential Asset Management Trust and Prudential Plc, UK.

45. 17th Respondent namely, Mr. R.K. Krishnakumar, also

known as KK, serves as a Senior Member of Tata Administrative
Service where he joined in 1963 having received a Master's degree
from the Presidency College, University of Madras. His graduate
studies were at Loyola College, Chennai. He is associated with the
tea industry and the Tata Group for over 40 years. He served as the
Member of Group Corporate Centre at Tata Sons Limited. He joined
as an MD in Indian Hotels Co. Ltd. in 1997 and continued till 2002.
Thereafter, he was appointed as a member of the Board of
Directors to Tata Sons. A year later, he retired from the Board and
went back to Indian Hotels Company and acquired the position of

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vice chairman and the managing director, and stayed on the job till
2007. Mr. Kumar served as Vice Chairman of Taj Hotels Resorts and
Palaces of the Tata Group. Mr. Kumar served as a Non-Executive
Non Independent Director of Tata Global Beverages Limited.
He Joined the Sir Ratan Tata Trust and Sir Dorabji tata Trust in
2007 but continued to sit in Board of Directors of Tata Sons, till he
retired from the board on 18 July 2013, on reaching the age of 75.

46, 18th Respondent namely, Mr. S. K. Bharucha, is a Trustee

of Sir Ratan Tata Trust and served as Director of the Associated
Building Co. Ltd.

47, 19th Respondent namely, Mr, N.M. Munjee, Trustee of Sir

Ratan Tata Trust.

48, 20th Respondent namely, Mr, R, Venkataramanan is the

Managing Trustee of the Sir Dorabji Tata Trust and responsible for
management and oversight of all the Tata Trusts. He is a Science
Graduate and did MBA from Satya Sai University. He is also a Law
Graduate of Mumbai University. Furthermore, he has done
Advanced management Programme from Harvard Business School.
For several years, he was Executive Assistant to Mr. Ratan Tata,
the former Chairman of the Tata group. Prior to his association with
Mr. Tata, Venkat was Head of Business Support at the Qatar
Foundation, a non-profit based in Doha. He had also worked in
Videsh Sanchar Nigam Limited, Mumbai (VSNL), now known as Tata
Communications and the Gujarat State Finance Corporation based
in Ahmedabad. He has also been a Member of the Board of Air Asia
I ndia Private Limited.

49, 21st Respondent namely, Dr. Amrita Patel, Trustee of Sir

Dorabji Tata Trust.

50. 22nd Respondent namely, Mr, V, R, Mehta, Trustee of Sir

Dorabji Tata Trust, an Honors degree holder in Engineering, aged
B0 years, was an Independent Director on the board of Tata Sons

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for five consecutive years for a term up to 3lstMarch, 2019,

presently he is a Trustee of Sir Dorabji Tata Trust.

51. 23,.d Respondent namely, Mr. F.N. Subedar, Chief

Operating Officer & Company Secretary of Tata Sons Ltd.

52. Mr. Bharat Vasani was General Counsel of Tata Group; he

worked as one of the directors of AirAsia India Ltd. (Tata Group
Company) as well. His name crops up many a times in relation to
AirAsia issue,

53. Mr, Mehli Mistry: Mehli's and Cyrus'mothers are sisters and
Mehli's and Cyrus' fathers were first cousins. M. Pailonji Co Pvt
Ltd(MPCPL) and other companies are run by Mr. Mehli Mistry.

54, Lord Sushanta Kumar Bhattacharyya is a British-Indian

Engineer, educator and government advisor. In 1980, he became
Professor of Manufacturing Systems at the University of
Warwick and founded the Warwick Manufacturing Group. In 2004,
he was made a life peer and became a member of the House of
Lords.

55. Mr, Sivasankaran is the owner of Sterling Infotech Limited

and other group companies of Siva Group.

56. The Petitioners' main grievance is Articles of Association,

bleeding of Corus acquisition and overpriced take over, Doomed
Nano car project, R2's relationship with Siva, DoCoMo Arbitration,
unjust investment of Mr. Tata at the cost of the company, aviation
industry misadventures, removal of Mr. Cyrus as Chairman of the
company, loss to the company in purchase of shares of Tata Motors
which are as follows:

Company Petition averments

57. The Petitioners'submit that in the year 2010, while selection

committee of the company scouting for a person for holding the
post of Chairman as replacement to Mr. Tata, Mr. Bhattacharya,

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close friend of Mr. Tata requested Mr. Cyrus to chair the Board of
the company, initially according to the petitioners, Mr. Cyrus
refused the offer, finally when selection committee, despite
interviewing several global leaders, was unable to locate a suitable
candidate, Mr. Cyrus was again asked to reconslder the oFfer made
by the Selection Committee. Of course Mr. Cyrus was also one of
the members of that Selection Committee. On being asked once
again to take up the assignment, Mr. Cyrus being assured by Mr.
Tata, the petitioners say, he would be given freehand; he had
accepted the offer to become Chairman in the interest of Tata
Group. Finally, he resumed office as Chairman of the company in
December, 20t2. By the time resumed office, Articles of Association
contained a right in favor of the Trustees of Tata Trust to nominate
7/3'd of directors on the Board of the company. Soon thereafter,
another change happened in the Articles of Association to ensure
that certain decisions relating to operating companies of Tata Group
were mandatorily to be placed before the Board of the company, by
these changes, the Articles of Association became a device for
superintendence and control of the company by Mr. Tata and
Mr. Soonawala, such kind of superintendence ultimately reduced
nominee directors of the Trust on the Board of the company as
agents to these two, and by virtue of this interference, they failed
discharging their fiduciary duties as directors of the company.
Under the Artlcle 104, the trustees of the Trust are entitled to
nominate three Trustee Nominated Directors; under Article L2l, all
decisions of the Board of Directors of the company would need
affirmative consent of majority of the Trusts Nominated Directors.
Under Article 121-A, such decisions have to be mandatorily brought
to the Board of Directors of the company, once it comes to the
company board, the Trusts Nominated Directors being majority, by
using Article 121, they could call shots. By this arrangement, Trusts
Nominated Directors started overruling the entire Board of
Directors. The Petitioners submit there has been another restriction
under Article 86 saying so long as the Tata trusts collectively hold
at least 40o/o of the paid up capital of the company, no quorum
shall be constituted in the General meeting of the company unless

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one authorized representative jointly nominated by Tata Trusts

present in such meeting. The petitioners say, as if it is not enough,
another restriction has been imposed with a clause saying, so long
as Tata Trusts hold aggregate of 40o/o of paid up capital, Tata
Trusts shall have the right to nominate 7/3d of the prevailing
member of directors on the Board. In Article 118, it has been
provided that so long as Tata Trusts collectively hold at least 40olo
of the paid up equity, the selection committee shall be constituted
to recommend a person as Chairman of the Board of the company
and such person would be appointed as Chairman by the Board.
The process that is followed for the selection shall be repeated
when removal of such chairman is contemplated by the board.
Article 121 provides that unless affirmative vote of majority of
directors appointed by Tata Trusts under Article 104-B voted in
favor of such person, he cannot become Chairman of the company.

58, Maln grievance of the petitioners is, over a period of time,

Tata Trusts Dlrectors have become handmaiden of Mr. Tata and his
lieutenant Mr. Soonawala, making them so, they have become
"Super Board". The petitioners submit that the Articles of
Association has become a device for superintendence and control of
the company by Mr. Tata and Mr. Soonawala, They submit that
under Article 104, the Trustees of the Trust are entitled to nominate
three Trusts Nominee Directors, under Article 121, all decisions
would need the affirmative vote of the majority of directors
appointed pursuant to Article 104-B (i.e. Trust Nominee Directors),
on the top of it, under Article 121-A, that every decision that has
been proposed in Tata Companies shall be resolved upon by the
Board of Directors wherever the company holds 20olo or more of the
paid up share capital in the respective company.

59, The Petitioners submit that arranglng such a mechanism that

the Trustee Nominee Directors could overrule the entire Board of
Directors with their affirmative vote and by which, Mr. Tata and
Mr. Soonawala could control the Trustee Nominee Directors in
getting everything done as per their wish suppressing the minority
shareholders, i,e. the Petitioners.

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60. In Article 86, it has been set out that so long as Tata Trusts
collectively hold 40olo of the paid up capital of the company, no
quorum shall be constituted in General Meeting of the company,
unless at least one authorized representative jointly nominated by
Tata Trust is present in such meeting. Likewise, under Article 104-B
also, it has been set out that as long as the Trusts collectively hold
40o/o of the paid up capital of the company, the Sir Dorabji Tata
Trust and Sir Ratan Tata Trust, acting jointly shall have right to
nominate 7/3'd of the Directors on the board as also to remove any
person so appointed and in his place to appoint another person as
Director, in furtherance of it. under Article 118, it is set out that so
long as Tata trust collectively hold at least 40olo of the paid up
equity capital, for selecting Executive Chairman, shall be
constituted to recommend the appointment of Chairman on the
Board and the Board may appoint such recommended person as
Chairman to the Board. The said Article also sets out the
constitution of the Selection Committee and the quorum for
meetings for the selection. According to the Petitioners, the same
Article 118 reiterates that the procedure followed for section and
appointment of chairman shall be followed even for removal of the
incumbent Chairman as well.

61, Though these Articles of Association are meant for to exercise

judicially and in the interest of all the shareholders, by seelng the
recent conduct of especially Mr. Tata, Trustees of Tata Trusts or its
nominee directors, of late, the petitioners submit, they realized that
the answering respondents started acting as per Mr. Tata's bidding,
the example they say is, in one board meeting of the company
dated 30.06.2016, the two nominee directors of the company i.e.
Mr. Vijay Singh (R9) and Mr. Nitin Nohria (R7) left the meeting for
approximately one hour, keeping other members waiting, to seek
instructions from Mr. Tata on the lssues being in discussion at the
meeting. The Trustees by using right under Article 121-A, started
dictating terms in respect to other individual Tata companies such
as Alr Asia India because lYr. Tata has special interest and
keenness for the aviation sector, these two Mr. Tata and

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Mr. Soonawala indeed penetrated into seeking details of day-to-day

business of listed Tata group companies. The Petitioners submit
that these Trustee nominee directors are beholden to the trustees
of the Tata Trusts and not to the company, not in the interests of
the company or the Petitioners or lacs of public shareholders of
various other Tata companies, whose actions continue to be
effected by the actions and inactions of the trustees of the Tata
Trusts and the nominee directors of the Tata Trusts. The petitioners
submit that the unbridled power in the hands of these nominee
directors has become a big concern to every stakeholder of the
company.

62, In view of the reasons mentioned above, they say, it is

imperative that Articles 86, 104(B), ll8, l2l and 121(A) be struck
off in entirety, as to Article 124 is concerned, they say the following
portion of the said Article to be deleted "Any committee empowered
to decide on matters which otherwise the Board is authorized to
decide shall have as its member at least one director appointed
pursuant to Article 104(8). The provision relating to quorum and
the manner in which matter will be decided contained Articles 115
and 121 respectively shall apply mutatis mutandis to the
proceedings of the committee" .

63, Apart from assailing vires of the Articles mentioned above,

these petitioners assail some other issues holding out as legacy
hotspots. As the Petitioners pleaded the issues item-wise, the same
are hereby paraphrased as below:

64. Overpriced and bleeding Corus acquisition: The Company is

the promoter of Tata Steel Ltd. (TSL) holding 31.35o/o of its paid up
equity capital, with that right, in the year 2007, Mr. Tata led the
purchase by TSL of Corus Group PLC (Corus) for a sum in excess of
USD 12 billion at a substantial premium, the value of it was more
than 33olo of its originai offer price, by which, the shares of Tata
Steel Ltd. on Indian Exchanges came crashing down, because the
transaction was not in the best interest of Tata group. t\4r. Tata
abused the power vested with him as Chairman of Tata group in

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acquiring Corus at heavily inflated price leading to blockage of

funds of the TSL. By doing so, TSL required to infuse substantial
funds in the Corus which has plants in UK and Netherlands. Post to
the aforesaid investment, the plants in Netherlands were fairly
successful, however, UK plant continued to do badly. When
bleeding in Tata Steel UK increasing, in the beginning of 2016,
Mr. Cyrus being the Chairman of The company initiated discussion
with UK government, the Pension Trustees, the Pension Regulators
and the Labor Unions to restructure the operations of the Tata Steel
UK by holding discussion with ThyssenKrupp (Thyssen) to merge
the whole of Tata Steel Europe into Thyssen, Mr. Tata was against
this decision of restructuring, because Mr. Cyrus trying to merge
this Tata Steel Europe into Thyssen did not go well to Mr. Tata, it
has become one of the additional reasons for the unceremonious
removal of Mr. Cyrus as Chairman of The company .

65. Doomed Nano Car Projectr In the year 2007-08, Mr. Tata
as chairman of The company made a public promise that Tata
motors would produce a car costing ?1 Lakh or less, in pursuance
thereof, land was acquired in the state of West Bengal, when it
failed to set up project there, it was moved to state of Gujarat with
a capacity to manufacture 2,50,000 cars per year, but there also
having Tata Motors failed to penetrate Nano into the market, now
the demand for Nano cars have come down to 3,000 cars per year,
but the car cost has gone above ?2 Lakh, whereas sale price of the
car remained less than two lakh rupees, causing loss of
t1,ooocrores in this project. Because of this project, once profitable
Tata Motors has slipped into losses hitting the dividend pay-out that
comes to the Petitioners from the company which gets from Tata
Motors. For Nano project has become a liability, the petitioners
submit, it should be shut down but emotional reasons involving
Mr. Tata in respect to this project, the declsion to shut down this
project has not yet been taken.

66, The Petitioners have learnt from e-mail of N4r. Cyrus that
Nano Gliders were planned to be supplied to an entity namely
layem Auto that makes electric cars in which Mr. Tata in his

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personal capacity holds financial stake, which is in conflict of

inte rest.

67. Mr. Tata's Relationship with Siva: After Mr. Cyrus became
the Executive Chairman of the company, he gradually learnt that
Siva owning Sterling Infotech Ltd. (Sterling) entered into various
dealings with the company because of the patronage he had from
the erstwhile Chairman Mr. Tata, causing huge losses not only to
the company but also to some of its group companies. On
23.72.2005, a term sheet was entered into between Tata
Teleservices Ltd. (TTSL) and Sterling offering 60 million equity
shares of TTSL having a face value of ?10 each at a discounted rate
of ?17 per share and 460 million share warrants carrying a right to
subscribe one equity share face value of ?10 for the price of only
a77, this term sheet was subsequently followed by share
subscription agreement dated 24,02.2006 between TTSL and
Sterling, by which, Sterling received preferential allotment of 520
million equity shares at a through away price of only ?884crores as
against the shares issued to a Singapore owned company called
Temasek Holdings @ ?26 per share. Pursuant to the share
subscription agreement, Sterling paid a sum of {782crores and
converted warrants to get a total of 520 million equity shares at the
price of ?17 per equity share. By this price difference in between
the shares issued to Siva through Sterling and the shares issued to
Temasek @ ?26 per share, the difference of windfall that came to
Siva was around ?468crores. When Siva himself was on record
stating that he was given special treatment owing to the
relationship with Tata, it is self-evident to say that Mr. Tata
provided special treatment to Mr. Siva.

68. Sometime in November, 2008, NTT Docot\4o, a Japanese

telecom company invested 260/o in the equity of TTSL comprising
primary equity to the extent of 20o/o and secondary purchase of 60lo
by way of an offer, taking it as an advantage, Siva caused Sterling
(Siva company) to sell 20.74 million shares to DoCoMo at the rate
of 4117.81 per share (i.e. a profit of more than ?100 per share)
thereby amassing a huge profit to the tune of almost {209crores in

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less than three years. Indeed, this fact has been admitted by Siva
in the aide memoire to his letter dated 3,d October, 2013 addressed
to Mr. Cyrus. This sale by Sterling of 20.74 million shares under the
secondary purchase was pursuant to an Agreement with the
company that Sterling would, inter aira, proportionately participate
in making good any indemnities being provided by the company
and/or TTSL to DoCoMo or any losses arising out of the put option
granted to DoCoMo. This understanding was recorded in the letter
dated 2nd December, 2008 addressed by the company to Sterling as
also by way of an Inter-se Agreement dated 13th December, 2008
entered into between Sterling, Siva, the company and TTSL.
Another startling fact is that TTSL, under the influence of Mr. Tata
not only offered Sterling preferential allotment of shares at throw
away price but also the company financed the entire consideration
paid by Sterling towards the shares by taking a loan of ?650crores
from Standard Chartered Bank under the guarantee given by the
company on 24.02.2006,as to remaining ?132crores out of
tT82crores shown as paid by Sterling provided by a company
known as Kalimathi Investment Pvt Ltd (in short "Kalimathi") a
subsidiary of Tata Steel Ltd. by way of temporary inter corporate
bridge loan to Sterling to facilitate it with funds for allotment of
shares until the monies due to Sterling under a loan from IDBI
Bank were disbursed In March 2006. To prove it further, the
Petitioners stated that in the letter dated 3.10,2013 Mr. Tata
written to Mr. Cyrus reflecting that Mr. Tata pushed it further to
accommodate Siva even after his retirement as Chairman of The
co m pa ny.

69, DoCoMo Arbitration: On DoCoMo initiated arbitral

proceedings against TTSL by exercising put option, an award was
passed for an amount of {B,4s0crores against TTSL, when this
award was taken to Hon'ble High Court of Delhi, the company was
directed to deposit entire award sum on behalf of all the parties
Including Siva whose proportionate share is around Rs.694crores,
such being the situation, in the Board Meeting dated 15.9.2016
Mr. Cyrus apprised the Board that Sterling was unwilling to

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contribute its proportionate share in the award amount, and

obtained approval of the Board to initiate legal proceedings against
Siva and Sterling for recovery of the said amount, it happened on
15.9.2016, to the surprise of Mr, Cyrus, on 19.9.2016, the
company, TTSL and DoCoMo received a legal notice from Siva as a

counter blast to the decision taken in the Board Meeting dated

15.9.2016. The point the Petitioners highlighted here is Siva would
not have come to know of Board decision in the meeting held on
15.9.2016, had it not been informed by somebody from inside to
Siva incidentally making him to put the company on notice about
the proportionate payment to be made to the award amount.

7O. In addition to the above benefit, the Petitioners verily believe

that an amount of approx. ?600crores have been paid to Siva's
companies by TTSL and its subsidiaries under various contracts
purportedly for procuring services and vendor management for
TTSL and its su bsidiarles.

7L. Unjust Enrichment at the cost of the company: Colaba

Tenancy Flat - The allegation is that though Mr. Tata, who resided
in the flat since 1968, had no ownership rights over the said flat, he
sold away tenancy rights of the residential apartment in a building
called Baktawar at for ?3crores in the year 2000 to a
Colaba
company called M. Pallonji & Co. Pvt. Ltd. (MPCPL), owned by
Mr. Mehli, a close friend and confidante of Mr. Tata and a distant
relative of Mr. Cyrus, because this property was initially belonging
to erstwhile Tata company namely Forbes & Forbes Campbell & Co.
(FFC). As to this property, there was a letter from FFC providing
occupancy rights to Mr. Tata with an understanding between FFC

and Father of Mr. Tata i.e. Naval Tata that should Mr. Tata decides
to vacate the said flat, the same would revert to FFC so that it
could be given to another employee of FFC. Of course, this
company is not in existence today but Mr. Tata has no right to
create thirty party rights in favor of Mr. Mehli. Because of the
closeness between Mr. Mehli and Mr. Tata, Mr. Mehli in the year
1993, helped Mr. Tata to buy an agriculture land at Alibaugh,
Maharashtra. In view of these relationship in between them, Tata

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Power Company Ltd. (Tata Power/TPC) from the year 1993 onwards
awarded long term contracts spanning across over 20 years to
Mr. Mehli's companies ranged from painting works to dredging,
barging and international shipment of coal from TPC and most of
them without tenders. Because of getting all these contracts
Mr. Mehli's companies' reserve grows from ?3.29crores in the FY
1994-95 to ?917crores by FY 2014-15. Likewise, the Petitioner
stated, Mr. Mehli has made so much gain by having several
contracts form Tata group companies solely because of the
closeness he has with Mr. Tata.

72. Aviation Industry Misadventures: The Petitioners su bmit

that partnership with Air Asia and Telstra Tradeplace Pvt. Ltd. had
already been concluded even before Mr, Cyrus became Executive
Chairman, since he incidentally became chairman of the company,
for it was thrust upon Mr. Cyrus as fait accompli, the deal was
signed by Mr. Cyrus, the petitioners submit that when forensic
investigation was carried out by Deloitte, it was revealed that
fraudulent transactions up to {22crores were carried out involving
non-existent parties in india and Singapore, Mr. Venkataraman
being an Executive Trustee, on the Board of Air Asia, he was
involved at every juncture of Air Asia deal, therefore he attempted
to brush this transaction under the carpet as being non-material,
The petitioners have further alleged that the
aforem e ntio ned {22cro res fraudulent transaction was routed
through hawala transaction to avoid coming under regulatory
scanner. The Petitioners submit that these dealings by the company
at the of Mr. Ratan Tata involved transactions with one
behest
Mr. Hamid Reza Malakotipour who has been classified as
"Suspected and UN - Sanctioned Alleged Global Terrorist" by the
Government of the United States of America, The Petitioners
believe that details of the dealings of Air Asia Ltd with such third
parties is contained in the Forensic Report issued by Deloitte.
Hence, acting upon the instructions of Mr. Tata, Tata Group in its
dealings with Air Asia have indirectly been financers of terrorism
and Mr. Tata, by his acts, has caused irreparable harm to the age-

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old image of the Tata Group in addition to breaching the trust of not
only the Shareholders of the Tata Group but also its employees.
The Petitioners crave leave to refer to and rely upon the forensic
report of Deloitte when produced. The Petitioners allege that
Mr. Venkataraman has been trying to scuttle the probe in respect to
these transactions for him being the potential beneficiary of the
pay-out of ?22crores. The Petitioners further submit that the
summary of the forensic report of Deloitte was indeed scheduled to
be placed before the Board of the company in its meeting held on
24.t0.2OL6, however it was placed before the board only in the
meeting held in November 2016, Despite there is a report
concluding that Air Asia had financed the global terrorist Mr. Hamid
Raza Malakotipour, the board of the company further funding Air
Asia evidencing that current board of the company. under the
influence of Mr. Tata, is incapable of taking right decisions. It has
also been sald that Mr. Cyrus was also forced to accept another fait
accompli in the form of joint venture between the company and
Singapore Airlines Ltd, for setting up another airline. Because it
would not be viable to enter into two separate ventures in the
aviation industry specially when aviation industry as a whole
running in huge losses. They say it is a fact that both the aforesaid
airlines venture already incurred expenditure far in excess of what
was originally budgeted; therefore, these ventures are not in the
interest of the company and its stakeholders.

73. Removal of Mr. Cyrus as Executive Chairman of the company:

The Petitioners submit that Mr. Cyrus was removed as Executive
Chairman of the company in the board meeting held on 24.70.20L6
without putting him to prior notice despite hls tenure would allow
him to continue as Executive Chairman until 31.03.2017. As it was
mentioned above, whenever executive chairman is to be removed,
as per Article 118, selection committee shall be constituted as is
done forappointment of executive chairman and then to
recommend the board for removal of executive chairman, but for
his removal, no selection committee was constituted for
recommending the removal of Mr. Cyrus and not even proposal for

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removal was shown as one of the agenda items in the notice given
for board meeting to be held on 24.70.2016 except Mr. Tata and
Mr. Nitin Nohria, some minutes before the board meeting, asking
him to step down as executive chairman, however when he refused
to resign as the executive chairman, Mr. Nitin Nohria informed him
that he would be sacked by the Board of Directors of the company,
in pursuit of it, the board of directors without even asking any
explanation from him, removed him as executive chairman, which
is a clear act of oppression coupled with mismanagement of the
affairs of the company. The purported reason for such removal was,
the board of directors had "lost the confidence" ln the leadership of
Mr. Cyrus, which is in sharp contrast to the applauding the
performance of Mr. Cyrus as recently as 28.6.2016 by the
Nomination and Remuneration Committee. In fact, on 28.6.2Ot6,
the said committee not only lauded the performance of the
executive chairman but also recommended for hike to his
remuneration. As to Mr. Cyrus'performance that was so good up to
28.6,2016, has all of sudden become bad leading the directors to
remove Mr. Cyrus as Executive Chairman on the footing they lost
confidence in him. On hearing such proposal from nominee
directors, Mr. Ishaat Hussain and Mrs. Farida Dara Khambata
abstained from voting for the removal of Mr. Cyrus, regarding other
directors, Mr. Amit Ranbir Chandra, Mr. Ajay Gopal Piramal and
Mr. Venu Srinivasan have recently been inducted at the instance of
Mr. Tata. These respondents had attended just one board meeting
prior to 24.10.2016, while the other three directors are trustee
nominee directors doing the bidding of Tata Trustees, who
nominated them as nominee directors on the Trust behalf. These
nominee directors on the board, instead of discharging their
fiduciary duty towards the company and its stakeholders, every
time keep projecting the interest of the Trusts and carrying the
commands of its Trustee Chairman Mr. Tata and Mr. Soonawala
despite knowing that by doing so, they have been flouting the
provisions of the Companies Act 2013. In the said meeting, when
Mr. Cyrus asked on what basis he was removed, he was informed
that he was removed basing on a legal opinion, but no such opinion

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was placed before the Board, which clearly establishes the nexus
between the Trustees of Tata Trusts and the board of directors. In
addition to illegal removal of Mr. Cyrus as the executive chairman,
so as to facilitate Mr. Tata to come as executive chairman, in the
same meeting, age restriction for director was removed. As to the
three newly appointed independent directors in the month of
August 2016, Amit Ranbir Chandra, Ajay Gopal Kishan Piramal and
Venu Srinivasan, they have not undergone any orientation
programme to get themselves familiarized with functioning of the
company and its group companies, But they were as tools to ensure
Mr. Cyrus removed as Executive Chairman. Had they not been
impartial, they would have abstained from taking a decision on the
performance of Mr. Cyrus, Mr. Amit is the brother-in-law of
Mr, Nitin Nohria and they are also on the board of Piramal reality.
As to Venu Srinivasan was concerned he was recently inducted to
the board of Tata Coffee, whereas his wife Ms. Mallika Srinivasan is
an independent director on Tata Global Ltd. and of Tata Steel Ltd.,
Ms. Srinivasan also owns multiple dealerships of Tata Motors in
South India under the name "Tafereach". On passing through
24.10.2016 episode, it is revealed that in view of Mr. Tata's close
relationship with Mr. Siva, Mr. Tata was determined enough to go
to any extent including removing of Mr, Cyrus as chairman so as to
ensure that no legal action come against Mr. Siva. In addition to it,
Sr. Advocate and spokesperson of the company, Mr. Mohan
Parasaran said to the press that a legal opinion was sought qua
removal of Mr. Cyrus as executive chairman one month before,
around the same time when the board of directors to initiate legal
action against Siva, therefore it is evident that decision to initiate
legal proceedings against Siva was one of the trigger points for
removal of Mr. Cyrus. To save his old friend from litigation, Mr. Tata
exerted his influence over the trust directors to ensure the removal
of Mr. Cyrus as Executive Chairman.

74. Endorsement by Independent Directors: Initially after

removal of Mr. Cyrus, he was supported by many independent
directors of Tata Group companies refusing to agree with the

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unexplained and inexplicable removal of Mr. Cyrus and they stood

behind him on his continuing as non-executive Chairman of seven
listed Tata Group companies i.e. Indian Hotels Co. Ltd.(IHCL), Tata
Chemicals Ltd, (TCL), Tata Steel Ltd. (TSL), Tata Motors Ltd. (Tata
Motors/TML), Tata Global Beverage Ltd.(TGBL), Tata Consultancy
Services Ltd. (TCS), and Tata Power Co. Ltd. (TPCL), but
subsequently, all of them turned their loyalty to lYr. Tata
succumbing to the pressure of Mr. Tata.

75, Continued Break-down: In the pressure tactics, the

independent director, Mr. Nusli Wadia did not budge to I\4r. Tata,
therefore he was removed as director of Tata Steel Ltd., Tata
Chemicals Ltd. and Tata Motors Ltd. Being Mr. Tata mind
obliterated with the idea of decimating Mr. Cyrus to zero in group
companies as well, he had gone to an extent of saying that if
Mr. Cyrus was permitted to continue as chairman oF any of the
group companies, then the company would withdraw the corporate
guarantees issued to the group companies.

76. Breach of Insider Trading Regulations: In spite of stringent

SEBI (Prohibition of Insider Trading) Regulations 2015 in respect to
unpublished price sensitive information, the trustees used to call for
unpublished price sensitive information from listed Tata operative
companies ignoring the regulations aforementioned. This concern
was in fact raised by Mr. Nusli Wadia when Mr. Kumar Bhattacharya
made statement before the Parliament in U.K. without having any
role or responsibility in Tata Steel Ltd. When Mr. Cyrus tried to
eradicate all this kind of mess by proposing Tata operating
companies to independently take decisions without looking over
their shoulder either at the company or at the trustees of the Tata
Trust, for this had not gone well to Mr. Tata, he engineered this
palace/board coup. Having seen all these, Mr, Cyrus finally on
19.72.2016 resigned from the boards of TCL, IHCL, TSL and TML.
The Petitioners apprehend that Mr, Cyrus would also be removed as
director of the company.

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c.P. No. 82(MB)/2O16

77, The directors of the company have not exercised their

fiduciary responsibilities for and on behalf of the shareholders; the
directors have become mere puppets in the hands of Mr. Tata and
other trustees of Tata Trusts. The power contained in the Articles of
Association of the company is being exercised in malafide manner
prejudicialto the interest of the petitioner and public interest
considering that several lakhs of shareholders of various Tata
operating companies owned and controlled by the company.
Various operating decisions have been taken by the company just
to pamper the ego of Mr. Tata, attempts are being made to shield
the persons responsible for authorizing fraudulent transactions at
Air Asia, and attempts are being made to ensure that no legal
action is initiated against Siva, who is obliged to pay ?694crores to
Tatas. Not only Mr. Tata helped to Siva doling out largess from the
company, he has also enabled his another associate, Mr. Mehli to
unjustly enrich himself at the cost of the company. Despite all this,
the present directors are incapable of protecting the interest of the
company and the public shareholders of various Tata group
companies. To submit that there is lack of probity and fair conduct
from the respondents' side, the petitioners relied upon
Rajahmundry Electric Supply Corporation Ltd. vs. A.
Nageshwar Rao, AIR 7956 5C273 and para 19 from S.P. Jain
vs. Kalinga Tubes Ltd., AIR 7965 SCI535.By referring those
cases and facts of this case, for there being lack of probity from the
majority, and the petitioners having lost confidence in seeing
Mr. Tata and Mr. Soonawala conducting the affairs of the company
prejudicial to the petitioners, lt would become a foundation for
winding up on just and equitable rule.

78, On the premise of these facts, the petitioners sought for

appolntment of an administrator to look after day-to-day affairs of
the company with such powers as may be necessary to take such
decisions and actions in supersession of the existing Board of
Directors until new Board is constituted; in the alternative,
appointment of a retired Supreme Court Judge as the non-
executive Chairman of the Board of Directors and such number of

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new independent directors of professional competence, reputation

and standing to the Board of Directors of the company, such that
these newly appointed directors constitute majority on the Board;
restraining Mr, Tata to continue as "Interim Chairman" dealing with
affairs of the company, restraining Mr. N.A. Soonawala from
interfering in the affairs of the company, directing the company not
to issue any securities which results in dilution of the present paid-
up equity capital held by the Petitioners, directing the company and
other Respondents (except R11) not to remove Mr. Cyrus as
director of the company, not to make any changes to the Articles of
the company without leave of this Tribunal, direction to investigate
the role of the Trustees of the Tata Trusts in the operations of the
company and Tata Group companies as also the functioning of the
the company and Tata Group companies, and
Board of Directors of
prohibiting the Trustees from interfering in the affairs of the
company and its Group companies; appointment of an independent
auditor to conduct forensic audit and independent investigation into
the transactions and dealings of the company with particular
regard to all transactions between Mr. C. Sivasankaran and his
business entities on one hand, and the company and its Group
companies on the other hand, and all transactions involving Mr.
Mehli and his associated entities with the company and its Group
companies whereby any unjust enrichment generated in favor of
any these parties could be recovered from concerned persons, and
the loss that has been caused Inter alia to the Petitioners and the
findings of the audit and investigation should be referred by the
Hon'ble Tribunal to the Serious Fraud Investigation Office of the
Ministry of Corporate AFfairs, Government of India, appointment of
an inspector (under applicable law) to investigate into the breach of
the SEBI (Prohibition of Insider Trading) Regulations, 2015, wlth
particular regard to the breach by Mr. Tata and Mr. Soonawala of
the obligation not to procure, demand or acquire unpublished prlce
sensitive information and submit a report to this Tribunal such that
this Tribunal can pass such further orders as may be necessary to
refer it to SFIO, directing Mr. Tata to pay the company the amount
of unjust enrichment that has accrued to him on account of

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surrender of the sub-tenancy of the Bakhtawar flat, along with

interest at such rate as this Tribunal may deem fit, from the date
on which Mr. Tata was unjustly enriched; for appointment of a
forensic auditor to re-investigate the transactions executed by
AirAsla Indla with entities in India and Singapore to ascertain
whether any proceeds have been diverted to any secret bank
account of Mr. Venkatraman and to submit a report to this Hon'ble
Tribunal; such that this Hon'ble Tribunal can pass such further
orders as may be necessary so as to recover from
Mr. Venkatraman, the loss that has been caused inter alia to the
Petitioners; and such findings of the audit should be referred by the
Hon'ble Tribunal to the Serious Fraud Investigation Office of the
Ministry of Corporate Affairs, Government of India; for striking of
Articles numbered 86, 104(B), 118, 121 and 121A in their entirety
and in so far as Article 124 of the Articles of Association of the
company is concerned, the following portion of the said article,
which is offending and/or repugnant, should be deleted: "...Any
committee empowered to decide on matters which otherwise the
Board is authorized to decide shall have as its member at least one
director appointed pursuant to Article 1048. The Provisions relating
to quorum and the manner in which matters will be decided
contained in Articles 115 and 121 respectively shall applY mutatis
mutandis to the proceedings of the committee." from the Articles of
Association of the company and substitute these articles with such
articles as the nature and circumstances of this case may require;
for a direction to the Respondents (excluding Respondent Nos. 4,
10 & 11) to bring back into the company, the funds used for
acquiring shares of Tata Motors; for restraining the company from
initiating any new line of business or acquiring any new business in
existing llnes without leave of this Tribunal and that too only after
the matter is discussed and declded upon by the Board of Directors
of the company without applying Article 121 of the Articles of
Association; restraining the trustees of the Trusts from interfering
in the affairs of the company and in the various companies that
form part of the Tata Group; restraining the existing Selection
Committee from acting any further and/or discharging any

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functions and a new Selection Committee be appointed, directing

that no candidate selected by Selection Committee constituted
pursuant to Article 118 of the Articles of Association of the
company to be appointed without leave of this Tribunal; directing
the company not to demand and/or procure any unpublished price
sensitive information from any listed operating companies within
the Tata Group; for granting interim and ad-interim reliefs in terms
of Prayers (A) to (S) above; and for passing such further orders
that this Tribunal may, in the interest of justice, deem necessary
for bringing an end to the acts of oppression and mismanagement
in the running of the company.

79, The Petitioners' Counsel, while submitting his arguments,

filed a memo on behalf of the Petitioners with regard to the prayers
in the Company Petition to restrict prayer (M) the relief as sought
under:

(a) The necessity of an affirmative vote of the majorlty of

directors nominated by the Trusts, which are majority
shareholders, be deleted ;

(b) The Petitioners be entitled to proportionate representation

on the Board of Directors of Respondent No.1;

(c) The Petitioners be entitled to representation on all

committees formed by the Board of Directors of
Respondent No.1; and

(d) The Articles of Association be amended accordingly

80. The relief (M) sought in the Company Petition is as follows:

(M) strike out Articles numbered 86, 104(8), 118, 121 and
121A in their entirety and in so far as Article 124 of the
Articles of Association of Respondent No. 1 is concerned,
the following portion of the said article, which is offending
and/or repugnant, should be deleted: "...Any committee

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c.P. No. a2(MB)/2016

empowered to decide on matters which otherwise the

Board is authorized to decide shall have as its member at
least one director appointment pursuant to Article 1048.
The Provisions relating to quorum and the manner in which
matters will be decided contained in Articles 115 and 121
respectively shall apply mutatis mutandis to the
proceedings of the committee." from the Articles of
Association of Respondent No. 1; and substitute these
articles with such articles as the nature and circumstances
of this case may require;

81. The reliefs not pressed in the memo are (A) supersession of
the Board of Directors, appointment of an Administrator, (B)
appointment of a Retired Supreme Court Judge as the Non-
Executive Chairman of the Board of Directors, (C) For restraining
the interim Chairman (Mr. Tata) from attending any of the Board
Meetings of the company or sub-committee thereof and/or
interfering in the affairs of the company.

a2. The reliefs not pressed for being infructuous are (F) for
direction to the company and other answering Respondents not to
remove Mr. Cyrus as Director from the Board of the company, (Q)
for restraining the existing Selection Committee from acting any
further and/or dlscharging any functions and a new Selection
Committee be appointed, (R) for direction that no candidate
selected by the Selection Committee constituted pursuant to Article
118 of the Articles of Association of the company to be appointed
without leave of this Tribunal.

83. The reliefs in this case have been decided in pursuant to the
memo filed on behalf of the Petitioners by the Counsel appearing on
behalf of the Petitioners.

A4, Mr. Cyrus, who is sailing along with the Petitioners, since
having filed reply to the petition, I believe it is contextual to place
his pleadings along with company petition; by paraphrasing them.
Though most of the pleadings in his reply are overlapping with the

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C,P, No.82(MB)/2015

pleadings of the petitioners, overall picture of the reply is placed

here giving in detail wherever it has not been mentioned in the CP.

85, Mr. Cyrus at the outset, tried to disown the actions prior to
2012 stating that ever since he was appointed as non-executive
member of the board of directors in the year 2006, he was simply
led by Mr. Tata, therefore, he did not have full knowledge or depth
of the oppressive conduct and widespread mismanagement of the
affairs of the company and its group companies. He says that the
oppression and mismanagement, the petitioners complained of is
current and real. As long as he continued as executive chairman,
according to hlm, he diligently discharged his duties addressing
intuitive and unscientific management, imprudent decision making
and oppressive conduct that he learnt of in his capacity as
executive chairman. He says his efforts at remedying the situation
met with resistance, initially in polite terms and over time, the
rising degree of resentment, eventually leading to events of
October 24,20t6 i.e, removal of Mr. Cyrus as Executive Chairman.
It is being said that till date no explanation has been given as to
why he was removed, it has become such that the operations of the
company are being conducted to sub-serve the whims and fancies
of Mr. Tata and Mr. Soonawala using Articles of Association as tools
to exert oppression against petitioners and others, he further says,
his removal in fact has become a cause of action to interdict
oppression and mismanagement in respect to the affairs of the
company. He says that soon after his removal many of the
remedies initiated by Mr. Cyrus have been stalled and some actions
been triggered such as releasing more funds to Air Asia Ltd. without
ascertaining the depth of the fraud discovered pursuant to forensic
audit, preempting negotiations in respect to restructuring in relation
to Tata Steel investment in the UK and Europe, no action for
recovery of ?694crores due from Mr. Siva on account of put optlon
exercised by NTT DoCoMo, whereas Tata group companies have
been made to cough up their shares, non -im plementation of
the company to cut losses in
decision of the board of directors of
respect to Nano project, jettisoning the corporate governance

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guidelines Mr. Cyrus proposed in respect to communication

between listed Tata group companies, the company, the Trusts in
particular, Mr. Tata and Mr. Soonawala.

86. He submits that essence of this proceeding is not about

seeking retribution to his being illegally removed from the position
of executive chairman but to ensure that the company does the
right things for the right reasons with a conscious awareness that
every step the company takes has serious consequences for a wide
range section of the society within and outside the country.

a7, He says, he joined as executive chairman believing that

interference from lYr. Tata would be with a large heart, to fulfill the
same he says he trled his level best to accommodate the requests
of Mr. Tata considering his longstanding past tenure as chairman of
the company. initially it went well but over a period of time;
Mr. Tata started getting offended if at all any information
mistakenly missed out from his sight. To which, he has given an
example saying Mr. Tata was keen that Tata Motors entered into
discussion with a party engaged in water injection technology with
whom Mr. Tata felt Tata Motors must have a tie-up. When the
terms and conditions of the draft proposed by the potential counter
party were objected by the Company Secretary and Chief
Compliance Officer of the Tata Motors, Mr. Tata was offended by
this development, Mr. Tata said that if such was the case, he would
not come up with any suggestions in future.

88. Mr. Cyrus has submitted that he had to take extra care to
treat Mr. Tata and his effo rts with utmost respect and seeks to
resolve the issues immediately, for which the example given is, on
20.08.2014 Mr. Tata through a letter pointed out that when Tata
Trusts started occupying 26th floor of World Trade Centre at Cuffe
Parade on signing an agreement with Tata Motors for buying out
that premises to the Trusts on deferred payment of over five years,
the audit committee of Tata Motors had intervened and wanted
interest to be pald on the amount of differed consideration or full
payment on signing. Mr. Tata, being offended of this, stated in his

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letter that if that being the case, Tata Trusts would claim
?1.90crores from Tata Motors for
changing their view on a
transaction after the Trust had incurred this amount on outfitting
the premises, then Mr. Cyrus said, he promptly intervened and
resolved the conflict through a letter dated 21.08.2014, since this
was not a material that should cause disrespect to Mr. Tata, for
which, Mr. Tata also thanked him through his letter dated
22.08.20t4.

89. On proposal for a right issue in TML (Tata Motors) in the year
20L4,l{.r. Cyrus says that he was shocked to receive from Mr, Tata
a nasty handwritten letter dated 30.1.2015alleging that there had
been no discussion of the issue and the Articles of Association had
been breached, according to Mr. Tata, before such an issue was
cleared by the underlying operating company (TML) approval of
Board of Directors of the company would have to be taken. He

says, Mr. Tata threatened that he would "revert with more precise
assessmenf of the potential breaches, but it may be worthwhile to
discuss this when you meet with Noshir (R14- referred as
"Soonawala") and me next week", to which he replied to Mr. Tata
through a letter dated 04.02.2015 remindlng him that these facts
had already been explained to him, along with, he already
conveyed to Mr. Tata that there had been no business plan or
projection of cash-flow for the company towards such causes, the
outflow required for this purpose had in fact being minuted and
recorded at a meeting of the company held on 30.09,2013, where
in, Mr, Cyrus further apprised him of the need to handle the various
issues in the Tata Group and also the need to prepare strategic
framework for the entire group.

90, Mr. Cyrus says that Mr. Tata without even being a director on
the Board of Directors of the company, he wanted information to be
shared with him and Mr. Soonawala, on other hand Mr. Soonawala
to him, meticulously taking care to
had the habit of writing letters
suggest almost every time that he was doing so in his personal
capacity and almost always discouraging a reply, he says, both of
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them used to allege breach of Articles every time they wished to

have the ir way.

91. Against this backdrop, Mr. Cyrus has again repeated that
Article 1048 and Article 121 have given unfettered right to the
Trustee nominee director to veto any decision that the entire Board
of Directors of the company may want to take, because these
Articles, every time whenever the company to take some actions,
they need to placate the ego of Mr. Tata and Mr. Soonawala by
exchange of letters. So to avoid this misunderstanding, there ought
to be a clear framework designed between the trustees on the one
hand and the management of Tata Trusts on the other hand. He
says, with effect from 09.04.2014 (the date of amendment of
Article 121), a veto decision could be taken by majority of directors
nominated by the Trusts, by this, an affirmative approval of the
majority is necessary and it is also necessary that in respect to the
matters mentioned under Article 1214 shall be brought to the
notice of Board of Directors of the company before taking any
decision in Tata Group companies, by virtue of these amendments,
the interventions from Mr. Tata and Mr. Soonawala became deeper,
more incisive, more demanding and seeking to control the affairs of
the group companies as well. He says at times it was happening
that the Trustee nominee directors, in the board meetings would
even communicate the views of Mr, Tata on the contents of the
Minutes of Meetings, and blatantly step out of Board Meeting to get
instructions from Mr. Tata as to how to act and conduct themselves
and communicate decisions. He says that Mr. Tata always wanted
matters first be brought to him or the Board of Directors of the
company (which would enable the Trustee nominee director to get
to know and thereby inform him) before they were taken up by the
Boards of Directors of Tata Group operating companies, therefore
he says that it would be wholly untenable to state that affairs of the
company were conducted without the omnipresent control of
Mr. Tata over its operations and thereby over the affairs of the
entire Tata Group. He says that the breakdown in governance of
the company at the hands of Mr. Tata and Mr. Soonawala came to

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a flashpoint this year without giving any chance to give way to new
thinking and new blood, forgetting they have retired from the
company pursuant to retirement policies they themselves had put
in place to let in new thought process in the Tata Group; they dug
their heels in and create an environment of ambiguity, refusal to let
go and tyrannical breakdown of rule of law and its replacement with
the ru le of men.

92, Mr. Cyrus has alleged Welspun to impress upon this Bench as
to how the interference of Mr. Tata and Mr. Soonawala in respect to
Welspun transaction has become an impediment in going ahead
with Welspun transaction, saying that despite presentation was
made to the Board of Directors of the company in the year 2016
itself on how renewable energy would be a new focus area for the
company and thereafter a note was circulated on 31.05.2016 to the
Board of Directors of the company sending a copy to Mr. Tata
about the proposal to acquire renewable energy of the Welspun
group, Mr. Tata and Mr. Soonawala suggested that the transaction
must be structured differently, he says that it is also pertinent to
mention that Mr. Vijay Singh (R9), Trustee nominee director
already appreciated the move initiated by Mr. Cyrus, in respect to
this issue, while BM dated 30.6.2016 was in progress, Mr. Nitin
Nohria (R7) and Mr. Vijay Singh (R9) repeatedly left the BM in the
mldcourse to take instructions from Mr. Tata on what stand to take
in the transaction, this, Mr. Cyrus feels, is abundantly clear that
Mr. Tata was omnipresent and controlling the conduct of the Trusts
nominee directors, who in turn had a veto on every single decision
of the company - it is nothing but abusing the Articles of
Association. It is evident even in the minutes of meeting held on
30.6.2016that they accorded their support after discussing the
proposal with Mr. Tata and Mr, Soonawala and those minutes were
approved by all the directors including the aforesaid two Trusts
nomine directors of the next BM held on 08.08.2016.

93, The point highlighted by I\4r. Cyrus is the nominee directors

are indeed dependent on the pleasure of lv1r. Tata, with this
advantage Mr. Tata has been running entire Tata business as he

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liked without active reference to the Board of Directors of the

com pa ny.

94, He says that he has to keep working in resolving these

allegations and placating the ego of Mr. Tata and Mr. Soonawala,
since he has been illegally removed, Tata companies are exposed to
the threat of serious oppressive conduct by these people without
any resistance or check on their unbridled intervention into day to
day business of them. Mr. Cyrus says that Mr. Tata involved and
interfered in the decision taking of the company in the following
CASCS:

(a) Potential application for a banking license in the year

20t3;

(b) Investing in Air Asia India Ltd. in the year 2013;

(c) Setting up of Vistara, an airline joint venture with

Singapore Airlines in the year 2013;

(d) Potential rights issue of shares by Tata Motors in the year

20t5;

(e) Sale of fertilizers business of Tata Chemicals Ltd. in the

year 2016;

(f) The purchase of stake of Mr. Arun Bhatia, one of the

original promoters of Air Asia India Ltd. at a premium in
the year 2015;

(g) All subsequent hike in financial exposure and ownership in

Air Asia India Ltd. in the years 2015 and 2016; including
arranging for personal ownership of equity stake by Mr. R.
Venkataraman (Respondent No. 20), the Managing
Trustee of Tata Trusts;

(h) Various decisions relating to Tata Teleservices Ltd. ranging

from the dealings with Mr. C. Sivasankaran; put option

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exercised by NTT DoCoMo in the year 2014; entertaining

entreaties from Mr, Sivasankaran and justifying his
expectations pressuring Respondent No. 1on how to
handle litigation involving NTT DoCoMo in the year 2016;

(i) Refusing to actually litigate against N4r. Sivasankaran's

companies etc.;

(j) Scenarios under which bidding for spectrum must be done

by Tata Teleservices Ltd. ;

(k) Strategic decisions of Tata Motors Ltd. includinq demand

of specific cost data and other commercially sensitive and
unpublished price-sensitive information by Respondent
No. 20 directly from officials of Tata Motors Ltd.;

(l) Communications with Augusta Westland on the future of

the joint venture in the defence industry;

(m) Decisions relation to the Piaggio Aero joint venture;

(n) Restructuring of Tata Steel's interests in the United

Kingdom; and

(o) Decisions relating to the Tata Group's investment in Tata

Sky Ltd., a direct-to-home broadcasting company and
potential exit including a listing.

95, Mr. Cyrus says that he annexed relevant documents as

Exhibit-F(Colly), demonstrating the scale and depth of the
involvement and interference of Mr. Tata in the operations of the
company. He also says that Mr. Tata, even after retirement, directly
engaged with employees and executives of various Tata companies
writing to the project team involved in the negotiation to set up
Vistara, the airline company i.e. letter dated 04.10.2013. He
accuses that Mr. Ranendra Singh, independent director (RB) and
Mr. Vijay Singh, Trust nominee director, would regularly demand to
meet CEO and Sr. management of various Tata group companies so

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as to report back on their interactions to Mr. Tata. On which, Mr.

Cyrus had detailed various averments saying that Mr. Tata and Mr.
Soonawala demanding unpublished price sensitive information of
the group companies to them is in violation of Securities
Regulations, for which he relied upon Exhibits-H
to L. As to Tata
Steel in UK and Europe, Mr. Cyrus supports the version of the
Petitioners that this business has been unable to be turned around
despite all efforts of the inputs to make it viable, at that stage also,
he had negotiations with U.K. Government for getting support for
this ailing business. When all this in progress, he was illegally
removed from the post of Executive Chairman. While Mr. Cyrus was
making efforts to revive the business prospects, simultaneously
Lord Kumar Bhattacharya in the media of United Kingdom, made a
public statement promising that Tata Steel would stay invested in
the United Kingdom and creates more jobs in the U.K. This
statement of Mr. Lord Bhattacharya under the authority of Mr. Tata
and their consequent action indeed demonstrate that the decisions
are taken by Mr. Tata and implemented outside the corporate
constitutional framework through his aides, which do not serve the
best interest of the operating company. He says despite adverse
market conditions, substantial support was extended to UK
business; still Tata Steel suffered impairment of more than GBP 2
billion (over l16,soocrores) in last five years alone. Likewise, he
repeated the same about Nano project, Jayam Auto, Tata
Teleservices (Siva's interest). Mr. Mehli Mistry issue, Aviation
Misadventures, and about his removal as Executive Chairman.

96. To prove his performance was good in his tenure, he stated

that the company portfolio investment over performed BSE
sensitive index by over for the last three years, the profit after
5 o/o

tax of Tata group companies grow by 34.60/o annually over the past
three years, the Tata Brand value has increased by USD 5 billion,
without increasing net debt, the Tata Group in the last three years,
undertook capital expenditure by approx. USD 25 billion, thereby
building product asset to prepare for the future and filing 2000 Tata

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group patents in the last year alone, which is an increase of nearly

100o/o from the position three years ago.

97. With this, Mr. Cyrus submits that lt is a clear case of

oppression and mismanagement against not only the petitioners
but also against the company, therefore grant the reliefs as sought
by the petitioners.

Reply to the petition on behalf of Tata Sons:

98. The company says that this petition is primarily filed to

espouse the cause of Mr. Cyrus to the petitioners to raise the issues
of alleged oppression against the petitioners and alleged
mismanagement in the company, but in reality, it is nothing but a
ruse by Mr. Cyrus to publicly express his displeasure at the loss of
his office as executive chairman of the company and also to
besmirch the reputation of the Tata group. The business decisions
of the operating companies of the Tata group which are now sought
to be challenged by the petitioners represent past and concluded
transactions, which in any event cannot constitute oppression
against the shareholders of the company.

99, This company was founded by Jamsetji N. Tata in the year

1868, now Tata group operates in more than 100 countries, across
6 continents, collectively employing over 6,60,000 people with a

mission 'to improve the quality of life of the communities we serve

globally, through long term stakeholder value creation based on
leadership with the fask'with the revenue of USD 103.51billion. In
this company, 65.3olo of the issued ordinary share capital is held by
Tata trusts, which supports education, health, livelihood generation,
art and culture. The Petitioners for the first time acquired shares of
the company in the year 1965 holding 78.40o/o of the paid-up
ordinary share capital of the company; and 2.L70/o of the issued
share capital of the company, thereafter in the year 1980, the
father of Mr. Cyrus was appointed as a director of the company and
continued in such position until his retirement in December 2004.

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1OO. Mr. Tata was appointed as chairman of the company in the

year 1991 and continued for about 21 years until his retirement in
the year 2012 upon attaining the retirement age of 75 years, and
that in his leadership, Tata group witnessed best significant growth
and the valuation of the company increased more than 500 times.

101. On 7August 2006, Mr. Cyrus was appointed as a non-

executive dlrector of the company, in the year 2011 as selection
committee constituted in accordance with the articles of association
of the company, recommended Mr. Cyrus as the successor of Mr.
Tata as chairman of the company. In view of such recommendation,
in April 20t2, Mr. Cyrus was appointed as executive deputy
chairman of the company, then on lBth December 2012, the board
of the company decided to re-designate Mr. Cyrus as executive
chairman of the company with effect from 29th of December 2012,
in the same board meeting, the board decided that Mr. Tata should,
as a special and a permanent invitee to the board meetings,
continue to receive notices, agenda papers and the minutes of the
board meetings, so that Mr. Tata could attend at his choice, any
meeting which he would feel appropriate but whereas Mr. Tata
clarified that he would no longer be on the board, he would always
be available if the directors needed his guidance clarifying that he
would like to make a clean break and have no carryover of his role.

102, As to articles are concerned, shareholders of the company

passed an unanimous resolution on l3thSeptember 2000
introducing a right to Tata Trusts to jointly nominate "one-third of
the prevailing number of directors on the Board" so long as the
Trusts own and hold in aggregate at least 40o/o of the paid-up
ordinary share capital of the company (Article 1048) and that all
" 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 all the directors appointed pursuant to article 1048 present
at the meeting" (Article 121). This article was subsequently
amended by unanimous resolution of the shareholders of the
companyon April 9, 2014, pursuant to which, the affirmative vote

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could be exercised by "majority of directors appointed pursuant to

Article 1048 present at the meeting".

1O3. It
is pertinent to note that Mr. Pallonji Shapoorji Mistry was
present at the AGM held in September 2000 and voted in favor of
the adoption of the new version of the Articles of Association which
included the Articles 1048 and 121, along with Articles 86 and 118
that the petitioners asking to be "struck off in their entirety", Il is
also important to note so far these affirmative voting rights have
never been exercised by Tata trusts. Until Mr. Tata retirement as
director and chairman of the company, the Trusts and the company
had common chairman. For having new chairman on l8thDecember
20'1,2, Mt. Tata mentioned that "in future with the chairman of the
Trust and the company not likely to be the same individual, it would
be desirable to enter into an agreement between the major Trusts
and the company to clarify the involvement of Tata Trusts
envisaged under Article 121 of the Articles of Association of the
company". He further referred to "an illustrative list of items like
strategic plan, annual plan and divestments of shareholdings" and
mentioned that "fhe trust would be approaching the company in the
matter". In furtherance of it, there were several rounds of
discusslons between Mr. Tata and Mr. Cyrus in respect to
implementation of the arrangement proposed by Mr. Tata on
18.12.2012 and finally Articles of Association were amended by
unanimous resolution passed by the shareholders on 9thApril 2014,
pursuant to which Articles 121 and 121B were introduced. Article
121A specified certain items which were required to be resolved
upon by the board of directors of the company and such items
included the items envisaged by Mr. Tata on 18 December 2Ol2
(i.e,, the 5-year strategic plan, annual business plan divestments of
shareholdings by the company in other Tata group companies)
along with other items. Mr. Cyrus was present in the extraordinary
general meeting not only in the capacity of director of the company
but also as an authorized representative of several Tata group
companies who are shareholders of the company, when article
121A was unanimously resolved to be included in the articles of

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association in the EGM held on 09.O4.2074, the petitioners raised

no objection in spite of having due notice of the same.

1O4. During the tenure of Mr. Cyrus, several disturbing facts

emerged in relation to his leadership in respect to capital allocation
decisions, slow execution on problems that were identified, which
are called as "hot spots", strategic plan and business plan lacked
specificity and no meaningful steps to enter new growth businesses,
reluctance to embrace the articles of association, growing trust
deficit between the Board of Directors and Mr. Cyrus.

105. As to mistrust is concerned, the company says, Mr. Cyrus

failed to put into effect the strategy for managing large and
complex group such as Tata group, as committed by him in the
detailed note of October 2010 tendered by him to the selection
committee, it was on that strength, Mr. Cyrus was selected. He was
in dearth of proper interface for communication between the trusts,
the board of the company and the operating companies, which led
to breakdown of communication between three constituents,
proving to be detrimental to the interest of the Tata group as a
whole. It took at least two years'time to Mr. Cyrus to avoid conflict
of interest in between their companies and Tata Group companies.

106. In addition to the above issues, there was an increasing

diversion in the functioning of the company and the operating
companies, the reason is, Mr. Cyrus in a systematic manner
reduced the representation of the company on the Boards of other
major Tata Companies. Over a period of time, several directors of
the company on the Board of Tata group Companies retired.
Exercising the executive power, Mr. Cyrus did not appoint any
directors of the company on the Boards of other Tata Companies,
as was practice in the past. This systemic dilution weakened the
bind through which Tata values, ethos, governance principles,
group strategies were to be implemented across the Tata Group
Companies. In most of the cases, Mr. Cyrus ensured that he was
the only director who was common to the company and Tata group
companies, effectively making himself the only ',channel,, between

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the company and Tata Group Company, Mr, Cyrus' actions

deliberately weakening the Tata group structure which was inimical
to the company interest, therefore, the mismanagement, if any, it
has been perpetrated by Mr. Cyrus not by the Respondents. Despite
all these, Mr. Tata personally advised and counselled Mr. Cyrus on
several matters when Mr. Cyrus reached out to Mr. Tata for
guidance on business related matters in which Mr. Cyrus felt
Mr. Tata could provide guidance by virtue of his vast experience
and contacts. Mr. Tata In fact stressed Mr. Cyrus that he on his own
ought to take decisions, he could only provide advice to him.

1O7. In respect to the positive comment of Nominations and

Remunerations Committee of the company on Mr. Cyrus'
performance, the company says, along the lines, the same
committee also commented over the relations in between the
company and the trusts "..... the need for greater clarity on the
functioning of the Board of the company in relation to the Tata
Trusts, as well as its role vis-a-vis its group companies...."
Therefore, it says that the positive comments of the committee
could not be seen in isolation from the remaining text. It further
says Mr. Cyrus 's leadership was not aligned to the long term goals
and targets of the company as a company and under the Tata
group as a whole. Mr. Cyrus presented a flawed and incomplete
annual business plan, which is being amply described by Mr. Amit
Chandra, as "more of a cash flow statement and needed to include
a summary of key business strategy as well as high level micro
assumptions that the plan is most sensitive to".

1O8. It is a serious note to see how Mr. Cyrus acted in acquiring

Welspun Renewables Energy Ltd. by Tata Power Renewable Energy
Ltd., a subsidiary of Tata Power company, to which purchase
consideration for the transaction was estimated to be approximately
in excess of USD lbillion, because Tata power has already
t40,ooocrores debt apart from non-resolution of tariff issue oF its
Mundra Project. In addition to this problem, Mr. Cyrus, without
placing it before the Directors of the company, agreed for such an
execution, this was only brought to the notice of Directors of the

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company on 31.5.2016 informing that Tata Power was in advanced

stages of finalization of this acquisition and the definitive
agreements were to be signed imminently. He claimed that the note
circulated to the Directors of the company is enough requirement
under the Articles, despite being aware that the financing structure
of this acquisition would necessitate Tata Power to raise debt,
approval for which would be required from the Board of directors of
the company. In this background, in the Board meeting held on 29th
and 30th June,2016, Dr. Nohria and Mr. Vijay Singh being Trusts
Nominee Directors, repeatedly reiterated the view that Welspun
Acquisition should have been deliberated at the Board of Directors
the company at a much earlier stage (even the funding and rating
implications) as opposed to being presented as fait accompli,
nonetheless, the Trust Nominee Directors finally approved the
financing structure of that definitive
Welspun Acquisition given
agreements had already been executed and deal had been
announced in the public domain.

1O9. The company submits that having seen many issues like
Welspun Acquisition, flnally on 24.1O.2016 Board of Directors of the
company in their collective judgment, replaced Mr. Cyrus as
Executive Chairman of the company and Mr. Tata was appointed as
Interim Executive Chairman of the company, before this step,
N4r. Tata and Dr. Nohrla personally spoke to Mr, Cyrus offering him

to resign voluntarily but having Mr. Cyrus refused to do so he was

removed as Executive Chairman of the company. Immediately on
the next day, Mr. Cyrus addressed a vitriolic emall to the directors
of the company making unsubstantiated and false allegations in
relation to the affairs of the company and its group companies
leaking to the media despite the email sent by him is marked as
'confidential'. Leaking such mail to the media is nothing but
prejudicial action against the company, after some bickering,
Mr. Cyrus himself resigned as Chairman from various group
companies of Tata. The Petitioners relied upon various internal
documentation of the company to which they were not privy,
perhaps, Mr. Cyrus would have provided all these documents

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forgetting his fiduciary duty to protect the confidentiality of such

documents, all that discloses that Mr. Cyrus is nothing but alter ego
and directing mind of the Petitioners. While this onslaught going
against the company, it received a special notice on 03.01.2017 u/s
169 r/w 100 of the Act from the shareholders of the company
seeking removal of Mr. Cyrus as Director of the company.

11O. The company submits this Petition speaks nothing about

espousing the cause of corporate governance or seeking remedies
of oppression and mismanagement of the company, in fact, the
Articles of Association against which these Petitioners making hue
and cry were unanimously approved either by the father of
Mr. Cyrus or by Mr. Cyrus, though amendments have come to these
Articles long before, they did never become a problem to these
Petitioners until before Mr. Cyrus 's removal, now all those past acts
have all of sudden become oppressive against the Petitioners from
the day he was removed as Executive Chairman.

111. As to historical business decision and investment by the Tata

Group, the company says, Tata Steel acquisition of Corus Group
plc. for an aggregate conslderation of USD 12 billion, is the largest
overseas acquisition by Indian corporate, making Tata Steel the
world's sixth largest steel producer. The launch of Nano Car by Tata
Motors, is a
revolutionary aimed at changing the landscape of
Indian Passenger car market. Siva group is a Consultant to TTSL as
an equity investor. The company re-entered into an aviation
business through joint ventures with two of Asia's leading airline
carriers in the low cost segment and premium full service business.
As to Mr. Mehli is concerned, it has nowhere been said in the
Company Petition that Mr. Cyrus was a director on the board of
Tata Power from the year 2002 approving many of the transactions,
Tata Power entered into with Mr. Mehli. The company submits that
all the above issues raked up by the petitioners were all hit by
delay and laches for many of them or almost all of them were
issues in between 1993 and 2008, therefore those issues cannot be
issues before this Bench solely because Mr. Cyrus was removed as
Executive Chairman. The company submits that this petition is

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sponsored by Mr. Cyrus to pursue personal vendetta against

Mr. Tata and Mr. Soonawala to adopt a "scorched earth policy" so
as to tarnish the reputation of Tata Group on being removed as
Chairman of the board of directors of the company and as non-
executive [huirrun of several Tata group companies.

112. The company submits that the allegations in the petition do

not constilute the affairs of the company, which in fact is a petition
sought to impugn the affairs of public charitable trusts which is not
permissiblg under law, of course, the allegation of violation of
Insider TrAding Regulation and FEMA Regulations is not triable by
this Bench.

113. The dompany submits that it is weird to hear that Tata Trusts
acting detdimental to the interest of the company, if such is the
case, Trusfs are the first persons to suffer because such action
would directly hurt the investments held by the Trusts in the
company. lhese Trusts have been shareholders for the company for
almost B0 years, there was not even a single occasion until before
filing this petition that the Trusts acted detrimental to the interest
of the company. Mr. Tata was the Chairman from the year 1991 to
December 2012, in his long innings as Chairman, the revenue of
Tata GrouFj increased 46 times reaching to t4.75 lakh crores in
z)lL-tzurlO tnu rise in net profit claimed 51 times to over t33,5OO
crores, the Tata Group market capitalization grew 33 times this
period. Whbn he stepped down as Chairman of the company, he
was paid $lowing tributes by the very same Cyrus and other
independenf directors because his visionary leadership led the
company t[rough many challenges (Exhibit R1/11), Tata Motors
transforme{ from domestic company to complete Tata mobile
company with path breaking product such as Tata Indica and Nano
(Exhibit R 1/12) taking over of Jaguar Land Rover of UK ultimately
becoming profitable and successful company, likewise many
achievements were achieved by Mr. Tata taking the company to
great heights. When Mr. Pallonji Shapoorji t4istry retired as Director
in the year 2004, it is Mr. Tata who made Mr. Cyrus as Director of
the .o.pJny in the year 2006, ever since he came into the

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company, he was privy to each and every decision taken by the

company, which are now called as hotspots and legacy issues, after
having acquiesced to all these deals, now the Petitioners are
estopped from assailing those decisions to which Cyrus group was
privy either in the position of director or in the position of
shareholder. The company submits that these petitioners have
received dividend of ?872crores from the year 1991-2016from the
company, but now these petitioners conveniently ignored the
historical facts as if they were not aware of all those things.

114. The company submits that the petitioners have cherry picked
certain business decisions predicating Mr. Tata has taken certain
decisions during his tenure which the petitioners consider
imprudent and non-judicious which have allegedly caused loss to
the company. When they say Corus and Nano are instances of bad
business deal, why they have not referred Tetley acquisition and
immensely successful Jaguar Land Grover acquisition and
phenomenal rise and success of TCS.

115. As to the allegation of interference by Mr. Soonawala, it has

been said that he held various positions on financial side in the
company including that of Finance Director from 1988-89 to 2000,
thereafter for 11 years as Vice Chairman and Finance Advisor of the
company, which he dutifully discharged till 20L0, this was
appreciated on 15.06.2010 stating that he relentlessly served the
institution for about 44 years, therefore it was unanimously
resolved that Mr. Soonawala would be available as an advisor to the
company as such Mr. Cyrus himself and other persons from the
company approached Mr, Soonawala on various occasions seeking
his guidance and advice, therefore, the company says, it is
wondering to hear Mr. Soonawala interfering with the affairs of the
company. It says that the directors of the company except
Mr. Cyrus have discharged their duties with absolute virtuosity and
utmost integrity and it is beyond doubt to say that they have
adhered to the highest standard of professionalism,

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116, It says it is a matter of record that Trust nominee directors

have been appointed as per Articles of Association of the company,
asto Mr. Tata, in the capacity as Chairman Emeritus, was asked to
remaln as special and permanent Invitee to the board meetings,
and he would continue to receive notices, agenda papers and
minutes of the board meetings so that Mr. Tata could attend at his
choice, any meeting which he would feel appropriate. It denied that
Mr. Ishaat Hussain and Ms. Farida Darius Khambata abstained from
participating in the illegal acts that were allegedly purported on
24.1O.2076.It is submitted that Mr. Hussain voted favorably in all
the matters as evident from the minutes of the meeting held on
24.10.2016.It is also pertinent to mention that Mr, Ralf Speth (CEO
of Jaguar Land Rover) and Mr, N. Chandrasekaran were appointed
as additional directors only on 25.10.2016 after following the due
process, there could be really no cause of action qua those
respondents. It is denied that over time, the Trust nominee
directors have become postmen who enable the other Trustees
including persons like Mr. Tata and Mr. Soonawala to play the role
of shadow directors and super controllers of the company. These
Trust nominee directors Mr. Vijay Singh and Dr. Nitin Nohria and
Mr. Amit Chandra are persons of eminence and great repute and
were indeed welcomed on the board by Mr. Cyrus himself. Mr. Vijay
Singh is a Rtd. Officer of Indian Administrative Service, after
serving as the Defense Secretary of India, Mr. Amit is the Managing
Dlrector of Bain Capital, the Global Alternative investment firm
based in Boston, Massachusetts and is part of the leadership team
in Asia. Dr. Nitin Nohria is George F Baker Professor of
Administration and the Dean of the Faculty at Harvard Business
School, and he became the 10th Dean of Harvard Business School
on 01.07.2010. Their expertise has already been explained in the
introductory paras, therefore for the sake of brevity, it has not been
discussed again.

117. It is denied that the removal of Cyrus as chairman of the

company is wholly illegal, ultra-vires and constitutes suppression of
the petitioners and it is against the interest of the company. It is

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submitted that the removal process does not suffer from any
impropriety and it is in complete conformity with the provisions of
the Act and moreover, it has never been challenged by Mr. Cyrus,
not sought any relief either for declaring removal of Mr. Cyrus as
invalid or for reinstatement of Mr. Cyrus, since the Petitioners could
not have sought such relief from this Bench in the first place and
secondly, Mr. Cyrus himself has not filed any proceeding
challenging the alleged illegal removal. It is also settled proposition
of law that directorial dispute cannot form the subject matter of
oppression/mismanagement action uls 241' of the Act. For the
Petitioners have strategically not pressed for such reliefs, the
Petitioners can disguise this petition as an action in public interest
and prevent the public at large from realizing that this action is
nothing more than an attempt to settle Mr. Cyrus 's personal score
with Tata Group for his removal as Chairman.

118. The company submits that the Petitioners are attempting to

draw false conclusions based on the movement of the share price of
Tata Steel. It has filed a graph (Exhibit R-1/22)depicting the
movement of the share price of Tata Steel and some of its listed
peers in the steel industry to show the correlation in the movement
of the share prices of these companies, the share prices of
companies in the steel industry tend to move together in a similar
manner and the movement of share prices is influenced by many
variables and it is misleading for the Petitioners to allege the fall in
the price of the shares was on account of the Corus acquisition. It
says that it should be noted that the closing price of the shares of
Tata Steel on lstFebruary 2007 when Tata Steel announced the
decision that it had won the bid to acquire Corus, its share price
was approxlmately t350, whereas the closing share price of Tata
Steel as on 2OthDecember 2016 was approximately ?400. An
immediate fall in the share price after announcement of a major
event, involving significant financial outlay, cannot be the basis to
question the prudence of a commercial decision to acquire a
business. The Corus acquisition involved a highly competitive
bidding process, in which Tata Steel participated along with

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Brazilian steel company Companhia Sider(rgica Nacional (*CSN").

It is a matter of public record that Tata Steel's winning bid was GBP
608 pence per share, while CSN's final bid was GBP 603 pence per
share. Therefore, there is no basis to state that the acquisition of
Corus was "done at a substantial premium". Admittedly, the final
bid price was higher than the initial offer price quoted by Tata Steel
to Corus. However, as mentioned above, this was merely a function
of value discovery through a competitive bidding process. Extracts
from the annual report of Tata Steel for the financial years 2007-08
and 2008-09 showing the beneflts accruing to Tata Steel from the
Corus acquisition are attached as Exhibit R-1/23(Colly). It says it
is also a matter of public record that part of the acquisition cost of
Corus was funded by a rights issue by Tata Steel to existing
shareholders of Tata Steel (including the company). The rights
issue was fully underwritten by the company. Mr. Cyrus was on the
board of directors of the company at the time when the company
agreed to subscribe to shares in the rights issue and was a party to
the decision. Neither were there any deliberations at the board
meetings of the company, nor do the board minutes of Tata Steel
indicate that Mr. Cyrus had objections to the decision by the
company to provide funds to Tata Steel for the Corus acquisition.
The Petitioners and Mr. Cyrus were aware of this transaction and
did not object to it, at the time when the decision was taken. The
company even filed the relevant minutes of the meeting of the
Board of Directors of the company in relation to funding of Corus
Acquisition as Exhibit R-[/24 (Colly). It is also relevant to
mention that when Mr. Cyrus took over as Chairman of Tata Steel,
he did not raise any concerns to the Board of Tata Steel regarding
the decision to acquire Corus, in fact, in the 'Chairman's Statement'
attached to the annual report for the financial year 2012-13, Mr.
Cyrus stated: " Finally, I would like to thank our Chairman Emeritus
Mr. Ratan Tata for his visionary leadership and extraordinary
stewardship with which he led the Company through many
challenges during his tenure as Chairman of Tata Stee/,'. Further, in
the same statement, Mr. Cyrus recognized that the challenge in
Tata Steel's European and UK operations had been on account of

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2008 financial crisis. He stated that "ln our key overseas markets of
Europe and UK where the Company has significant manufacturing
presence, the economic downturn has significantly affected steel
demand, which is now almost 30o/o lower than pre-2008 financial
crisis level." (Exhibit R-1/25). It has even filed the statement of
former Managing Director of Tata Steel Mr, B. Muthuraman dated
23 November, 2016 that Corus acquisition is well thought out after
lot of deliberation to grow the company through capacity expansion
in India and internationally through inorganic growth. The Corus
acquisition decision was taken unanimously by the board of Tata
Steel, the acquisition of Corus Group Plc was based on the long
term strategy of Tata Steel to pursue growth through international
expansion and enhance the portfolio of value added products. The
performance of Corus Plc post acquisition validated the strategy till
the black swan event of the global financial crisis structurally
impacted the underlying demand conditions in Europe causing
financial hardship to the steel industry in Europe. In this context, it
is incorrect for the Petitioners to conclude that Corus was acquired
al an'inflated price' , It is of course easy for the Petitioners to adopt
a myopic view and question the commercial wisdom of the alleged
'inflated price' paid by Tata Steel with the benefit of hindsight or to
allege that the acquisition led to a strain on Tata Steel without
looking at the larger context. It is submitted that Mr. Cyrus has
himself acknowledged in successive 'Chairman's
Statements/Messages' and signed off on directors' reports which
are in the public domain where he has attributed the reason for the
lackluster performance of Tata Steel Europe to external conditions
and the financial crisis. Copy of the relevant annual
reports/chairman's statements is annexed as Exhibit R-1/28 to
this reply. In respect of statement that "howeve r, the IJK plants
continued to do badly", it is to be noted that Tata Steel UK Holdings
Limited (formerly known as Tata Steel UK Limited, the SPV which
acquired Corus) performed well in fiscal 2008 (the first year after
the acquisition). The consolidated EBITDA of Tata Steel UK Holdings
Limited for the period ended 31 March 2008 was USD2,190mn (as
against USD1,553mn in Fiscal 2009). It is submitted that every

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operating business has its positive and negative aspects and the
Petitioners campaign to present a one-sided story is evident from
the fact that they have chosen to ignore statements made by
Mr. Cyrus in the course of his tenure regarding the improvement in
the operations of Tata Steel. It says it should be noted that in the
"Chairman's Statement" to the Annual Report of Tata Steel for the
Financial Year 2012-13, Mr. Cyrus himself stated that:

"the operational capabilities in Europe have also been

strengthened on the back of investments made in the last
year... There actions should improve the competitiveness of
the European operations even though the market is expected
to remain challenging."

119, Some instances of positive developments ln the Tata Steel

Europe business which the Petitioners are glossing over are
recorded in Annual Reports of Tata Steel for the last five financial
years. To support their defense, the company highlighted below to
demonstrate the lopsided view of Tata Steel's European operations
that the Petitioners are presenting to mislead this Hon'ble Tribunal:

a. The Chairman's Statement for the Financial Year 2013-

14 states that record production performances achieved
by various plants of Tata Steel Europe (including plants
in the UK which the Petitioners have alleged did not
perform as expected) in that financial year. Attention ls

drawn to pages 52 and 53 of Tata Steel's Annual Report

for the Financial Year 20L3-14 which is annexed hereto
and marked as Exhibit R-L129.

b. Tata Steel Europe comprises both the UK operations as

well as the operations in the Netherlands. The
Petitioners have acknowledged the fact that the plants
in the Netherlands have been fairly successful. This fact
was also recorded in the Chairman's Message in the
Annual Report of Tata Steel for the financial year 2014-
15. The Directors' Report for the Financial year 2014-15

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states that "Since early 2014, our facility at ljmuiden

has enhanced its performance and achieved the best
EBITDA margin amongst its European peers."

12O. In fact, a review of the Chairman's Statements made by

Mr. Cyrus in the Annual Reports of Tata Steel from the financial
years 2012-13 to 2015-16 onwards would clearly show that,
according to the company, Mr. Cyrus recognized that the global
steel industry was operating in a difficult environment on account of
the oversupply from the Chinese market and increased raw material
prices. It is unfortunate that the Petitioners, who are the alter-egos
of Mr. Cyrus, are now attempting to pin the entire blame for the
diFficulties being faced by Tata Steel on decisions allegedly taken by
Mr. Tata. The company says that there is no basis for this allegation
having been made by the Petitioners against Mr. Tata. It is denied
that Tata Steel is "bleeding" or has undergone irreversible financial
loss. As mentioned above, and as acknowledged by Mr. Cyrus in
multiple public statements, the entire steel industry has been facing
stress in the last few years on account of macroeconomic factors
and that there is no basis for the allegatlon that Mr. Tata
jeopardized the merger talks with ThyssenKrupp and/or
undermined Tata Steel management's ability to negotiate with
ThyssenKrupp and/or the Pension Tru stees/Pe nsio n Regulators in
UK or anybody else. In any event, this pertains to matters and
decisions which are under the control of the board of directors of
Tata Steel and the company is not in a position to comment on the
same. As is evident from the extracts from the Annual Reports of
Tata Steel for the financial years 2072-13 to 2015-16, the company
says, the adverse macroeconomic conditions faced by the global
steel industry were beginning to reverse and the operations of Tata
Steel Europe were showing uptrend.

121. As to Corus issue, the company says, it is evident that the

Petitioners' attempt to impugn the Corus acquisition as a non-
judicious corporate action is misconceived. The acquisition of Corus
was a decision taken by the board of directors of Tata Steel, acting
in the best interests of Tata Steel. The price paid for the Corus

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acquisition was discovered through a highly competitive bidding

process, and thus represented a fair value, In any event the
allegations made by the Petitioners relating to the Corus acquisition
pertain to past and concluded transactions by Tata Steel. These do
not constitute affairs of the company and cannot constitute acts of
oppression or mismanagement,

122. As to allegations in respect to Nano car project, the company

says, launch of Nano project was the decision of the entire board,
whereby it could not be imputed that it was the decision of a
particular individual i.e. Mr. Tata. It was approved by the board of
directors of Tata Motors after carefully analyzing the commercial
prospect of the project, of course, Mr. Tata may very well have
conceived the idea and perhaps promoted its launch, that by itself
cannot mean the decision to launch Nano was the sole decision of
Mr. Tata. On the allegation that serious investment in land and
machinery are being tied down on account of Nano project, by
looking at the filing made by Tata Motors with BSE on 4.11.2016, it
is evident that major part of the investment in the factory is
presently being used for the production of Tata Tiago car. In
respect to dividends, it is incorrect to say that declaring dividend
after the launch of Nano ls incorrect because Tata Motors continue
to pay healthy dividend even post-launch of the Nano project, it
was only skipped in the FY ended 31.3.2015 under the
chairmanship of Mr. Cyrus. It is also being said that the commercial
vehicle division of Tata Motors contributes for greater percentage of
its revenue than the passenger vehicle division, consequently, the
ability of Tata Motors to pay dividend is depending much more on
the performance of its commercial vehicle division as compared to
its passenger vehicle division, it is also relevant here to mention
that under the leadership of Mr. Cyrus Tata I\4otors has Iost
significant market share in the commercial vehicle segment. The
statement of Mr. Cyrus as a Chairman of Tata Motors in the year
2015 is very much contrasting to the present statement in this
company petition because in the annual report of Tata Motors for
the financial year ended 31.03.2015, Tata Motors, under the

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stewardship of Mr. Cyrus, noted that the Nano brand was highly
regarded and Tata Motors intended to nurture and promote it
further. It further says that how such decision of continuing Nano
motorcars yielded any undue benefits to the answering
Respondents because consequence of such decision either positive
or negative would affect the Trusts i.e. majority shareholders just
as much as it affected the Petitioners, if not more, Moreover, it
was a decision taken in the year 2007 almost after a decade; this
has become an issue to the petitioners because Mr. Cyrus was
removed as Executive Chairman of the company. As to attribution
of Mr. Tata's emotional attachment for continuation of Nano
project, the company says Mr. Tata has never raised any objection
for closure of this project and he could not have even prevented
also if any such decision taken because he was not the director on
the board of The company. It is a fact that soon after demise of Mr.
Karl Slym, M.D. of Tata Motors in January 2014, Mr, Cyrus
continued for about two years as the head of Tata Motors, in that
tenure also Tata Motors invested further in the Tata Nano so as to
develop newer variants of the Nano such as GenX Nano, therefore
the history says that Mr Cyrus cannot attribute that the project is
not being shut on account of emotional reasons involving Mr. Tata.
As to the allegation that Mr. Tata has some shares in'Jayem Auto'
and supply of Nano Gliders, the company said it is totally baseless
for the reason that as soon as Mr. Tata acquired some shares in
Jeyem Auto, he immediately wrote letters on 02.02.2016 and
09.02.2016 to Mr. Cyrus disclosing its interest moreover, Tata
Motors has not concluded any arrangement or contract with Jayem
for supply of Nano gliders. not even an MoU was executed, no
monetary consideration was exchanged except for certain testing
and trial expenses. In view of the same, the company submits that
commercial decisions taken by distinguished board of directors
cannot be subjected to judicial scrutiny under the cover of
oppression and mismanagement, moreover, it is a past and
concluded transaction, which will not constitute the affairs of the
company much less under the head of oppression and
mismanagement.

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123. In regard to an imputation that Mr. Tata made undue favors

to Mr. Siva, the company says, the allegation that the price of
shares issued to Sterling was "highly discounted" or at a
"throwaway price" is without merit, because TTSL approved the
decision to raise funds within the share price band of 417 to
?40.The decision for allotment to both Sterling and Aranda (an
affiliate of Temasek) within the price range mentioned above
almost slx months before the shares were allotted to Temasek. The
allegation by the Petitioners is basically that shares were allotted to
Sterling @ 417 whereas to Temasek @ t27, to which the answer is,
the company says Temasek was willing to pay higher premium as
compared to Sterling is a matter of commercial negotiation
depending on the expectations of each of the investors, in the
agreement entered into with Temasek, it has been provided the
right to nominate director to the board of TTSL and to participate in
the decision making regarding some critical matters and
fundamental issues, on the other hand, Sterling entered into an
agreement without any such right, this difference is demonstrative
of the fact that Temasek and Sterling viewed their respective
investments in TTSL differently, thereFore they paid share price also
at different rates, at the same time Shapoorji Pallonji Group entities
to renunciation of rights
also subscribed to TTSL shares (pursuant
by the company -for which no renunciation fees or compensation
fees were paid to the company) and acquired TTSL shares from
Tata Industrial Ltd. (a subsidlary of the company) at a price of ?15
per share, which was completed approximately three months before
the term sheet with Siva was agreed by TTSL. In 2008, the
company had entered into an agreement with DoCoMo to sell 60lo of
TTSL @ {116.09 per share, whilst not obliged to do so, the
company offered all shareholders of TTSL the opportunity to
participate in the secondary sale of TTSL shares to DoCoMo to
enable them to monetize as part of their investment at huge profit.
While the company obligated the Siva group to taken various
obligations with respect to put option liability and other indemnity
qua DoCoMo, Shapoorji Group was not asked to undertake any
such similar obligations. Apart from Sterling, Shapoorji pallonji

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famlly also sold shares to DoCoMo. The Company submits that the
Petitioners projected as if Sterling alone got the advantage of this
wlthout mentioning the fact the same advantage was also availed
by the very same petitioners. As to undertaking provlded by the
company in favor of Standard Chartered Bank, the company
submits, lt is a matter of record that the company provided the
undertaking on 24.O2.2006, but this was provided to protect
against Standard Chartered Bank selling TTSL shares pledged by
Siva group to an undesirable third party, this undertaking required
the security trustee to mandatorily serve notice on the company
before invoking the pledge on TTSL shares and selling them to a
third party, upon receipt of such notice the company was obligated
to acquire TTSL shares for the initial subscription price (?17) plus
an additional amount of 60/o p.a. on non-compounded basis, in fact
this undertaking is to ensure that TTSL shares not be sold to a third
party without the company being able to purchase them. This
arrangement is clear that the company did not undertake to buy
TTSL shares for a price which would settle Sterling's entire liability
to Standard Chartered Bank; therefore, no guarantee has been
given by the company for the loan taken from Standard Chartered
Bank. Given the historical growth in the value of the shares of TTSL
at a relevant time, it is evident that the price of 117 with a growth
of 60lo p.a. would have permitted the company to acquire TTSL
at steep discount to the actual value of the shares, this
shares
commercial undertaking is similar to the terms of mandatory call
option under the term sheet executed between TTSL and Sterling,
the call option under the term sheet with Siva further discloses that
it triggers if Siva group shareholding in Sterling falls below 7 5o/o to
ensure that an undesirable party could not obtain control of TTSL
shares held by Siva group without consent from the company. This
undertaking in fact given to Standard Chartered Bank is virtually a
mandatory call option to ensure that TTSL shares held by Sterling
should not be sold out to a third party.

124. There being another allegation from the petitioners stating

that Kalimathi provided intercorporate deposits to Sterling on

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27.02.2006 at an interest rate of B.5olo, the company submits, this

deposit was provided as Bridge flnancing to Sterling on account of
delay in the drawdown of funds by Sterling from IDBI Bank, in fact
the said deposit was repaid in full by 08.03.2006 with interest i.e.
within a period of nine (9) days but whereas this whole scenario
has been painted as the company through its group companies
provided undertaking loans to Siva's company so as to buy TTSL
shares and thereafter to sell them with huge profits.

125. On the allegation of Mr. Siva writing a letter dated 3.10.2013

to Mr. Cyrus, the company says, it should be seen in the proper
light as an attempt by Mr. Siva to obtain concession from Tata
Group based on unsubstantiated assertions that some "off the
record" considerations motivated Siva group to invest in TTSL, it
says that it ls a matter of public record that Siva group was (and
continues to be) under financial distress on account of such
payment to be made by to Batelco (Bahrain Telecommu nications
Co.), perhaps, in this context, Mr. Siva was attempting to obtain an
exit from TTSL by selling its shares to Tata group, out of which, the
Petitioners now try to spin a conspiracy theory to falsely manifest
that the transactions between TTSL and Siva group were done
"solely at the behest of and under the dictate of Mr. Tata", to
which, the company says that the e-mail dated 08.10.2013 written
by Mr. Tata to Mr. Cyrus has been used as a trump card to show
that Mr. Tata was instrumental in facilitating t\4r. Siva to invest in
TTSL, but the fact of the matter according to the company is, the
petitioners have glossed over the fact that Mr. Tata did not himself
deal with Siva, it was only projected on selective basis to impute
mala fides to Mr. Tata.

125. In respect to DoCoMo arbitration, the company says that the

petitioners have no basis to allege that the legal notice from Siva
was backdated, this bald assertion has been made in order to paint
a picture Siva having some access to the decision taken at the
board of directors of the company, it is a matter of record that on
15.09.2016 board meeting, indeed Dr. Nohria (Trust nominee
director) proposed to initiate legal action against Siva Industries

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and Holding Ltd. making it further clear that the company so far
has not waived any of its rights and remedies under law to proceed
against Siva group, likewise even to the legal notice dated
15.9.2016 issued by Siva group making baseless claim on the
company, it instructed its lawyer to send a strong rebuttal to the
said legal notice on the 16.11.2016.

L27. As to the allegation stating that the company paid t600crores

to Siva group in various contracts, the company submits that for
Siva group, part of promoters of Aircel Ltd. a leading
telecom mu nications had the expertise in program management and
vendor negotiations, which are crucial for rapid roll out of telecom
infrastructure, TTSL has confirmed that to have Pan India
operations, availed services from Siva group, but it does not mean
that any undue advantages was given to Siva group putting the
petitioners to strict proof if any undue benefit given to Siva group
with respect to those contracts. Inducting a service provider like
Siva group as a significant shareholder is a commercial strategy to
ensure that the vendor's interests are aligned with the company
and its shareholders to keep the cost of acquisition of
assets/services low, which is beneficial not only to TTSL but also to
the company, it is a fact that TTSL repeatedly recorded that the
significant benefits and cost saving accrued to TTSL pursuant to the
services provided by the Siva group. As to the contracts given to
Siva, they were awarded in between 2003 and 2007, whereas
Mr. Tata joined the board of TTSL only in the year 2005. With this
explanation, the company submits that the petltioners are
attempting to distort facts to suit their own ulterior agenda and
imputing him impropriety where none exists.

128. In respect to allegation of Colaba Tenancy Flat, the company

is not in a positlon to respond to such allegation because it is not a
privy to the same, thereFore the same are denied for want of
knowledge, henceforth, it does not constitute affairs of the
company and cannot constitute oppression of the petitioners.

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129. As to allegations of making favors to Mr. Mehli and its

associates, the company denies them as purely speculative;
moreover, since those allegations are pertaining to the affairs of
Tata Power, the company is not in a position to address the same,
But by seeing response from Tata Power on 4.1.2077, the company
says that all contracts awarded to Mr. Mehli are pursuant to
following requisite process in awarding of the contracts and
necessary approval from the board/commlttee/ma nagement was
taken as required as per the schedule of authority prevailing at
various times detailing how painting contracts to Mr. 14ehli's
company were awarded by following competitive biddings, as to
reserves of Mr. Mehli's companies are concerned, it cannot be
attributed that profits of Mr. Mehli's Company has gone high is only
because of getting contracts from Tata Power. As per the
petitioners' averment itself, this increase of reserves of him in
manifold is in long tenure of about 20 years, therefore the growth
of Mr. Mehli through his companies could not have been attributed
as an undue advantage given to Mr. Mehli either by the company or
by Mr. Tata, It has been vividly described in the Company Petition
as to how 1993 Dredging contract, 2004 Barging contract and 2006
Sea Freight contract were given to Mehli. It
is fact of the matter
that Mr. Cyrus was Chairman when Mr. Mehli Group Company
having contracts with the Tata Power, therefore Mr. Mehli doing
works of Tata Power could not be attributed as a favor done by
Mr. Tata to Mr. Mehli that apart, Tata Power is not a party to this
proceed ing.

130. Aviation Industry "Misadventures": The attribution made by

the petitioners in respect to Air Asia issue, the company submits
that the petitioners submitted that joint venture agreement with Air
Asia was thrown as fait accompli on Mr, Cyrus initially when he took
the reins of the company as lts Chairman. The fact ls initially the
company agreed to invest in Air Asia limited to 30o/o of USD 30
million, but this limit was subsequently enhanced by the board of
directors of the company during Mr. Cyrus's tenure as executive
Chairman. Now it has been shown as R2 has passlon for airways

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that's why the company entered into joint venture with AirAsia. As
to allegation of fraudulent transaction worth of ?22crores, no doubt,
it has come out in the forensic investigation conducted by Deloitte
revealing the ex-CEO of Air Asia India indulged in that fraud, with
which none of the directors of Air Asia India have been connected,
whereby a fraud committed by a CEO cannot be attributed as fraud
committed by the directors of that company. With regard to this
issue, the petitioners attempted to show that Mr. Venkataraman
was involved at every juncture of the Air Asia deal and tried to
scuttle the probe purported to be conducted into this fraudulent
transaction because Mr. Venkataraman is potential beneficiary of
the payout of this a22crores. The company submits that this is
scurrilous to say that Mr. Venkataraman tried to brush aside this
fraudulent transaction for he has illicit benefit in it. In fact, this
issue on 26.09.2016 came before the board of directors of AirAsia,
on appraisal, the said board unanimously decided to take the
investigation to its logical conclusion, in pursuance thereof, on
09.11.2016 AirAsia India has lodged a complaint against ex-CEO
and other private individuals seeking registration of FIR with regard
to the alleged fraudulent transaction. According to the forensic
report, this transaction is an act of embezzlement of fund, Air Asia
India by its ex CEO, in conspiracy with one HNR Trading PTE Ltd.
(Singapore entity) and M/s. Link (Chennai based company) which
was not within the knowledge of the board of directors of Air Asia.
As to the allegation that Mr. Tata involved transactions with one
Hamid Reza Malakoutipoor, who has been classified as "suspected
and UN sanctioned alleged global terrorist" by the United States of
America, the company denies the allegation of the Tata group
acting on the instruction of Mr. Tata to indirectly finance terrorism
to cause harm to the age-old image of the Tata group. These
petitioners went to an extent to attribute linking Mr. Tata to a
terrorist entity without having any material with them. The
company says, when this allegation is put against the forensic
report given by Deloitte, it
has nowhere been mentioned any of
these allegations hurled at the most reputed person like Mr. Tata,
except saying this embezzlement indicted the ex-CEO along with

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aforesaid two companies. Therefore, no fault can be found against

either the directors of Air Asia or Mr. Venkataraman. much less
against Mr. Tata. As far as the argument on losses in Airways
business, the company says, it is a well-known fact that aviation
business is a long gestation buslness wherein losses have to be
born in the initial years until certain level of market penetration is

achieved. thereby, merely the industry reeling under losses cannot

always be the decisive factor for the fate of a business venture.

131. As to the pleadlng of the Petitioners that the Chairman of the

company should not have been removed without being selection
committee constituted as envisaged under Article 118 for it has
been stated in the very same Article that the process for removal of
incumbent chairman must be as that of the process applied for
appointment of the chairman, the company submits, this pleading is
fallacious because selection committee means for selection of
chairman, it would be absurd to interpret that clause of constitution
of the selection committee in the Article is equally applicable for the
removal of the Chairman. The company says that this applicability
of process for removal is indicative of the fact that removal of a
Chairman is subject to Article 121, which requires that aFfirmative
vote of all the directors appointed pursuant to Article 1048, not
about constituting another selection committee for removal of the
incumbent chairman. When Mr. Cyrus was removed as Chairman
24.L0.20L6, only one director i.e. Mr. Hussain abstained from
voting on the resolution to replace Mr. Cyrus. The company denied
the fact that 14r. Amit, Mr. Ajay and Mr. Venu Srinivasan have been
inducted on to the board only at the instance of Mr. Tata. It is

denied that the agenda item for the removal of Mr. Cyrus as
executive chairman from the board of directors was improperly
introduced at the meeting of board of directors. Mr. Tata says that
it was conducted on 24.10.2016 in accordance with the mandatory
SS-I prescribed by the Institute of Company Secretaries of India
and approved by the Central Government. In that standard, it has
been mentioned that "any item not included in the Agenda of a
Board Meeting may be taken up for consideration with the

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permission of the Chairman and with the consent of majority of the

directors present in the meeting, which shall include at least one
independent director, if any". Since the then Chairman Mr. Cyrus
was interested in this resolution, he was therefore required to
refuse himself from deliberations in this regard when Mr. Cyrus did
not recuse himself, the directors selected Mr. Vijay Singh as
Chairman for the Board meeting, therefore majority of the directors
being present in the board including more than one independent
director, the chairman of the board Mr. Vijay Singh presided over
the meeting and approved the resolution permitting the board to
consider the matter which was not specifically included in the
agenda of the board meeting, thereafter the board of directors
passed the resolution to remove Mr. Cyrus as chairman. The
company therefore submits that it is not a requisite that unless an
agenda item is not included it could not be taken up for passing
resolution. The company submits that actions of Mr. Cyrus aFter his
replacement as Chairman clearly exposed his "scorched earth
strategy" to Ieak sensitive information to outsiders. It is submitted
that Article 1218 provides right to any director to request the board
of directors to consider particular matter at a board meeting by
providing 15 days' notice, but it does not mean that conferring a

right to a director would become an impediment to the Board in

including an item in the agenda, such right made available to a
director cannot be interpreted to preclude majority of the board of
directors from deciding to take up additional matters during a board
meeting in accordance with SS-I. It is submitted that there was no
legal requirement for the board of directors to provide reasons for
the removal of Mr, Cyrus as Chairman, the reasons for the removal
of Mr. Cyrus as chairman is Trust deficit was growing between the
Trusts of the largest shareholders of the company and Mr. Cyrus,
and also loss of confidence of the board of directors of the company
in Mr. Cyrus continuing as Chairman. By Mr. Cyrus being removed
as chairman, since Mr. Cyrus and the petitioners are unable to
come to terms with the fact that he failed to meet the expectations
and win the trust of the board of directors, they filed this Company
Petition as if it ls a ground covered u/s 24L of Companies Act,2013.

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The relaxation of the retirement policy at the board level cannot be

considered to be a ground for filing this petition stating relaxing
retirement age is oppressive against the petitioners, because there
is no vested right in favor of any shareholder that retirement policy
shall be kept in place. It is said that directorial complaint or a
complaint for loss of office does not constitute oppression of
minority shareholder. Moreover, the petitioners have also not made
any grievance regarding Mr. Cyrus'removal as chairman; therefore,
the alleged illegality in the process of his removal from office is

wholly irrelevant.

132. In respect to removal of directors invoking section 169 of the

Act 2013, the company denies the averment of the Petitioners that
special notices were given en-masse to remove the directors not
toeing the line of Mr. Tata, because special notice u/s 169 was
given only in respect to removal of Mr. Cyrus and Mr. Nusli Wadia.
There is no requirement in law to provide reasons for seeking
removal of directors; the respective companies are under no
obligatlons to give explanation for removal of Mr. Nusli Wadia.

133. As to the allegation of the company purchasing the shares of

Tata Motors to increase its voting power to outvote Mr. Cyrus, it
says that it is incorrect, because the price of Tata Motors share at
that time was at the average of ?560 per share, but whereas the
company purchased shares at ?486.13 per share, moreover, even
after increase of 7.73o/o shares by virtue of this purchase, the
company shares are still below the mark of 50o/o therefore, the
company purchasing shares aggregating to 1.73olo cannot become a
ground to say that increase has been made so as to remove
Mr. Cyrus from as Chairman from Tata Motors. On the allegation of
petitioners that the company veiled a threat to withdraw its
guarantee against its group companies, the company submits, it is
a vague allegation without support of any material; therefore, such
allegation is not only unfounded but also highly deprecated.

134, In respect to the allegation of breach of insider trading

regulations, the company at the outset submits that this allegation

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cannot form the subject matter of this petition u/s 241 of the
Companies Act, 2013, apart from it, the company denied the
trustees directly calling for "unpublished prlce sensltive information"
from the listed Tata operating companies. The petitioners, who are
alter ego of Mr. Cyrus, have now been saying that Mr, Tata and
Mr. Soonawala interfering not only with the affairs of the company
but also with the affairs of the group companies turning their blind
eye to the fact that Mr. Cyrus himself on numerous occasions
sought the advice of Mr, Tata and Mr' Soonawala for various
business and strategic decisions. It has been rightly done so,
inasmuch as Mr. Tata has been continulng as Chairman Emerltus to
the company, and Mr. Soonawala being Financial Advisor, despite
having hung their boots, as per the Articles of the company, in fact
for every strategic decision in group companies, the company has
to take a call over the same. Most of the times when presentations
are made to Mr. Tata, it has been done right ln the presence of
Mr. Cyrus, therefore, now it isnot open to these petitioners to
complain about breach of insider trading regulations. Indeed,
Mr. Cyrus himself encouraged information being shared by
operating companies with the board of directors of the company.
The company and the Trustees have always interacted with and
dealt with information in relation to the listed Tata operative
companies strictly in compliance with SEBI Regulations. The
contribution of Mr. Tata and Mr. Soonawala for decades together
has led the Tata group to the height it has reached today, and they
are the best repository advice and guidance with respect to its
affairs. It has been further said, the petitioners have wrongly
alleged that the purported practice of various Tata operative
companies making presentations before the board of the company
of their proposed business plan, needs to be revisited, to ensure
that there is no violation of the insider trading regulations, what
these petitioners failed to understand is that the object of such
communications or presentations by Tata operating companies is
for bonafide corporate reasons and for legitimate business
purposes. The company being the promoter of all these Tata
operating companies, they remain looking to the company to get

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financial support, fund, comfort letter, corporate guarantee. The

decision of the company on such issues is critical to meet the needs
and plans of the operating companies; therefore, it would be for the
legitimate purpose and to protect the interest of the concerned Tata
operating companies. For that purpose, the relevant information is
appropriately and legitimately shared with the company by the
operating companies.

135. Thus, in summary, while putting the Petitioners to strict proof

of their allegation that any prlce sensitive information was shared
and without admitting the same in any manner, it is submitted that
(a) these allegations are beyond the purview and jurisdiction of the
present proceedings; and (b) the advice and counsel of Mr. Ratan
N. Tata and Mr. N.A. Soonawala was taken for legitimate business
purposes and in the larger interests of Tata Sons and the operating
companies.

136. For having the Petitioners had a veiled allegation against Prof.
Lord Kumar Bhattacharya, the company says, it is pertinent to
mention that Prof. Lord Kumar Bhattacharya is an academician,
who has made life peer and member of the House of Lord in 2004,
in fact it was Mr. Cyrus who approached Lord Bhattacharya to
deliberate and discuss matter concerning the Tata group in Europe
including the discussions for closing the company operations in UK,
in such circumstances, the petitioners or Mr. Cyrus cannot point
any finger at Lord Bhattacharya as has been attempted. Lord
Bhattacharya has not derived any pecuniary gain or taken
advantage of any information provided to them, which information
was provided to him by Mr. Cyrus or at his behest to seek advice
and direction. Denying the averments of para 108 of the petition,
the company says that Mr, Cyrus did not take any steps to
introduce any reforms as alleged, but the contents of letter dated
03.10.2016 are being misconstrued for the petitioners, convenience
suppressing the letter dated 23.09.2016 which is written by
Mr. Cyrus to Mr. Tata indicating the role for the Trusts and the
nominee directors of the Trusts in the management of the affairs of
the company and the proposed governance plan for the same.

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137. In respect to allegation about Mr. Cyrus' resignation From

Tata operating companies, the company has vividly explained as to

what happened before his resignation from those respective
companies but that those issues not being points at the time of
hearing, those explanations have not been depicted as averments
of this reply, The company has point by point assailed the reliefs
sought by the petitioners saying as to how those reliefs could not
be granted by this Bench. The company has concluded its reply
saying that the allegations of the petitioners are bereft of any
merit, henceforth sought for the dismissal of this Company Petition.

Reply of R2 (Mr. Tata) to the Petitioners

138. In reply of Mr. Tata to the Company Petition, he submits that

his association with Tata Group started in the year 1962 in
Jamshedpur from TELCO (now known as Tata Motors) and then
working at shop floor of Tata Steel factory, while doing so in the
year 1991, he had become the chairman of the company, there he
put his abilities to realize his vislon of making the Tata group one of
the world's largest conglomerates with its presence over 100
countries supporting over six lakh employees by establishing
industries of national importance as also emerging as the hallmark
of good governance and corporate practlces, today contributing
nearly 4o/o of the nation's GDP.

139. Mr. Tata explained as to how much efforts they have put in
between zotl-t2 for selecting a man as Chairman who would be in
sync with the ethos, governance structure and financial imperative
of the company, but little they did realize at the point that their
search would culminate not very far from where they started,
Mr. Cyrus who was himself was member of this selection
committee, presented himself as promising candidate, on the
selection committee being of the view that Mr. Cyrus 's candidature
would be befitting to the position of Chairman, he was made as
Chairman to carry forward the enviable task of carrying forward the
legacy of Tata Group, however things having started revealing that
the confidence that the company reposed on Mr. Cyrus became

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otherwise, therefore he was replaced as Chairman on 24'10.2016.

On 18.12.2012 itself, Mr. Cyrus proposed Mr. Tata as a special
prominent invitee to the Board Meetings of the company, to which
Mr. Tata reluctantly accepted to remain available for guidance when
necessary with a clarification that he did not wish for his shadow to
loom over the group without carrying over his previous role as
Chairman, of course, he said that he decided to take clean break
from the company. Ever since he retired, he redirected his focus
and energies on hls other pursuits, passions and interests devoting
more time to the Trusts activities focusing on nutrition and
prosperity immersing himself in identifying young entrepreneurial
talent, in the pursuit of it, till date he made investments in over 50
startups since Decembet 2072, earlier in the year 2016, he founded
in association with Dr. Vijay Kelkar and Mr. Nandan Nilekani, a
technology enabled financial inclusion vehicle Avanti Finance, for
providing credlt to the underserved and unserved wherein founders
are committed to plough the gains from this venture into
philanthropy. This is not to say that he has not offered his advice
whenever sought either by Mr. Cyrus or others on the board, he
always used his good relations and offices with various people to
help the new management forge new ties both nationally and
internationally. While he was willing to offer any and all assistance
he was asked to, he sensed that there was a growing disconnect
between Mr. Cyrus, other members of the Board of the company
and Tata group and that Mr. Cyrus was not doing enough to steer
the company and Tata group forward in line with strategy plan he
had presented during the selection process. He says he was
informed that there was little or no intentlon on the part of
Mr. Cyrus to encourage active discussion on the board on important
business decision and a strategy to steer the company forward. In
fact, the financial performance of the company and the operating
companies constituting Tata Group wltnessed a decline during
Mr. Cyrus' tenure, the dividend received by the company from
operating companies other than TCS had fallen significantly, one
side income is falling and other side expense was mounting. He
says that the borrowing of Tata Group has increased many fold,
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excessive reliancestill remains on TCS and JLR to provide cash-

flows and revenues to the group. Little has been done to resurrect
companies such as Tata Motors, which has consistently ceded
market share over years despite holding immense potential.

14O. Mr. Tata says what subsequently emerged was that Mr. Cyrus
had suddenly developed deep seated resentment with the
governance structure of the company as reflected in the Articles of
the company, there were instances where details of signiFicant
business itemsto be transacted in the business of a board meeting
would be shared with the Trust nominee directors just shortly
before the scheduled board meeting, thereby depriving the Trust
nominated directors the opportunity to adequately prepare and
present their views to the board, apart therefrom, he had refused
to engage constructively with the trusts, the primary shareholders
of the company. In the answering respondent's efforts to address
these and several other issues that had emerged during the course
of Mr. Cyrus' tenure, Mr. Tata made several endeavors to impress
upon Mr. Cyrus that there was brewing discontentment in the
board, however such efforts did not yield result and it became
increasingly clear that the selection committee, as well as Mr. Tata
in his personal capacity, had failed in their duty to identify and
nurture a suitable candidate for chairmanship of the company.

141. In his reply Mr. Tata has categorically mentioned that the
dividends received from all other 40 companies, apart from TCS,
continuously declined from approximately ?1OOOcrores in 20L2-73
to approximately ?TB0crores in 2015-16 but the later included
additional interim dividend of ?1OOcores which would have normally
received in 20t6-17 reflecting clear decline in the total profits of
those operating companies, likewise, he has given other figures
how expenses have increased in the tenure of t\4r. Cyrus .

142, Shortly after his replacement as chairman, Mr. Cyrus

embarked upon a motivated campaign to publicly disparage, malign
and ridicule the company and Mr. Tata in particular by leading
confidential and sensitive information of the company to outsiders

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including his family members which is very much unbecoming from

a person who was entrusted with duty for leading Tata Group. It is
regrettable that it is only on his removal that allegations are being
made about business decisions that Mr. Cyrus himself was party to
for over a decade In different capacities.

143. Mr. Tata says that the petition says that Mr. Cyrus became
aware of the issues confronting Tata Group, a so called
"inheritance" from Mr. Tata, little was done on Mr. Cyrus' part to
alleviate the group from such circumstances despite having
completed for more than five years i.e. almost the entire tenure, to
hold his inheritance liable for the group performance during his
time. It
is the fact that Tata Group companies were historically
supported by the company in multiple ways by providing funds,
strategic advice, simultaneously exercising control over the
operating companies through its shareholding and commonality of
the board and senior management, this cohesion seamlessly
continued for many decades by which this operating companies
have individually grown and prospered but whereas after the
advent of Mr. Cyrus as Chairman, he has gradually over the course
of his tenure concentrated power and authority in his own hands as
Chairman in all the major Tata operating companies where there
are no longer any representatives from the Board of Tata Sons, as
had always been the case in the past and which had ensured
cohesion in the group. As a result, many of the operating
companies are drifting apart from the group and Tata Sons, through
a systematic reduction of control and influence by Tata Sons over
them. Mr. Tata says that it is not true that Mr. Cyrus was removed
as Chairman in a surreptitious manner without assigning reasons
and that he was asked to step down as things were not working
well in between Mr. Cyrus and Mr. Tata. For Mr. Cyrus lost
confidence of the board, a collective decision was taken for the
removal of him.

144. As to
Bakhtavar Apartment, Mr. Tata said since the
allegations against him unjustly enriching himself at the expense of
the company is very personal to him, thereby he said that he must

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deal with this unequivocally saying that Forbes Forbes Campbell

and Co. C'FFC") was the tenant of Pallonji Mr. Mistry and four
others (together the "original owners") having leasehold rights over
the land with building known as Bakhtavar, including apartment
202 situated on the second floor of "A" wing of the said building
where Mr. Tata resided from 1968 until 2000. In respect to this
property, Mr. Tata's father entered Into an agreement with Mr. F.H.
Kemple of FFC permitting him to occupy this apartment with the
understanding that the tenancy rights would remain in the name of
FFC, by which, Mr. Tata became sub-tenant of per letters
FFC as
dated 08.10.1968 and 10.10.1968 (Exhibit R-2/1 Colly), as it stood
thus, this apartment came to be sold by the original owners to FFC
in June 1975, by which, he became tenant for lawful consideration
by which he was acknowledged as tenant of Bakhtavar apartment
and continued there as tenant up to 2000. In the year 2001, by
way of tripartite deed of transfer, FFC (then known as Forbes Gokak
Ltd.) sold this apartment to M. Pallonji &Co. Ltd. for a consideration
of {2crores, for he had tenancy rights over the said property, in the
same transfer deed, he surrendered his tenancy rights in that
apartment in favor of the Pallonji company for a lawful
consideration of {3crores, which is annexed as Exhibit-R2/2 of the
reply of Mr, Tata. It is a tripartite agreement with necessary
permission with due disclosure and after having fair market
valuation by a registered valuer and these transactions have passed
scrutiny of provisions of section 269UL of Income Tax Act and an
Income certificate u/s 230(a), but unfortunately, despite everything
was done lawfully on fair market valuation with permissions from
various authorities after due disclosure, these petitioners and
Mr. Cyrus dug out this as an issue holding out Mr. Tata made out
illicit gain out of it.

145, Mr. Tata says that these petitioners have smeared

accusations against Mr. Tata stating that Mr. Mehli received undue
benefit at the cost of rata Group companies only on account of his
close association with Mr. Tata. The main a[egation is Tata power
awarded several contracts to Mr. Mehli. Since it has been vividly

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denied in the reply of the company, instead of repeating the issues

already covered revealing how much truth in this allegation is, it is

necessary to mention that Mr. Cyrus was director on the board of

directors of Tata Power from the year 1996 to 2006 and director
again from 2011 and thereafter Chairman from 20t2. So all these
transactions should be within the knowledge of Mr. Cyrus, in fact
they were, as to some transactions Mr. Cyrus himself approved but
that fact was convenlently kept under the carpet so as to show that
as if Mr. Tata made some undue favor to Mr. Mehli, The fact he
says is, Mr. Cyrus was in know of everything from 1996 until before
his removal i.e. 24.10.2016, but now it has become an allegation
aga inst Mr. Tata.

146. As to accusations in respect to Siva and his company Sterling,

he strongly objects to the petitioners that "in all probability",
Mr. Tata disclosed to Siva that decision of board of the company in
its meeting dated 15.09.2016 to take appropriate legal action
against Siva for recovery of approximately ?694crores as to which
he says he was neither part of the board meetlng dated
15.09.2016, nor was in any manner privy to discussions of the
meeting. He says, of course, the record available and presented in
the reply of the company would belie the long story spun against
Mr. Tata. Mr. Siva, in his letter dated 02.10.2013 described his
difficulty in exiting from his investment from TTSL in view of call
option present in it. lYr. Tata wrote only an email on08.10.2013 to
Mr. Cyrus saying that he was not directly involved with the
transaction but anyhow Mr. Cyrus might consider agreeing to
Mr. Siva's request for a meeting on the subject.

l47.1ata Nano: Notwithstanding the fact these petitioners or

Mr. Cyrus, before removal of him, never wrote either to the
company or to Mr. Tata that Nano is an issue of concern to the
petitioners, but having the petitioners as well as Mr. Cyrus made it
an issue after Mr. Cyrus' removal on 24.10.2016, Mr. Tata says
when this idea was conceived and taken Nano proposal to Tata
Motors Board, it was unanimously approved after examining the
commercial viability of this project. When this project was

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launched, there was a demand for approximately 300,000 potential

owners who made payment almost full for the cars. But Tata Motors
could not fulfill this demand due to the challenge to the land
acquisition faced at Singur, West Bengal. He says it is a known fact
that these development in respect to land acquisition was beyond
the control of Tata Motors and also Mr. Tata, however finally the
project was relocated to Gujarat on timely intervention of the then
Gujarat Chief Minister, by which already one year was lost
resultantly Tata Motors could not fully capitalize on the initial
market enthusiasm for the Nano and this inordinate delay in
production led to loss of market demand, which ultimately
depreciated in the brand value of the product and further fall in
demand for Nano. By the time production was commenced from
Sanand, the market dynamic has changed in the year 2010 by
advent of new alternatives emerging in the market. Mr. Tata
specifically submits in respect to allegation implying that "emotional
reasons" prevented Nano project from being shut down is incorrect,
immature and strikingly naive. He says that although the
manufacturing facility at Sanand was originally intended for
production for Nano, nothing prevented the management and board
of Tata Motors (at least from December 12 onwards) from utilizing
these manufacturing capabilities for augmenting production of other
cars by Tata Motors, such as the Bolt, Zest, Tiago, etc. This would
also have ensured better utilization of investment made by Tata
Motors in the land and machinery at the Sanand facility. Mr. Tata is
neither on the board of the company nor is on Tata Motors, the
decision in relation to Tata Nano entirely rest with Mr. Cyrus at
least from December 2012, i,e., for four years. It is a long time for
a company such as Tata Motors to take a decisive view of the thing,
one way or other on Tata Nano. Instead of doing so, the petitioners
now charged him with an accusation that Mr. Tata alone prevented
Mr. Cyrus from taking crucial decision to shut down the project, He
says, on the contrast, Tata Motors, recently launched newer
variance of Tata Nano under the chairmanship of Mr. Cyrus. Though
Mr. Tata was not in the management, the present state of affairs
viz. of idling capacity and underutilization of facilities at Sanand is

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still being imputed to him. After demise of Karl Slym in .January

2074, Mr. Cyrus despite being the person leading Tata Motors, little
was done by him on his own initiative to remedy what has now
come to be viewed as a failed and loss making project. In the
recent past, after induction of Nano, the only year in which Tata
Motors has not declared dividend is the FY 2Ot4-75, of course,
declaration of dividend is also being imputed to him much after his
departure. Mr. Tata says to draw such causation between dividend
declaration and the commercial succession of Tata Nano is an
overly simplistic approach to a matter such as this, to say all these,
no documentation has been filed. Mr. Tata says he voiced his
concern to Mr. Cyrus about TM losing market shares to others; he
did little to arrest this trend, to prove that he wrote letter, he
annexed those letters as exhibit R2/5.

148. Insofar as Jayem Auto is concerned, Mr. Tata says, whilst it is

true that he presently holds a small minority stake in Jayem Auto, it
is equally true that the shares were purchased by him only after
learning that Tata Motors had no electrical vehicle plans, and that
apart, from an initial set of prototypes/samples of gliders that were
supplied, there was no further engagement of Tata Motors with
layem Auto towards development of an electrical concept,
therefore, the allegation of any alleged conflict of interest on
Mr. Tata's part is entirely bereft of truth. In fact, the disclosure in
respect Mr. Tata having shareholding has been made on his own to
Mr. Cyrus much before this Petition was filed, this was informed not
only to Mr. Cyrus but also to the Board of the company in order to
avoid any misgivings. Copies of these letters are marked as Exhibit
R- 2/6 (colly).

149. As to allegations in respect to Corus Acquisition, he submits

that the board minutes of Tata Steel board meetings reveals that
the decision to acquire Corus was the collective decision of
Directors of Tata Steel Ltd. after having duly debated upon the
structure for the investment, the revision of the bid price, the cause
and benefits of the acquisition, there were eminent personalities on
the board at the time this decision was taken, therefore, he says

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that it is not really understood as to why he would deliberately want

his company to enter into or to continue with loss making projects
and he further says that it is not even the case of the Petitloners
that he has made some personal gains at the cost of such
to the contention of the Petitioners saying that the
decisions. As
Trusts have major stake in the company but whereas the
Petitioners are direct and real stakeholders, therefore, they are
suffering more on account of this deal, as against this allegation,
Mr. Tata says since the Trusts are the majority shareholders of the
company far exceeding that of the Petitioners, how could these
people make such inconsiderate allegations degrading his lifelong
contribution to the success story of Tata Group companies,
moreover it is commercial decision taken at the behest of the
unanimous Board of Tata Steel, since it did not yield desired profits,
could it be they are free to use it as weapon to malign his
reputation in public and to allege that he had lost sight of the best
interest of the company. He asks at the end of the day what
Mr. Cyrus has done to remedy the operational losses of Tata Steel.

15O. In respect to aviation industry, Mr. Tata, denying the

averments made against him in respect to entering into ioint
Venture with Singapore Airlines and Air Asia Airlines, stated that it
is a fact that the company was engaged in aviation industry as far
back as 1932 in the name of Tata Airlines now known as Air India,
it is a history, but can lt become sole reason for Tata Son investing
in the Aviation Industry without any rationale analysis of the
feasibility of the business, the fact of the matter is, that all the
business plans pertaining to such investments were actively
debated and deliberated upon by the entire board of the company
before and after his tenure as the Chairman in fact Mr, Cyrus not
only presided at several meetings as the Executive Chairman but
also actively participated in the meetings of the Board of Directors
of the company where it was unanimously resolved to set up
Vistara, the Joint Venture v/ith Singapore Airlines.

151, As to
interference allegation against Mr, Tata, every time
whenever information was provided to him, including by Mr. Cyrus,

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for legitimate purposes to get his advice on matters of strategic

importance, it was done in his capacity as Chairman of Emeritus -
thls designation was reserved upon him for his counseling and
advice. Indeed Mr. Cyrus repeatedly sought his advice on numerous
matters, such as the proposal to launch a new model of Nano,
composition of proposed interim steering committee with Tata
Motors, plans to diversify portfolios of Tata Companies issues,
dealing with DoCoMo, the challenges faced by Tata Steel Europe,
appointment at key managerial persons such as Managing Director
of Tata Motors, Chairman of Tata International, Omen Directors on
the Board of Tata Motors. He says Mr. Cyrus on his volition also
shared confidential information such as Tata shares preliminary
proposition for proposing interest in Silver Stone as he was "keen"
that Mr. Cyrus team should "make a presentation " "to him to seek"
his guidance on which way to proceed. He says he was even
personally asked by Mr. Cyrus to join Board Meetings so as to
provide valuable assistance on any new business plans. Saying so,
he elaborated in many paras as to how inputs were taken from him
in dealing with various business transactions. He says it is
unfortunate and ironical that calling him as "sole proprietor",
"shadow director, "super- board" reigning over the company, apart
from all these things, he says he being the Chairman of the Trust, it
is his bounden duty to safeguard and protect the trust property i.e.,
shareholding in the company, in a situation like this, not only as a
Chairman of Emeritus but also as Trustee of Trust having major
shareholding in the company expressed his opinion to safeguard the
interest of Tata Trusts and the interest of the company.

152. He has further clarified in respect to Welspun Energy issue,

that issue was brought before the Board in June, 2016 by Tata
Power Co. Ltd with a decision to acquire renewable energy assets of
Welspun Energy Pvt, Ltd for around ?9000crores, at that point of
time, when two of the Nominee Directors of Tata Trust present at
that meeting expressed their reservations regarding the manner in
which a significant decision, having a bearing on Tata power, the
company and consequently on the Trusts, was being placed before

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the Board at the last moment contrary to the letter and spirit of
Articles of the company, which require to present such issue before
the Board of Dlrectors before any of the Tata Companies about to
take a decision in respect to raising of capital, incurring of debt and
divesting or acquisition of any undertaking or business of Tata
Company. This Welspun acquisition being of huge investment
amounting to Rs.9000crores, that decision ought to have been
taken by the company before Tata Power decided such issue. When
the Nominee Directors asked their objection be formally recorded in
the minutes, he was told that Mr. Cyrus vehemently objected to the
proposed language, therefore, Mr. Vijay Singh and Mr. Nitin Nohria
stepped out of the meeting during the recess of the Board Meeting
to consult him to arrive at the language that would be agreeable to
all. He says finally this resolution was passed, though the company
did not take any prior decision in respect to this acquisition before
Tata Power had taken a decision of acquisition without approval of
the company. He submits that the Petitioners have exhibited no
restraint or reluctance while making remarks of such personal
nature accusing him of constant interference and causing
incalculable loss to the company caricaturing Mr. Tata's presence as
grave. Mr. Tata submits he conducted himself within the
parameters of relevant SEBI regulations which apply to listed
companies, and denying the breach of SEBI regulations by putting
the Petitioners to strict proof of the same. Mr. Tata finally submits
that no cause of action is being made in this petition; the same
therefore is liable to be dismissed with costs,

153. R3 Reply: It is Amit Ranbirchandra (Mr. Amit), appointed as

Nominee Director in the Board of the company on 26.8.2016 on
behalf of the Trust under Article 104B of the Articles of Association
filed this reply for he has been shown as R3in the Petition. Since it
is important to say who he is, he has stated that he has been the
Managing Director of Bain Capital Equity since 2008, before that as
the Head of Global Markets and Investment Banking and Managing
Director at DSP Merrill Lynch Limited one of the leading investment
Bank, while doing so, for having believed in giving back to the

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society that nurtures the people, he has been actively involved in

social sector for 15 years contributing both his time and money. He
says he has the privllege of serving on the board of NGOs and now
divides hls time equally between the corporate world and the social
sector. For he proudly considers Jamshedji Tata is one of the role
models and follows his approach to giving nearly all his wealth he
has been fortunate to create for the benefit of the less privilege in
the society. He says he had long standing association with the Tata
Group and was invited to join as the Trustee of Tata Trust starting
in 2015 in addition to serving as one of the Trustees of Shri Ratan
Tata Trust, his philanthropic endeavors also include active
participation in India not for profit including his service as the
trustee and board member of Akansha Foundation, IFRE (Ashoka
University) and Give India. He says his Board commission and
sitting fees, net of taxes received from the company are pledged to
charity.

154. He was formally appointed on the Board of Directors of the

company on 26.8.2016, which was proudly accepted by Mr. Cyrus
saying his "vast experience could be of immense value to the
company and will enrich the deliberations at the meetings of the
Board". For this Respondent along with others being painted as
"postmen" and "agents" of Mr. Tata, Mr. Soonawalla enabling them
to play as "Shadow Directors" and "super controllers of the
company", denying this version, he says, that he has acted
independently uninfluenced by external factors in discharge of his
duties as Director of the company. Specifically, qua him, he says
that the petitloners seem to be inexplicably aggrieved for he cast
his vote on the resolution for removal of Mr. Cyrus as Executive
Chairman of the company in the Board meetlng held on 24.10.2076
on the contention that since he became the Director on the Board
only in August, 2016, as such "ideally" he should have abstained
voting in the resolution and since he did not abstain, they say that
he breached his fiduciary duty towards the company.

155. To dispel this argument of idealism, Mr. Amit submits that he

has been provided with exhaustive compilation of documents

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related to the activities of the company upon his appointment to

the Board of the company which made him fully conversed with the
activities of the company under the leadership of Mr. Cyrus, to say
whether he is conversant with the affairs of the company or not,
the contribution and discussion and dellberations happened in the
Board Meeting held on 15.9.2016about 5 year business plan
presented by Mr. Cyrus is itself a testimony especially about Tata
Communication Services (TCS) because Mr. Cyrus himself
appreciated his "insight inputs" during the Board Meeting and
wanted to get him exposed to other parts of the Group, to prove
the same, Mr. Amit placed a letter sent by Mr. Cyrus on 20.9.2016
as an Exhibit-R-III/2 and also Board minutes dated 15.9.2016
reflecting his suggestions on the business plan mentioned above. As
to allegation of collusion between Mr. Nitin Nohria, he has stated
they have independently held their business reputation in different
walks of life, sometimes both of them disagree with each other
perspective because they have, he says, always conducted
themselves with utmost professionalism, dignity towards their
opinions, therefore, he has taken strong exception to the
Petitioners suggestions that he was in cahoots with Mr. Nohria. He
submits that Mr. Cyrus as well as the Petitioners have downplayed
that the decision to replace Mr. Cyrus was taken by majority of the
board with 7 out of 8 Directors (not including Mr. Cyrus) voting in
favor of his replacement, one abstaining and Mr. Cyrus not voting
which itself makes it clear that Board arrived at a conclusive
decision to reintegrate leadership of the company. Finally, he says
that the decision taken on 24,10 ,20t6 by the Board of Directors is
in paramount interest of the company therefore there is no merit in
the argument of the petitioners and Mr. Cyrus. He voted in the
resolution and acted in the interest of the company at board
meeting whereby this Petition against him is liable to be dismissed.

156, It is Mr. Ajay Gopalkishan Piramal, Leader of Piramal Group, a

Conglomerate with diversified business interest across
pha rmaceutica ls, financial services, information services, real estate
and glass packaging apart from this, also the Chairman of Shriram

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Capital, associated with various esteemed organizations as a

Chalrman of Board of Government, the Indian Institute of
Technology, Indore, the Board Member of Pratham, largest NGO in
the space of primary education, a member of Board of Deans
Advisors at the Haward Public School, in Boston, Member of Central
Board of State Bank of India and member of (i) the alternative
investment policy Advisory Committee constituted by SEBI, (ii) the
National Council Federation of Indian Industry, (iii) the Hon'ble
Prime Minister's Council for Trade and Industry and the Board of
Trade Constituted by Ministry of Commerce and (iv) the Hon'ble
Prime Minister's Task Force on Pharmaceuticals and Knowledge
based industries. With this background, on 25.8.2016 he has come
on the board of the company as Non-Executive Independent
Director. As to the allegations the Petitioners and Mr. Cyrus made
saying lack of independence to Independent Directors, Independent
Directors related to each other, denying all the allegations in toto,
he submits that it can't be said either by the petitioners or by
Mr. Cyrus that since he has come on Board on 25.8.2016 as an
Independent Director, he should not have participated in the
decision taken on 24.1O.2076, which has neither been said in the
Articles of Association nor in law that a Director should attend such
and such number of meetings before voting. He is seasoned
business with several years of experience, and he noticed that since
there was breakdown with trust between the largest shareholder
and the Chairman of the company, i.e. Mr. Cyrus, it was required to
be expeditiously addressed, he was even present in the meeting
dated 15.9.2016 therefore, he says that the Petitioners stating that
Independent Directors are controlled by Mr. Tata or Trustees of the
Tata Trust are devoid of any merit and it is a brazen allegation
against him wlthout even producing a shred of evidence to
substantiate the same. As to the allegation of connections, Mr. Amit
and Mr. Nohria are not on the board of Piramal Realty, he says, he
shared number of boards either as a Chairman or the Director. in
fact, Mrs. Rohika C. Mlstry until recently also on the Board of
Pratham NGO which he chairs therefore he says none of these
associations have in any manner affected his objectivity or

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independence on any board he has served, so this allegation of

collusion is
based on some factually incorrect assumptions on
commonality of boards. Accordingly, he has sought for dismissal of
this Company Petition against him.

157. It is Mr. Nitin Nohria, the George F. Baker Professor of

Administration and became the Dean of Faculty at Harvard Business
School (HBS) on 1.7.2010. He says that he has been on the Board
of the company since 6.9.2013. As to the allegation of conflict due
to the gift given to HBS by Mr. Tata, he submits that Tata became a
member of HBS Board of Deans Advisors in 2000, during his service
on the Board of Deans Advisors, he was approached by Dean Jay
Light to consider a gift to HBS to build a new executive building, he
had no involvement whatsoever in the discussions. His predecessor
Dean finallzed this gift in March,2010, before he even knew he was
going to be appointed Dean. His appointment was announced on
April,2010 and his term began in July,2010 whereas he only
joined on the Board of the company on 6.9.2013 after Mr. Tata had
retired from the Board. Mr. Nohria says that the Petitioners and
Mr. Cyrus twisted this background as if he was involved in soliciting
the aforesaid gift from Mr. Tata and thereby compromised in his
role as Dlrector of the company. Thls was denied by Mr. Nohria
saying that there is no truth in this allegation. He says that he
joined the Board of the company to give something back to his
country by serving on the board of one of the important institution-
Tata Group. He was proud of being nominee of Tata Trust, he says,
because he always argued that a good business must create a value
for the society and the majority ownership of the company by Tata
Trusts was an example of business group that was fully devoted to
the ideal. As to the allegation of acting as "postman", he says, that
he spent more time in conversation and discussion with I\4r. Cyrus
and other directors of the company than Mr. Tata and he was
always free to exercise his best and independent judgment as a
member of the Board of Directors of the company. He says earlier
board minutes would reveal that he actively and independently
engaged in discussing the merits of the matters, he never hesitated

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in saying to Mr. Cyrus to take prudent actions, including those that

would overturn decisions taken during Mr. Tata's tenure, As to
allegatlon of condoning questionable practices at Air Asia, that all
those issues were fully examined and addressed, in respect to the
allegations about Mr. Siva and Mr. Mehli, when concerns were first
raised about loan to Mr. Siva in Board Meeting dated 8.8.2016, all
the board members, including himself voted unanimously to pursue
any and all actions necessary, even in the board meeting held on
15,9.2016 as well, all agreed unanimously to serve legal notice to
Siva Industries and Holdings Ltd and if necessary to file suit for
legal recovery. Accordingly, legal notice was issued to Mr. Siva,
therefore, the allegation saying that these answering Respondents
tried to help Siva is belied in the minutes of the Board meeting held
on 15.9.2016.

158, In respect to Welspun transaction, he says, that this issue

was never brought before the board of the company for full
discussion befoie approval was sought through written circular, it
ordinarily should not have happened because a thorough discussion
was required in respect to group company issue before having
formal approval, In the board meeting, having Mr. Cyrus
vehemently objected to the language Mr. Vijay proposed to enter
into the minutes regarding Wellspun issue when Mr. Vijay
communicated that seeking approval for Welspun transaction from
the company was in breach of the terms of Articles of Association,
to get over the situation, Mr. Vijay and Mr. Nohria requested an
opportunity to talk to 14r. Tata to see if they could find the language
that would be acceptable to Mr. Cyrus. After having spoken to
Mr. Tata, they were able to come up with a language that Mr. Cyrus
could accept, and finally orr the suggestion of Mr. Tata, consensus
was arrived at in the said meeting to approve Welspun acquisition
despite no formal approval was taken from the board of the
company before the decision came from Tata Power to the
Company Board. He says that it is one of the glaring examples to
say that there was irreparable trust deficit between Mr. Cyrus and

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Tata Trust - the majority shareholders of the company, in spite of

it, mlnutes came out with consensus.

159. As to allegation in acting with concert with Mr. Amit and

Mr. Piramal, he says it ls true that Mr. Amit is his brother-in-law
and Mr. Piramal is friend and long term business associate, despite
all of it, they have their business reputations and have attained
thelr independence and integrity maintaining track record.
Therefore, he takes strong exception to any insinuation that he
acted in concert with any other board member maligning his
integrity or their integrity. He says that he faithfully discharged his
fiduciary duty and stand by the board decision to remove 14r. Cyrus
as Executive Chairman therefore he says he exercised his vote for
good and cogent reasons without any favor, in fact out of his
experience he says, he became increasingly concerned during his
time on board about Mr. Cyrus ability to meet long time interest of
the company. Finally, he says that the majority decision taken by
the board on 24.10.2016 to replace Mr. Cyrus was the decision
taken on paramount decision of the company whereby this petition
is liable to be dismissed.

160. It is Mr. Noshir A. Soonawala (R14), Commerce Graduate

from University of Bombay and qualified Chartered Accountant
worked with ICICI for 10 years, during which he interacted with
International Finance Organizations, viz. the World Bank and the
International Finance Corporation Washington thereafter jolned in
the company in the year 1968 ever since he continued up to 2010
i,e, period of 42 years holding various positions as Finance Director
thereafter Vice Chairman and Financial Advisor of the company by
dutifully discharging his duties for a period of 42 years. He also
continued as Directors in Tata Group Companies, when he retired in
the year 2010 in the Board Meeting dated 15.6.2010, the company
board noted with appreciation of his career of 42 years with Tata
Group including 21 years as member of the company board wherein
it was unanimously resolved that he would be available as an
Advisor to the company. Now he is aged above B0 years. He had
been Trustee of several Tata Trusts for many years after his formal

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disassociation with the company, he moved to the office of Tata

Trusts doing only part time work limiting his time to 2-3 afternoons
hours a week to help the trusts in financial matter on charitable
grounds. He says by virtue of this background and having known
pin to pin about the affairs of the company and its Group
Companies, his advice has been sought by Mr. Cyrus as well as the
company and its Group Companies whenever any financial issue
has cropped up, Now it has been shown as interference with the
affairs of the company and its Group Companies.

161. He said while perusing the petition he noted some

uncharitable allegations against himself and Mr. Tata, though he
does not wish to draw the proverbial sword at such misconceived
and entirely baseless allegations, it does pain him to see how no
stone is being left unturned to sully the name of this grand
institution at the instance of those who were sworn to honor the
same. He says that there is ample material to show that how
Mr. Cyrus made requests asking him to accompany Mr. Tata to
some meetings to discuss some specific financial matters relating to
the company and the operating companies just to show one
example, Mr. Cyrus had asked the Company representatives of Tata
Chemicals Ltd. to seek the views of tYr. Tata and himself, regarding
divestment of divisions of Tata Chemicals, he filed a mail sent by
Mr. Tata on 28.7.2016 greatly appreciating the clarifications he had
given, He further clarifies it was Mr. Cyrus who would send him the
copy of presentatlons on the matters to be discussed though he had
never asked for those documents to be sent to him. For Mr. Cyrus
beinq the Chairman of the company, he could not have declined the
request come from Mr. Cyrus to attend meetings or to accept the
presentation papers sent for this purpose without which he would
unable to express any views.

162. He has given another example of the year 2016, when

Mr. Cyrus wanted to seek Mr, Tata's views on strategic matters
pertaining to Tata Tele Services Ltd (TTSL) and Tata Power,
documents were sent for having meeting with Mr. Cyrus as well as
Mr. Tata to express his personal views on the relevant topic, to

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establish the same, Mr. Soonawala placed relevant correspondence

exchanged between 1.5.2016 and 22.7.2016 which is clearly
demonstrating his nature of involvement which according to him
cannot be called as interference. He says at no point of time, he
asked for any information which could be considered confidential or
price sensitive information. In the context of Welspun acquisition
by Tata Power, he was consulted on the financial structure for the
acquisition, when he required further information to formulate his
views, when he put it to Mr. Cyrus for the material, he arranged for
the relevant information to be provided by the company and Tata
power for his review, to show its relevance he placed the
correspondence exchanged between 26th and 27ti )u|y,2016. As to
his meeting with Merchant Bankers, at 14r. Cyrus's suggestion only,
he had discussion with merchant bankers by putting this
information to the Managing Director of Tata Power before meeting
with Merchant Bankers and also kept Mr. Cyrus informed of his
meeting with the merchant bankers. This was in fact appreciated by
Mr. Cyrus stating that he would ask the Company Secretary
Mr. Farooq to co-ordinate with Mr. Soonawala.

163. In December, 2014, he says, when Tata Motors was

considering alternative for raising long term finance, the CFO and
CS of Tata motors met him at Mr. Cyrus instance to seek his views
on a very limited aspect of the proposal namely the treatment of
DVR shares. He has categorically mentioned that only on two
occasions, he sent notice to Mr. Cyrus and Mr. Tata on his own
initiative i.e. on 4.72.2015 analyzing the company's financial results
pointing out some areas of concern, second one is on 9.7.2015 in
respect to TTSL financial problems. These notes were in the context
of his role of a Trustee, whose duty is to protect its major
investment in the company which is a valuable asset of the Tata
Trusts. He says that bare perusal of these notes will clearly indicate
these were advisory in nature and such advisory could not be
construed as "directions" or "instructions" from him as alleged. He
says that to the best of his knowledge he has not sought
information, on his own from the iisted operating companies during

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last four years of Mr. Cyrus'tenure, if any information was provided

regarding listed operating companies, it was only to seek his
guidance and advise at the behest of senior officials of such
companies given his long association with the Tata Group and
presumably his experience in the relevant field.

164. He says he has held equity shares of only two listed

companies, out of them; one is Tata Investment Corporation Ltd
where he holds only 3000 shares therefore no question of his
personal aggrandizement by use of such information. He says he
has never attended a single Board Meeting of the company since his
retirement in 2010. He met the Trust nominee directors on the
Board of the company only on two occasions, that to at the request
of Mr. Tata to answer some specific questions.

165. As to Welspun acquisition, he came to know of it only through

a press release by the company that the acquisition has been
agreed upon, when Mr. Tata queried Mr. Cyrus as to whether this
large and important acquisition had been placed before the
company who has 30% stake in Tata power, upon which, Mr. Cyrus
requested Mr. Tata and himself to attend a presentation by the Tata
Power management to explain this acquisition, the financials
involved, as to this aspect the correspondence exchanged with
Mr. Cyrus is between 24.6.2Ot6 and 25.7.2016 which is annexed as
Exhibit R-XIV/11(Colly). When the management, in respect of this
acquisition presented the proposed financing structure, he did say
an alternative structure should also be examined because the
acquisition was proposed to be made through subsidiary of Tata
Power wherein the outsider investors might also be brought in,
possibly at higher varuation resurting upfront dilution
of Tata power
stake in its
subsidiary which was undertaking more profitable
business than its present business. He was also of the view
that
proposed structuring was not in the interest of shareholders
of Tata
Power, on this suggestion Mr, Cyrus with the concurrence
of the
COO of Tata power Mr. Soonawala was requested to discuss a
feasible alternative under more beneficial structure
with the
Investment Bankers. In these circumstances he had
a meeting with

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lM Financial. In the back drop of it, he says, it could not be seen

that he had dictated something relating to Welspun acquisition, he
only suggested that the idea whlch would be more advantageous to
large (including the company) and small shareholders of Tata
Power.

166, As to Mr. Soonawala and Mr. Tata being caricatured as

"shadow Directors", "super Board", "Director", he says they are all
baseless and just to vilifying the distinguished persons occupying
the seat on the Board of Directors of the company. Finally denyinq
all the allegations made by the Petitioners and Mr. Cyrus, he has
stated that he has worked towards discharging his obligations for
the Trusts. In view of the same, he has sought for dismissal of this
Company Petition against Mr. Soonawala.

L67, It is Mr. Ramachandran Venkata Ramanan (Venkat-R20),

presently worklng as Managing Trustee of Sir Dorabji Tata Trust
and Allied Trust, he is a Science Graduate thereafter did his Law
from Mumbai University, MBA from Sri Sathya Sai University, later
completed his Advanced Management Program (AMP) from
prestigious Harvard Business School, he says he had the honor of
knowing Tata since 2002 during his association with Videsh Sanchar
Nigam Ltd, a company that was bought over by Tata Group in early
2002, initially he started his life with Tatas as Executive Assistant to
Mr. Tata, his association started with Air Asia India Ltd. (AAIL) in
the year 2012 and continuing as Nominee of the company on the
Board of AAIL. He denies all the allegations made by the Petitioners
as well as Mr. Cyrus against him, specifically mentioning that the
alleged fraudulent transaction that was taken place in AAIL, that is
finally made clear in the forensic audit report of M/s. Deloitte
Touche Tohamatsu India LLP (Deloitte) regarding the transactions
aggregating to ?22crores, attributable to Ex-CEO of AAIL, but
whereas in this Petition, he says he was alleged as beneficiary of
this fraudulent transaction attributing involvement with a
"suspected and UN sanctioned global terrorist" which is downright
defamatory and scandalous. In fact, Deloitte itself, which was
appointed by the unanimous decision of AAIL never made any such

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observation in their forensic audit report. And having AAIL Board

already initiated concrete action against the Ex-CEO by filing a
complaint before the Commissioner of Police, Bangalore on
9.11.2076, how could he be blamed for something done by
another. In this entire audit, it is nowhere ever whispered that
Venkat have been indulged in this fraudulent transaction except by
these petitioners, moreover Director of Enforcement and Local
Police of Bangalore, has been pursuing the issue pursuant to the
complaint lodged by AAIL, in view of the same, Mr. Venkat has
sought for dismissal of this Company Petition against the
Respondents includ ing Mr. Venkat.

168. Apart from the reply filed by Mr. Venkat on behalf of himself,
he has also filed reply on behalf of R16, R17, R1B, R19 and R20 in
their capacity as the Trustees of Sir Ratan Tata Trust (SRTT) and
R16, R17, R20, R21 and R22 in their capacity as the Trustees of Sir
Dorabji Tata Trust (SDTT) stating that this Petition is hopelessly
lacking material particulars to sustain any cause of action against
these Trustees because they are not separate legal entities and
moreover no specific allegations have been made against the said
Trustees by the Petitioners, therefore, the relief sought against
these Trusts cannot be countenanced in the facts of the present
case

169. Mr. Venkat submits that the Trusts are registered as public
Charitable Trusts governed by Maharashtra public Trust Act, 1950
(MPT Act), therefore, prior to instituting any suit against or relating
to Public Trust or Trustees, seeking inter-alia declaration or
injunction in favor or against the public Trust, consent in writing of
the Charity Commissioner must be obtained, in this case, the
petitioner has neither obtained prior written consent from Charity
Commissioner, nor they have impleaded the Charity Commissioner
as a party to the Petition, thereby this infirmity goes to the route of
maintainability petition vis-i-vis the Trustees of rrust hence the
Petition liable to be dismissed.

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17O, As to legacy of the Tata Trust, Mr. Venkat says that SRTT was
established on 10.9.1919 by a will executed by Sir Ratan Tata on
20.3.1913 settling his property including the shares held by him in
the company setting out the objects of SRTT as well as the manner
in which his bequest should be applied, since it has already been
said in detailed about the objectives of the Trust, I don't think I
need to repeat the averments in this regard. Sir Dorabji Tata in the
year 7932 settled the Trust bearing his name and beneath his stake
in the company to the Trust, this has also been dealt with in detail
for the sake of brevity, it has not been discussed again as to how
much work this Trust doing to the Society.

171. He says, the basic allegations against the Trusts are the
Articles of Association of the company, which have been duly
approved by the Petitioners and Mr. Cyrus, are being used as tools
of oppression for appointment of Nominee Directors to act on the
instructions of the Trustees and for interference by the Trust and
calling for information by the Trustees specifically Mr. Tata and
Mr. Soonawala directly from the company and operating Tata Group
Companies, he says these are all unfounded allegations without any
supporting evidence. While explaining historical evolution of the
rights of the Trusts in the company, he says that Trusts have been
majority shareholders of the company since their inception in 1919
and 1932, the Petitioners have become shareholders of the
company in the year 1965, by the time Trusts were majority
shareholders of the company, over the years also, the situation has
remained same having all through majority in the company having
all these Trusts collectively holding 65.30o/o of the equity/ordinary
share capital of the company. He says former Articles of the
company were substituted by a new set of Articles by way of a
unanimous special resolution passed at the Annual General Meeting
of the shareholders of the company on 13.9.2000 wherein the
Petitioners were duly represented at the said General Meeting by
Mr. Pallonji Shapoorji Mistry (Mr. Cyrus's father) and voted in favor
of substitution of Articles agreeing for these two Trusts shall have
the right to jointly nominate "1/3rd of the prevailing number of

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directors" so long as the Tata Trusts own and hold in aggregate at

least 40olo of the Paid Up Ordinary Share Capital oF the company
(Article 1048) and the "matters" before any meeting of the Board
which are required to be decided by the majority of the Directors
shall "requfe the affirmative vote of all the Directors appointed
pursuant to Article 1048 present at the meeting".

172. Another significant alteration to the Articles of Association is

on 9.4.2014, a General Meeting chaired by Mr. Cyrus was held
amending Articles 104B, 118 of the Articles of Association along
with addition of Article 121A and 121B setting out certain matters
mandatorily required to be placed before the Board of Directors of
the company/ such as bringing the major issues of operating
companies to the Board of the company before making any
approval in respect to those issues by the operating companies, so
that the functioning of operating companies will remain in tandem
with the guidance of the company. Mr. Venkat says that for the last
several decades there was no objection either to Mr. Cyrus or to his
family members or to the Petitioners to any of these Articles, now
they have become an impediment to the corporate governance of
the company only when Mr. Cyrus was removed on 24.10.2016 as
Chairman. He submits that the Trustees have not only to implement
philanthropic objectives but also to protect its shareholding in the
company, therefore these two duties lying on the shoulders of
Trustees cannot be separately looked into because they are inter
connected with each other. He says it need not be said again that
Mr. Tata has been made as Chairman Emeritus of the company on
the recommendation made by Mr. Cyrus likewise even
Mr. Soonawala was asked to continue as Financial Advisor and to
aid his expertise to the company as well as its operating
companies, which have now become interference to the petitioners
and Mr. Cyrus.

173. Mr. Venkat recounts that these amendments admitted by the

Petitioners and Mr. Cyrus at the time of amendments or addition
ate"good intentioned" and for "securing the interest of the Trusts"
but now they have been seen as being "converted into a regime for

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enabling in control". He says that the rights of the Trusts are valid
and law puts no limitation on their rights therefore, he says that the
petitioners modulated their case saying that the " manner" in which
the rights majority exercising is oppressive against the Petitioners,
but no material to support this allegation. He says that there is no
legal restriction on inclusion of protective covenants in the Articles
of the company and the Articles stand to the scrutiny of time and
no objection regarding these provisions had ever been raised by
either the Petitioners or Mr. Cyrus before filing this petition, He says
that these are the reactionary allegations surfaced for the sake of
making allegations only after Mr. Cyrus has been removed as
Executive Chairman. He says that there is not even a single
instance saying that have these Trustees or Trusts or its Nominee
Directors ever exercised the affirmative rights agalnst the
Petitioners or even In any of the meetings so far held therefore, this
per se argument made by the petitioners is not tenable. The
Petitioners nowhere stated in their Company Petition, he says, what
benefit the Trusts availed by the so called interference in the
matters concerning the company, If at all their interference caused
any loss to the company, the Trusts would hurt most rather than
the Petitioners, whereby he says that these allegations are
nonsensical in nature. As to the Nominee Directors Mr. Nitin Nohria,
Mr, Vijay Singh, Mr. Amit Chandra, he has reiterated what all they
stated in their replies is that their diverse and rich experience has
been agreed to render to the company and its Group Companies,
but whereas now their expertise and eminence has been reduced,
Mr. Venkat says, to puppets, handmaiden and postmen. These
Trustee Directors brought about synergy between the Trusts, the
company and Tata group operating Companies, there has never
been any allegation that they have breached their fiduciary duties
towards the companies, and they have always discharged their
fiduciary duties independently. He submits that the interest of the
Trusts is aligned with the interest of the company, the interest of
the Tata Trusts is to ensure that the company is the flagship of Tata
group continues to function optimally so that, in turn investments

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of the Tata Trusts stands well protected and delivers optimal yield
which can be utilized for the charitable activities of the Trusts.

L74. As to unpublished price sensitive information allegation, he

says that Trustees have never been directly calling for such
information from operating companies, besides this, if at all any
such issue is there and that issue is hit by SEBI (Prohibition of
Insider Trading) Regulation, 2015, SEBI has to take action, not this
Tribunal.

175. In respect to the relief sought against the Trustees,

Mr. Venkat says each Trustee has a fiduciary duty under Section
364 of MPT Act that the Trustee shall be entitled to exercise all
power incidentals to the prudent and beneficial manner of the Trust
and to do all things necessary for the due performance of duties put
on the Trustees.

176. Finally, Mr. Venkat says that the Petitioners as well as

Mr. Cyrus tried to impress upon this Bench as if Mr. Cyrus accepted
the offer to become the Chairman of Tata Trust on being assured by
Mr. Tata that he would be given a free hand, but to fortify this
allegation, he says, no evidence has been placed to that effect,
inasmuch as the two documents, i.e. the resolutions passed at the
board and shareholders meeting of the company at which Mr. Cyrus
was appointed as Chairman and the letter of appointment issued by
the company to Mr. Cyrus, they do not reflect that either Board or
the Shareholders agreeing to provide free hand to Mr. Cyrus, in fact
as per the provlsions of the Companies Act, there is no concept like
"providing free-hand" to Executive Chairman except to work within
the boundaries of the applicable law and its chartered documents,
in fact, this "concept of free hand" will militates against the
collective authority of the Board which the Petitioners themselves
purportedly claims to espouse. He says this espousal of free-hand
concept by the Petitioners and Mr. Cyrus will clearly indicate that
Mr. Cyrus wants an unbridled control over the company and its
operating companies by virtue of having Executive Chairman
posltion in the company and the majority shareholders in the

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company to remain decimated to mere formalism. He says that the

board of the company expressed loss of confidence in Mr. Cyrus
leadership and his ability to provide visionary leadership to Tata
group and therefore he was replaced as Executive Chairman. He
says, their personal grouse against his removal has been falsely
manifested as cause of action to file this Company Petition stitching
it with various other non-issues, henceforth, Mr. Venkat submits
that this Petition shall be dismissed as misconceived.

177. Under Article 121(B), all directors on the board are on equal
footing and are entitled to give notice to the company or its board
regarding any matters/resolution which they would like to place
before the board of directors. Under this Article, it is mandatory for
the directors to take up such resolution for consideration at the
board meeting next held, after such notice is received, therefore it
is denied that the provision of the Articles have been used to
oppress the Petitioners or that Mr. Tata and Mr. Soonawala are the
purported "real Board" of the company. In the year 2000 itself,
Article 121 has been included to permit Trust nominee directors to
exercise an affirmative right with respect to all matters required to
be approved by the board, Article 121(A) is nothing but an
extension to 121 listing out specific items whlch are required to be
to ensure that the management of the
placed before the board
company below the board level does not misuse the executive
authorlty vested in them and take decisions on such key matters
without the board of directors of the company being involved in
such decision making. It is said this arrangement is an arrangement
to maintain that checks and balances are rest with the board of
directors to ensure the management and overall supervision of the
company is smoothly run. As to constitution of selection committee
for removal of executive chairman, it is submitted that Articles of
Association do not require constitution of selection committee for
the purpose of the removal of the Executive Chairman.

178. It is a rejoinder filed by the Petitioners on 23.01.2017 to the

reply of the company. In this rejoinder, the petitioners denied the
answering Respondents saying that this petition is nothing but a

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ruse by Mr. Cyrus to publicly express displeasure at being treated in

the course of loss of his office. I\4r. Cyrus along with his family owns
entire equity share capital of the petitioners as set out in the
Company Petition. Denying that the Petitioners herein are alter ego
of Mr. Cyrus, in truth, the Petitioners say, the company is the alter
ego of the Tata Trust, it is evident that the company acting in
collusion with the Trust issued notice for holding EoGM on
6.02.2077 for the removal of Mr. Cyrus from the Board of the
company. The petitioners again reiterated that Mr. Tata would
micro manage every decision of Board of Directors of the company
and implementation of those decisions. Mr. Tata being the
Chairman of the Trust, he would instruct the Trust nominated
Directors before Board N4eetings of the company in the manner in
which such meetlngs are to be functioned. With the constant
interference by Mr. Tata in the aFfairs of the company, it only goes
to show that the Board of Directors were acting in the interest of
the Trust ignoring the interest of all other stakeholders of the
company. Mr. Tata as Chairman of Tata Trust, holding sway over
the affairs of the company which constitutes an act of oppression
against the minority shareholders like the Petitioners.

179. The Petitioners have questioned the removal of Mr, Cyrus as

Executive Chairman of the company on 24.70,2O16 stating that his
removal from Chairmanship of the Board of Directors was not on
the agenda of the Board Meeting though Articles of Association
require Selection Committee to be formed for the removal of the
Executive Chairman as enunciated under Article 118 of the Articles
of Association. On being removed without even following the rules
laid down in the Articles of Association, the petitioners submit that
it discloses the high handedness of the Respondents who attempted
to justify the reason for the removal of Mr. Cyrus as Executive
Chairman with a reason of loss of confidence is a lame excuse to
exclude Mr. Cyrus from the post of Executlve Chairman,

180. As to the reply given by the company stating that Mr. Tata
did not attend any of the Board meetings post his retirement as
Chairman Emeritus is farcical in as much as he did not need to

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attend the meetings considering the manner in which he had

converted the Articles of Association into tools of oppression.
Whenever he wanted, he attended the meetings, one example to it
is, Mr. Tata attended the general meeting held on 25.8,2016, when
he nominated and brought on the Board of Directors new additional
Directors, Mr. Ajay Piramal and Mr, Venu Srinivasan in his capacity
as a Shareholder.

181. The Petitioners further submit that it would become necessary

to reiterate how the Articles of Association have become tools of
oppression. With the power to veto, the decisions were sought to be
brought to the Trustees before being brought to the Board of
Directors, this approach further being degenerated with Trust
Nominee Directors taking instructions on how to deliberate and
what to say about decisions tabled at the Board 14eetings. Likewise,
after approving decisions, the Trust Nominee Directors would go
back on the earlier decisions under instructions from Mr. Tata,
when this was resisted, they would step out to take instructions
from Mr. Tata. Evidence has been brought to bear on Mr. Tata
dictating what has to come in the mlnutes of meeting, which
renders the need to physically attend the Board Meetings
redundant. On the plain reading of the communication exchanged
between Mr, Tata and Mr. Cyrus, it is clear that f4r. Tata was at all
times attempting to compel Mr. Cyrus to toe his line.

182. As to the Petitioners or Mr. Cyrus acquiescing to the decisions

taken by the Board until before the removal of Mr. Cyrus, they
submit that Mr. Cyrus was battling constant interference and coping
politely with the onslaught of interference by Mr. Tata and
Mr. Soonawala. They submit that merely by consenting to the
decisions taken by the Board does not follow that the majority
shareholders get perpetual immunity from the oppressive conduct.
The majority of the shareholders i.e. Tata Trusts has abused the
Articles of Associatlon and by doing so, they have oppressed the
minority shareholders. The recent instance of such oppression is
that the notice dated 05.01.2017 issued by the company for holding
an EOGM for decision on the spe.ial agenda of removing Mr' Cyrus

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from its Board of Directors. After Mr. Cyrus having been appointed
as Executive Chairman, he identifled some contentious issues
troubling the company and therefore, documented the same in the
strategic plan of June, 2014. Thereafter, he not only identified them
but also pleaded to take necessary action into those hotspots such
as requirement of closure of Tata Nano project, restructuring of
Tata Steel UK, working on TTSL-Siva transactions which have been
causing losses to the company. About Mr. Cyrus along with his
brother being 100o/o shareholders of the Petitioners, raising all
these hotspots so as to avoid losses to the company, it is nothing
but raising concern over the losses the company incurring, that
being so, it could not be said that the Petitioners have not raised
any grievance in respect to the losses the company incurred before
removal of Mr. Cyrus as Executive Chairman of the company.

183, The Deponent herein submits that he has been duly

authorized by requisite Board Resolutions to act on behalf of the
Petitioners including but not limited to affirming the above Petition
and Affidavits as advised to do so.

184. As to the reply stating that this petition is hit by delay and
latches, the petitioners submit that the oppression and
management against the petitioners is still continuing- recently the
company suffered an award of nearly ?8500crores as a result of put
optlon granted by the company to NTT - DoCoMo under the watch
of Mr. Tata. This award has meant serious financial restraint on the
company with the entire amount having to be deposited with the
court. The petitioners submit that it is not worthy that when the put
option was contracted, the existence of put option has been
suppressed from the Foreign Investment Promotion Board. As a
result of this transaction, the company have been forced to pay a
sum in excess of the fair value for the Shares of TTSL, If it is held
that such payment was itself contrary to the law of land, it would
follow the agreement promising to do so would also be contrary to
law. That Mr. Tata, in the case of Indlan Hotels Co. Ltd, dissented
sale of assets in United States, thereby laying bare his inability to

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act in the best interest of the company and its stakeholders and
demonstrating he was more focused on protecting his legacy.

185. As to denial by the company stating that impugned

transaction does not constitute the affairs of the company, the
Petitioners submit that such insinuations are entirely baseless and
contrary to the records before this Bench.

186. The Petitioners submit that the decisions of continuing to fund

and throwing good money to bad in such transactions and refusing
to deal with them professionally with a view to protecting the
legacy, has become blatant mismanagement and oppressive
conduct. The petitioners deny that the grievance of the petitioners
is against the wisdom of management of the company to enter into
transactions, because the grievance is not against entering into
transactions but it is against the current proclivity to persist with
carrying on loss making business, which amounts oppression as set
out in the Petition.

187, As against the reply of the company saying that the veto
power lying with Tata Trusts was never physically used, the
Petitioners submit that not using veto power is of no relevance,
because the petitioners had agreed to the amendments of the
Articles on the premise that it would enable the Trustees to bring
on Board, individuals of standing and capacity to take decisions for
enabling the governance of the company, but on the contrary, the
Trust Nominee Directors started acting as postman and
communicators of views and decisions of Mr. Tata and
Mr. Soonawala without applying their wisdom, since such a

framework is de-facto reality, the petitioners therefore submit, it is

appropriate to have the provisions of Articles of Association cited in
the Company Petition struck down.

188. It is true that till the retirement of Mr. Tata from the Board of
Directors, the Chairman of the company and Tata Trusts were
common therefore there was no scope for any difference of opinion,
but on appointment of Mr. Cyrus as the Chairman of the company,

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the Chairman of Tata Trust has become different, in that new

scenario, to provide a degree of protection to Tata Trusts from any
future potential adverse managerial decisions taken by the
company, to protect the dividend distribution flows to the Trusts
and to ensure businesses were not entered into that were in
variance with a group ethos, of course Mr. Cyrus was very much
present at the EoGM dated 9.9.2014, whereat, Articles 121A and
1218 were introduced in the Articles of the company but it was not
intended that the same articles would allow for abuse by Mr. Tata
and Tata Trusts to make the Board of the company redundant and
act as tools of oppression against the Petitioners. The petitioners
deny that Mr. Cyrus in systematic and planned manner reduced the
representation of the company director on the Boards of other
major Tata companies.

189, As to the reply of the Respondents saying that Mr. Cyrus did
seek advice and Counsel from Mr. Tata on several matters, the
Petitioners submit, the issue is not about seeking advice, counsel or
guidance In keeping with the norms of politeness, decency and
respect for age, but whereas Mr, Tata converted this respect for
age into a license to such an extent that he even throw out
Mr. Cyrus without complying with basic legal requirements by
continuously interfering with the decision making process of the
company. The manner in which Mr. Tata would thrust his business
contract into the company would show the level of interference by
Mr. Tata. It is denied that Mr. Cyrus was lacking or did not match
up to the expectation from him or that his leadership was not
aligned with the long term goal and targets of the company or Tata
Group. In fact, it is noteworthy that most of the Directors on the
Board of the company by October 24, 2Ot6 had no long term
experience with being directors of a holding company Board. For
most of them, it was the first time they had served on the Board of
Directors of such a company.

19O. As to allegations raised against Mr. Cyrus, the petitioners

deny that Mr. Cyrus showed a litfle or no progress on strategic plan
presented in 2074 or to implement the action on the hotspots

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identified therein, in fact Mr. Tata was offended by the term

hotspots, saying so they deny the strategy provided by Mr. Cyrus
should not have been construed as more of cash flow statements
and needed to include summary of e-business strategy as well as
high level micro assumption that the plan is more sensitive to as
alleged.

191. In respect to Mr. Amit Chandra, who has been shown as

worked in Bain Capital, that company has gone into losses for want
of even basic due dlligence which is very much available on public
domain, The Petitioners submit that showing business strategy as
cash flow statement is an afterthought process, because Mr. Tata
wrote a letter dated 2.9.2016 asking for more information to be
included in business plan and draft business plan covering the
information asked for was also part of the agenda for the meeting
scheduled on 24.10.2016. The petitioners submit that when
Mr. Tata was the Chairman, there was no annual business plan
presented to the Board, in the four years of tenure of Mr. Cyrus, no
fault was found and no change in the format was sought. Only in
the months preceding the illegal ouster of Mr. Cyrus, changes were
sought - evidently pointing to the stratagem to pull some ground
however tenuous to find fault with Mr. Cyrus. As to Welspun
transaction, the petitioners deny that there was lapse of
governance in the context of the Welspun acquisition,

192. As to board room storm, the petitioners submit that Mr. Tata
and Mr. Nohria personally spoke with Mr, Cyrus just minutes before
commencement of the meeting of Board of Directors on
24.tO.2OL6, no reasons were given by them for requesting
Mr. Cyrus to resign. Mr. Tata and Mr. Nohria insisted that the Board
of Directors of the company has lost confidence in Mr. Cyrus, which
in itselF weigh arbitrariness. Mr. Cyrus was removed from the
Chairmanship of the company in the meeting held on 24.10.20t6
when that was not on the agenda of the said meeting. The
Respondents not having prepared for resistance in principle are now
drumming up inherent purported reasons and claiming to supply
reasons for their inexplicable, illegal and violative conduct. The

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petitioners submit that the Respondents seeking to show that

"giving an option to reason" minutes before an illegal ouster can be
passed off as a reasonable fair notice and opportunity to engage on
the purported grounds of removal. This reason of holding up of
trust deficit is nothing but a cooked up afterthought.

193, As to removal of Mr. Cyrus as the Director on the Board of

Directors, the company issued notice on 5.1.2017 for an EoGM on
6.1.2017 for the removal of Mr. Cyrus from the Board of Directors
with an explanatory statement alleging leakage of "internal
communications including those which were marked as
confidential". The petitioners submit that the email dated
25.10.2016 was marked to multiple addressees - namely the
Trustees of the company and the Directors of the company.
According to the company, anything detrimental to the interest of
the company would be detrimental to Tata Trusts, however, if the
Income Tax Authorities would deny exemptions to Public Charitable
Trust carrying on business masquerading as Charities it would have
no bearing at all on the company, therefore, by conduct, the
Respondents have demonstrated that they are conducting the
affairs of The company solely addressing the interest of the
Trustees of Tata Trusts and not in the interest of all shareholders
and sta keholders.

194. As to resignation of Mr. Cyrus as director of Tata Group

Companies, the Petitioner denies that the issue has brought to a
close it does not hurt the group operating companies because he
resigned from the group companies out of embarrassment. The
Petitioners submit that of course this petition does not seek to
enforce insider trading regulation but to articulate the disregard the
Respondents have towards the law. Likewise, the attempt to
characterize old decisions as being the one assailed when it is
abundantly clear that it is the failure to deal with the old decisions
that have been inco ntrovertibly proven wrong despite best efforts
of over a decade to make them right, is what is oppressive in
character. The petitioners submit that the content therein are
irrelevant in view of the fact that the challenge is not against the

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transaction but against the decision to continue with the same

despite they having been proven to be mismanagement. They deny
that they have failed to explain how the petition is within limitation
period as prescribed under the Act and the Limitation Act, 1963 and
the real cause of action for the petition is the replacement of
Mr. Cyrus as Executive Chairman, likewise, even denied that the
receipt of dividend and the petitioners by reasoning of accepting
dividend would render the Petition not maintainable, if that is so, no
member who has received dividend can ever invoke the provisions
of law that confer statutory protection against oppression and
mismanagement. They deny that this petition has been sponsored
by Mr. Cyrus so as to pursue an agenda of personal vendetta
against Mr. Tata and Mr. Soonawala adopting a "scorched earth
policy" of tarnishing the reputation of the Tata Group on being
removed as chairman, in fact the intent of the petitioners is to save
the company from the whims and fancies of Mr. Tata and those
willing to lend themselves to aiding and abating his manner of
continuing to control the company even after retirement. The
Petitioners deny that the instant proceedings are proxy and/or
benami litigation. For having Mr. Tata and Soonawala conducted
themselves in compelling the Board of Directors to continue with
loss making businesses is just another instance of interference of
the Trustees in the affairs of the company because some of the
businesses the petitioners have raised their grievance against are
emotionally important to Mr. Tata, which makes it impossible for
the company to close such businesses. They further deny there is
no conflict of interest, nor as such any conflict of interest being
demonstrated between Tata Trusts on one hand and the Board of
Directors on the other hand. The Petitioners submit that the
affirmative vote given to the Trusts is only a negative right to say
NO to any of the Board Resolution comes before the Trustees but
such negative right cannot become a positive right to bring to the
Board of Directors of the company only such subject and in such
form and in such manner as Mr. Tata would be satisfied with.
Whenever the Trustees felt that they were not consulted even
before the Board was sounded out, Mr. Tata would allege a breach

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of Articles of Association. In the backdrop of it, the protective

covenant, if misused by the majority shareholders against the
minority, then the right of affirmative vote becomes the tool of
oppression, therefore the same are liable to be struck off, In
respect to the milestone Mr. Tata achieved, the petitioners submit,
such achievement does not mean the oppressive conduct
thereafter, in particular, after retirement would become immune
therefore, past achievements are wholly irrelevant to the
determination of issues in the instant case, The Petitioners submit
that their grievance is that Mr. Tata as the Chairman of the Trusts,
sought to interfere in the affairs of the company by instructing the
Trusts nominated directors to steal the decisions of the company to
suit the objectives of Tata Trusts, which constitute oppression on
the minority shareholders. Mr. Tata being an invitee in the position
of Chairman Emeritus to Board Meeting is quite different from
demanding the conduct of pre-board meeting discussion to stage
manage and floor manage the conduct of board meeting of the
company is nothing but reducing the board meeting to mere
ritualistic formality. The petitioners submit that the removal of
Mr. Cyrus as Executive Chairman is an act of oppression and
mismanagement of the company and also say that the Company
Petition is to protect the company from the oppressive conduct by
the other Respondents. The petitioners submit, as to the allegation
of Mr. Cyrus leaking information to the petitioners, that the
respondents deserved to be hoisted on their own petard considering
they are seeking to level serious allegations of confidentiality
breaches against Mr. Cyrus even while themselves indulging in full
flow of all information received by Mr. Tata in his flduciary capacity
to create a super board and shadow directorship and controlling the
strings from the background. The petitioners submit that Mr, Cyrus
approving the resolutions for alteration of Articles in the past is of
no consequence because Mr. Cyrus voted in favor of the decisions
believing those decisions were legitimate business decisions, now it
appears to him that they were in fact decisions taken to give
impetus to the objectlves of Mr. Tata and Tata Trusts. The
Petitioners have explained that durlng the tenure of Mr. Cyrus as

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executive chairman, the cash flow to the Trusts significantly

improved on account of special dividend that Mr. Cyrus authorized
from TCS and purchase of Tata Capital shares from the Tata Trusts.
These shares were earlier glfted to the Trusts. This additional
windfall was in excess of {4.6crores, the petitioners submit that
this simple analysis would spade to the company's attempts to
falsely suggest that receipt of dividend is payment of license fee to
oppress the shareholders who receive the dividend and mismanage
the company that paid the dividend. As to the allegation that the
company is not allowed to take decisions in respect to the affairs of
its group operating companies, the petitioners submit that the
company directors take policy and strategic decisions in respect of
the functioning of the other Tata group companies. On the
allegation the company raised that these petitioners as well as
Mr. Cyrus remained silent over Corus acquisition, Nano project, the
contracts awarded by Tata Power Ltd. to Mr. Mehli and the
investment by Mr, Siva into TTSL, have only surfaced after the
replacement of Mr. Cyrus as Executive Chairman, it has been said
that Mr. Cyrus said that his knowledge is limited to the information
and documents shared during the meeting of the Board of Directors
of the company in respect to the aforesaid issues.

195. With regard to Mr. Soonawala, the petitioners indeed stated

that he was intervening in respect to the affairs of the company
under the garb of expressing his views on behalf of the Trusts. It is

being said that a retired man being available as an adviser is quite

different from a retired man seeking to impose his rules as if he
never retired. The petitioners allege that it would be open to
Mr. Soonawala to provide advice or refrain from doing so, but
without advlse being sought, if Soonawala is to demand that his
advice to be taken, that would constitute control.

196. The company has falled to provide a plausible reason as to

why Mr. Cyrus was removed without following the due process
including constitution of selection committee as has been mandated
by the Articles. The petitioners denied this petition as directorial
dispute in the disguise of "an action in public interest". To prove

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that Mr. Tata has dictated minutes, the petitioners have referred
some correspondence, which is as follows:

a Email dated February 05, 2013 addressed by respondent

No.20 to Respondent No.23 with a copy marked to
Respondent No. 11 (page 68 of the Cyrus Reply) whereby
Respondent No. 20 communicates the suggestions of
Respondent No. 2 to the board minutes of Respondent No.
1;

b. Email dated May 08, 2016 addressed by respondent No. 23

to Mr. Vijay Singh (page 70- of the Cyrus Reply);

c. Email dated September 28, 2016 addressed by respondent

No. 23 to Respondent No. 11 (page 67 of the Cyrus Reply)
which clearly shows that Mr. Vijay Singh would "clear" the
draft board minutes with Respondent No. 2.

197. On the reply given by the company stating that the process of
selection is not applicable for removal of Chairman, the petitioners
deny that the Articles of Association do not require the constitution
of selection committee for the purpose of removal of the
of
chairman and state that the interpretation of the articles sought to
be propounded by the company is in clear contradiction to the letter
and spirit of the Articles, they further submit that the nominee
directors of the Trustees of the company have not been exercising
the powers granted to them in judicious manner, indeed they have
become handmaid of Mr. Tata. The Petltioners submit that R5 and
R6 and R3 had barely attended one board meeting and yet have
been humble enough to claim that it is more than adequate for
them to form judgment over how a complex group of company was
being run. The petitioners have explained the extent of control
wielded by the company over Tata Motors is evident from the fact
that the Company Secretary and the Compliance Officer of the Tata
Motors circulated an email dated November 74, 2016 to
Independent director enclosing and advice from the company
general counsel Bharat Vasani stating that independent director has

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no power to take independent decision and report their view to

stock exchanges, in fact, Mr. Tata has caused the company to
threaten withdrawal of Tata Brand from companies that do not toe
its line. In respect to Siva issue, the petitioners submit that the
company is now attempting to distant itself from Siva, when Siva
had in the past acquired shares at discount in TTSL owing to his
close relationship with Mr. Tata and considering that Siva has sent
dossiers to demonstrate his proximity to Mr. Tata including
demonstration that Siva would set up personal email id for the use
of Mr. Tata. The petitioners repeated how the company ensured
that Siva was provided loan by Standard Chartered Bank against
the shares issued to Siva Company.

198. The petitioners repeated how Bakhtawar flat was sold to Mr.
Mehli and about transaction with PNB Metlife, in the same vein,
about AirAsia, India Hotels Company issue, the petitioners ascribe
that Mr. Tata and Mr. Soonawala have deep rooted nexus with the
board of directors of the company, by taking it as an advantage,
Mr. Tata and Mr. Soonawala have got access with insider
information in violation of SEBI norms,

199. The petitioners annexed EOGM notice dated 05.01.2015 along

with explanatory statement for removal of Mr. Cyrus as the director
of the company and a letter written by Mr. Tata to Mr. Cyrus on
02.09.2016 along with email correspondence in between Vasani and
Compliance Officer of Tata N4otors, the company and its group
companies, the effect of all these documents would be discussed
when the issues involved in this case are discussed.

2O0. It
is a rejoinder filed by the Petitioners to the reply filed by
Mr. Tata, wherein they submit the same what they have said in the
CP reiteratlng that Mr. Tata stepped down as Chairman of the
company with a view to take a clean break from the company citing
company policy of retiring at the age of 75 but as soon as Mr, Cyrus
was removed as Chairman on 24,10.2016, he came back as Interim
Chairman disregarding the company policy. The petitioners submit
that Mr. Tata announcing his renunciation from the post of

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Executive Chairman of the company to the world at large as an

example of Tata values was nothing more than a mere fagade and
he expected Mr. Cyrus to do his bidding and allow t\4r. Tata to
function as shadow director without any accountability, which Mr.
Cyrus realized over a period of time. Soon after Mr. Cyrus became
chairman, Mr. Tata started interfering in the day-to-day affairs of
the company undermining the board of the company and directing
Mr, Cyrus to meet some of his business associates and also from
time to time kept on instructing the Trust nominee directors even
about the language of the resolution to be passed at the board
meeting of the company making it clear that Mr. Tata had not made
clean break from the company. Indeed, they submit, Mr. Tata
abused the position as Chairman Emeritus by demanding prior
consultation on most matters and seeking information including
unpublished price sensitive information in violation of law and
corporate governance norms even before these issues were
considered by the board of the company. They submit that Mr. Tata
and Soonawala are reluctant to let go control they hitherto enjoyed.
Instead of letting the Articles of Assoclation work themselves out
with the picking of good nominee directors, these two continued to
exercise control through these nominees rendering the board of
directors redundant. The petitioners further allege, Trusts nominee
directors expressly acknowledged the need for governance
document demarcating the role of TT and the role of the Board of
the company. The petitioners again submit that Mr. Tata even met
Mr. Cyrus before the meetlng of Board of Directors on 24.10.2016
asking him to step down from the post of executive chairman which
clearly indicates that Mr. Tata was very much behind the removal of
Mr, Cyrus as executive chairman of the company. The petitioners
again reiterated the same issues in respect to Bhaktawar
Apartment, dealing with Mr. Mehli and Sivasankaran, about Nano
project, AirAsia issue, about Bharat Vasvani writing letters.

201. On reading thls entire rejoinder, we understand that the

petitioner tried to focus that though Mr. Tata retired from the
Executive Chairman in the year 20t2, he tried all along to impose

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his decisions upon in the board of the company either directly or

through its nominee directors, which according to them, has
curtailed the freedom of board of the company and more especially
erstwhile Executive Chairman Mr. Cyrus from discharging from their
duties as per their positions.

2O2. The petitioners rejoined to the reply given by Mr. Amlt (R3)
stating the same that Mr. Amit was appointed as director on the
board of the company without any orientation programme in August
2016 and became a competent man to outvote Mr. Cyrus from the
position of Chairman in the second meeting he attended. The
Petitioners submit that he does not know anything about the
business Mr. Tata was doing because he failed to state independent
reason for voting in favor the removal of t\4r. Cyrus from the
position of Chairman.

2O3. As to reply given by Mr. Ajay Gopalkrishna Piramal (R5), the

petitioners submit that he has been brought to the company as an
independent director, against whom {6,00,000penaltyhas been
imposed by SEBI for violation of unauthorized and illegitimate
sharing of unpublished price information outside the need to know
framework. He was also inducted as director in the month of August
2016, in the second meeting he voted in favor of the removal of Mr'
Cyrus from the position of chairman. He also has not given any
detailed reasoning for voting in favor of the proposal for removal of
Mr, Cyrus as Chairman of the company'

2O4. As to the reply filed by Mr. Nitin Nohria (R7), the petitioners
submit that it is Mr. Nohria volunteered to draft governance
document clarifying the role of the Tata Trusts in the affairs of the
company, in his email dated 31.01.2015 and 04 02'2015 he has
stated as follows:

31.01.2015

" I can certainly empathize with your f rustration about what

items can be deatt with by the company board
and what

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require prior approval of the trusts, These are the questions

that my note also seeks to get clarity on. I will send it to you
in the next week. I hope we can find some way to get clarity
on these issues because it is otherwise a source for tension
and confusion for all involved."

04.o2.20t5

"All of these issues raise concerns that I think we need to

surface and address.

separation of leadership of the Tata Trust and the company

is more significant than anyone has fully comprehended or
internalized. Even though the Memorandum and Articles of
Association provide some guidelines, they have not been
translated into operating practices that have everyone's buy-
in. I will send you the document I have been working on by
this weekend."

2O5, In relation to this corporate governance policy, between

March 2016 and May 2016, Mr. Cyrus sent various mails to
Mr. Nohria and were ultimately shared with Mr. Tata in August
2016. Finally, the note on corporate governance was circulated by
Mr. Cyrus to the board of directors in September 2016 and was
placed in the agenda for the meeting of the board on 24.10,20t6.
The petitioners submit that the record placed by the petitioners as
well as Mr. Cyrus clearly indicate that Mr. Tata constantly interfered
in day to day functioning of the board of the company, Mr. Nohria
was fully aware of the issues relating to the interference by Tata
Trust, the efforts Mr. Cyrus made to initiate framework for
governance. They submit it that despite Mr. Nohria was aware of
the efforts made by Mr. Cyrus for bringing in corporate governance
to separate the functions of Tata Trusts from the company, because
Mr. Tata made a single biggest donation to Harvard Business School
where Mr. Nohria was worklng as Dean of the school, because of
which he compromlsed the capacity of Mr. Nohria to think
objectively and independently in the best interest of all the

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stakeholders of the company. Besides this, Mr. Amit and Mr. Nohria
are related and they have been consultants to the companies which
were under the control of Mr. Piramal. For they are being related,
they have all concerted into a group to work against Mr. Cyrus,
therefore their voting against Mr. Cyrus in the board meeting dated
24.t0.2016 could not be termed as independent of the influence
from Mr. Tata.

206. On the reply given by Mr. N.A. Soonawala (R1 ), the

Petitioners submit, the averments in his reply are false, Mr. Cyrus
only sought strategic advice and guidance out of difference and
respect for their experience and knowledge of the Tata Group.
Exploiting such decency, the petitioners submit, it is evident that
Mr, Soonawala as did Mr. Tata, dictated terms to how the company
must conduct business, they took Mr. Cyrus asking guidance from
them as a license for them to interfere in the day to day affairs of
the company. The continuous hold that Mr. Soonawala enjoyed is
upfront from the email dated 8.11.2013 (Exhibit F, page 87 of Mr.
Cyrus reply) when a draft letter was circulated which has changes
suggested by Mr. Soonawala. They further submit that from plain
reading from Mr. Cyrus reply (Exhibit A & B) when Mr. Cyrus's
officials had briefed Mr. Soonawala in relation to a proposed
issuance by Tata Motors Ltd., Mr. Soonawala sought postal ballot
notice for the dlrector's remuneration, copy of the working on the
impact of the Right Issue on EPS and promoter voting rights due to
dilution, on such asking, the officers of Mr. Cyrus briefed Mr.
Soonawala on 22.12.20t4, they were given an impression that Mr.
Soonawala preferred Right Issue, with that impression when Tata
Motors proceeded with the proposed issuance, Mr. Cyrus received
rude handwritten letter dated 30,1.2015 alleging that there had
been no discussion of the issue and that the Articles of Association
had been breached. The petitioners submit that the above stated
series of events make it amply clear that confidential and price
sensitive information had been sought by Mr. Soonawala. The
petitioners submit that Mr. Soonawala instead of offering guidance
he imposed his guidance as his direction upon Mr, Cyrus' Mr.

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Soonawala not only sought interfering formulation of the legal

strategy involving the company and NTT DoCoMo but effectively
overruled the legal counsel of Tata Group. The petitioner inserted
some of the portion of the email written by legal counsel Mr. Bharat
Vasani on 26.07.20t6 which ls as follows:

"I had carefully thought through our DoCoMo legal strategy as

soon as the award was pronounced against us on 22nd June
[redacted] ..... Unfortunately, with the Trustees directly taking
charge of the matter and giving direct instructions to Darius
and showing extreme anxiety... my view became irrelevant.
(Darius told me last night over (the) dinner that he is
completely fed up with the multiple instructions coming to him
in this matter and would like to have a joint meeting with all of
us plus RNT and NAS for the next steps after today's hearing.
He asked me as to how do I work in this kind of
environment! !)"

207. With respect to Welspun acquisition by Tata Power Co. Ltd.,

the petitioners submit that a note on the proposed acquisition of
Welspun by Tata Power was circulated to the Board of Directors of
the company along with Mr. Tata, which recelved appreciation from
Mr. Vijay Singh (R9) a trust nominee director, and subsequently the
transaction was executed on 12.06.2016.However, out of nowhere
Mr. Soonawala and Mr. Tata suggested that the transaction must be
structured differently; indeed Mr. Soonawala went ahead in having
discussion with the Merchant Bankers to the transactions on what
the ideal structures should be. After having all these being done, on
30.06.2016, Mr. Nohria and Mr. Vijay Singh stepped out of an
ongoing board meeting of the company to get a nod from Mr. Tata
and Mr. Soonawala for the said transaction. This has even been
recorded in the minutes that Mr. Nohria and Mr. Vijay Singh
accorded their support only after discussing the proposal with Mr'
Tata and Mr. Soonawala, which indicates that these nominee
directors were not imparting independent judgment except
following the diktat of Mr. Tata and Mr. Soonawala. The petitioners
submit, nothing is further required to state these two were/have

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been acting as shadow directors and superboard super imposing

their decisions upon the board of the company. With this
submission, the petitioners submit that Mr. Soonawala always
imposed his direction upon the company even if he was not being
asked to advise upon the issues pending for decision by the board
of the company.

208. As to the reply affidavit flled by Mr. Venkataramanan (R20)

on behalf of R6, R16-21, the petitioners rejoined stating that the
independence of the board of directors was compromised, the
decision making process has taken backseat. The petitioners submit
that the Exhibit E, page 17 of Mr. Cyrus reply reveals Mr. Tata
giving his inputs regarding the minutes and agendas of the
company board meetings, likewise other email dated 24.06.2013
and 26.06.2013 disclose that Mr, Venkat simply acted as an
assistant to Mr. Tata instead of acting as director of the company.
The petitioners submit that Venkat has been acting as a director of
AirAsia India Ltd. as well as Trustee of Sir Dorabjee Tata Trust
which are in conflict of interest to each other because Mr. Venkat
has access to commercially sensitive information in relation to the
joint venture on account of his close proximity to Mr. Tata. Mr.
Venkat has not said anything in respect to email dated 24.02.2013
come from Mr. Vasani.

2O9. Mr. Cyrus rejoined to the reply given by the company which is

as follows:

to his conduct are

He denies Tata Sons allegations in relation
vague nothlng more than ipse dixit of Tata Sons stating that Tata
Sons has wrongfully accused him of acting in breach of his legal
and fiduciary duties by allegedly leaking and parting with
confidential and commercially sensitive documents to the outsiders.
Mr. Cyrus says he was forced to provide information to
Dy. Commissioner of Income Tax (Exemptions) (DCIT) only when
Tata Sons failed to act promptly in providing information sought by
DCIT, he says that no confidential and sensitive information was
shared with DCIT. As to the allegation that Mr' Cyrus leaked out

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confidential information, he submitted that the reference to the

dealing with PNB Metlife were unnecessary under the contents of
the minutes of the board meeting held on 24,10.2016 ought to
have blanked out the diFferences to PNB Metlife. In respect to this
issue, he submits PNB Metlife is a company in which none other
than Mr. Mehli holds substantial commercial interest, in fact this
issue was brought before the board on 24.10.2016 itself. Mr. Cyrus
again reiterated Siva's issue saying that Siva in his letter dated
5.11.2013 refers to the Tata Group decision to finance Siva group
acquisition of shares of TTSL, wherein Siva says, " in no other case
the TG assisted any third pafty investment into their group, it is
obvious that such system was given only to enable the Siva group
to make the investment......... I do feel that since the investment
was personally handled by others and therefore you do not have full
knowledge of what happened them, it is necessary to brief you on
how the entire investment was conceived and made". The time
when he was non-executive member of board of directors, he was
not fully aware of the complexities, it was only during his tenure as
Chairman, he realized the extent to which the policy and decision
making of the company was given by extraneous factors, such as
I.4r. Tata showing favoritism towards his friends, his personal
affinity for flying and the airline industry. and his obstinate refusal
to back down from his unworkable public promise to deliver a car
under {1,00,000.

21O. Mr. Cyrus submits that the acts of oppression and

mismanagement complained of are continuing in nature, in the case
of NTT DoCoMo transaction where the company has very recently
suffered an award in the amount of nearly {8,SOOcrores because
the transaction in between TTSL and DoCoMo led the company to
pay aforesaid amount as fair market value for the shares of TTSL,
which is contrary to the law of the land. Likewlse, in the case of
IHCL where the company has significant stakes, Mr. Tata dissuaded
sale of assets in the United States thereby demonstrating his
inability to think of the best interest of the company and its
stakeholders which is explicit in the email dated 03'04.2015

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addressed by Mr. Tata to Mr. Cyrus. [4r. Cyrus has categorically

stated that for he was continuing as executive chairman, instead of
filing any case against Mr. Tata and others, was taking immediate
action from within the company to put an end to the past
oppressive conduct and mismanagement orchestrated at the hands
of Mr. Tata, before Mr. Cyrus being removed, considering his 50o/o
shareholding in the petitioners, they thought it would not have been
prudent or logical to approach judicial forum to complain of such
oppression and mismanagement. It was only upon the illegal
removal of Mr. Cyrus as Executive Chairman on 24.10.2116 that
the petitioners were left with no option but to approach this
tribunal, Mr. Cyrus denies the allegation that he did not do anything
when he was as Executive Chairman because he put all his efforts
to undo the past actions by taking several steps such as securing
approval of the board to litigate against Siva group to recover the
dues (amounting to ?694crores) from Siva companies under the
inter-se arrangement, encouraging fair and transparent bidding for
awarding Iarge contracts of all Tata Group companies resulting in a

saving of nearly ?200crores annually only in respect of contracts

awarded by Tata Power Co. to Mr. Mehli's companies, calling upon
Mr, Bharat Vasani to take steps to ensure an investigation into the
questionable transactions involving Air Asia India Ltd. Mr. Cyrus
contends that Mr, Tata, despite not being on the board, would insist
upon that he should be consulted or be provided the information to
be discussed by the board of the company and Tata operating
companies, it is matter of record that the Trust nominee dlrectors
take instructions from Mr. Tata prior to attending board meeting at
times in between also they consulted Mr. Tata.

211. Mr. Cyrus submits Mr. Nohria was aware of the issues posed
by the interference of the Trusts in day-to-day functions of the
company, to illustrate it, Mr. Cyrus relied upon an email dated
31.01.2015 sent by Mr. Nohria to Mr. Cyrus stating as follows:

"Ican certainty emphasize with your frustration about what

items can be dealt with by Tata Sons Board and what require prior
approvat of the Trusts. These are the questions that my note also

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seeks to get clarity on. I will send to you in the next week. I hope,
we can find some way to get clarity on these issues because it is
otherwise a source for tension and confusion for all involved."

212. Another email dated 04.02.20L5 sent by Mr. Nohria to Mr.

Cyrus on the manner in which Mr. Tata would react to a proposed
business declsion in one of the operating companies is hereby
mentioned which as below:

"All these issues raise concern that I think we need to surface

and address.

The separation of leadership of the TT and Tata Sons is more

significant than anyone has fully comprehended on internalized.
Even though, the memorandum and Articles of Association
provided some guidelines, they have not been translated into
operating practices that have everyone's buy-in. I will send you
the document I have been working on by this week end."

213, Though Mr. Nohria said all these things, no such note ever
saw the light of day, then Mr. Cyrus decided to himself prepare
governance framework, in furtherance of it, several drafts were
sent between March 2016 and May 2016 to Mr. Nohria and they
were ultimately shared with Mr. Tata in August 2016. Finally, the
note prepared by Mr. Cyrus in September 2016 was placed on the
Agenda for the board meeting dated 24.10.2016. He submits that
even Mr. Bharat Vasani was also frustrated with the level of
interference by the Trustees of the Trusts in respect to DoCoMo
issue, this was illustrated by Mr. Cyrus saying that Mr. Vasani in his
mail dated 26,07,2016 put it to Mr. Cyrus saying that
" unfortunately, with the Trustees directly taking charge of the

matter and giving direct instruction to Darius and showing extreme

anxiety ........ my view became irrelevant".

214. As to Tata Steel in UK and Europe, Mr. Cyrus submits that all
his efforts to improve the viability of Tata Steel Europe operations
were belied by a public statement made by Mr. Lord Kumar

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Bhattacharya (close friend of Mr. Tata) in UK media stating that

Tata Steel Ltd, would stay invested in the United Kingdom, it is a
fact that this Bhattacharya, Mr. Cyrus says, has no role in the
company. This statement came at a time when Tata Steel was
examlning its options either for restructuring or for complete exit
from the business of United Kingdom. The grievance in relation to
Tata Steel, as set out in the petition and has confirmed by his
earlier affidavit, is that despite the Corus deal having proved to be
an unviable acquisition, and its best efforts to turn it around, even
as late as 2016, Mr. Tata remained adamantly opposed to
restructure Tata Steel UK operation with ThyssenKrupp. He says
that his intention for restructuring Tata Steel Europe was to curtail
huge losses Tata Steel India incurring but whereas, Mr. Cyrus says,
it has become one of the causes for his removal as chairman of the
Co m pa ny.

215. Mr. Cyrus submits, Mr. Tata in his letter dated 07.09.2016
has made it clear that the company at the behest of Mr. Tata, was
against any disinvestment of Tata Steel UK operations as against
Tata Steel on board of directors' statement made eight months
prior stating that Tata Steel Board of Europe should explore all
options for portfolio restructuring including the potential
disinvestment of Tata Steel UK in whole or in parts.

216. As to Tata Tele Services, Mr. Cyrus submits that the company
merely saying that it has not waived any of its legal rights to
proceed against Siva group would not become a demonstrative
action to proceed against Mr. Siva. It is a fact that Tata Capital has
loaned t2oocrores to the Siva group against security of Tata Tele
Services shares given to him at a sizable discount. Likewise,
Mr. Cyrus pleaded various issues that have already been pleaded in
the previous pleadings except to the extent additions that have
come in this rejoinder.

217. As to the
rejoinders filed to the replies filed by other
Respondents by the petitioners as well as Cyrus Mistry, the same
being almost repetition of the issues already dealt with in in the

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pleadings already dealt with, for the sake of brevity, they have not
been reproduced. If and when any of the point out of these
pleadings are necessary for deciding any issue before this Bench,
they will be taken into consideration in the ensuing discussion.

2L8. Whether Siva Group company (Sterling) non-paying its

share amount payable proportionate to its shareholding out
of the total award amount paid by the company through
TTSL towards the award passed against TTSL on the
Arbitration proceedings initiated by NII- DoCoMo; Mr. Siva
coincidentally sending legal notice to the company assailing
the proposal to take legal action against Sterling about
nonpayment of its share of payment towards Arbitration
Award as per the tripartite agreement, just about the time
resolution passed by the company and the Tata group
companies having had some business deals with Siva and his
companies in the past, relate back to Sterling acquiring TTSL
shares in the tenure of former Chairman, Mr. Tata so as to
attribute Mr, Tata conducted or conducting the affairs of the
company in a manner prejudicial to the interest of the
company or oppressive/prejudicial to the interest of the
petitioners or not?

219. On perusal of the pleadings and written submissions filed by

either side, the points that could be derived from the facts admitted
by either side are as follows:

220. Tata Teleservices Limited (TTSL) is an Indian broadband

and service provider based in Mumbai,
telecom mu n ications
Maharashtra, India, belonging to Tata Group. Mr. Tata was the
Executive Chairman of the company when Siva Group made
investment in TTSL, at that point of time; Mr. Cyrus was one
of the
directors of the company. In February 2006, Sterling Infotech
Ltd.
(Siva Group company - hereinafter referred as ,sterling,) acquired
520 million shares of TTSL at ?17 per share aggregating to
?B84crores through share purchase agreement, out
of which, Siva
group paid {102crores, as to barance ?7B2crores,
?650crores was

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loaned by Standard Chartered Bank, as to balance {132crores, it

came from Kalimati Investments (in short "Kalimati), a subsidiary
of Tata Steel. Sterling had taken the loan of ?650crores from
Standard Chartered Bank for financing the share purchase and had
in return pledged TTSL shares as security, that time, the company
provided an undertaking to Standard Chartered Bank to acquire the
shares pledged by Siva group in favor of Standard Chartered Bank
at {17 per share (plus 60lo interest) in order to ensure that the
pledged shares were not sold to an undesirable third party in the
event the pledge was invoked on Siva's default. The company had
only undertaken to purchase the pledged shares at a pre-
determined fixed price; it did not guarantee to make good Sterling
principal loan liability of ?650crores. The said undertaking given by
the company was expired in March 2009. It is a fact that this
undertaking was later withdrawn by the company and it has been
substituted by collateral from the Siva group as security. Kalimati
provided short term bridge loan to Sterling, which was repaid in
March 2006 itself with full interest @8.45olo within 10 days. In the
following month i.e. in March 2006, Temasek Holdings (Japan
Company) was issued TTSL shares at ?26 per share. The acquisition
price of TTSL shares for both Siva and Temasek was within the
price band of ?17 to ?40 per share as approved by the board of
TTSL and unanimously by the shareholders at the EGM of TTSL. The
petitioners also acquired TTSL shares at {15 per share three
months before Siva's acq u isition.

221. When NTT - DoCoMo, in the month of November 2008, came

into TTSL as a strategic investor investing 260lo investment in the
company, Sterling as well as, Mr. Cyrus's brother and father sold
part of their shareholding at ?117 per share to NTT-DoCoMo. For
DoCoMo investment having eventually turned sour, and with no
initial public offering in sight, as there is a clause of put option in
favor of DoCoMo, on initiation of arbitration proceeding by DoCoMo,
an award was passed directing TTSL to pay t8450crores to DoCoMo
for the shares held by DoCoMo, by virtue of this award, since there
is an inter-se agreement binding Sterling to the put option provided

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to the DoCoMo, the Siva group has come under obligation to pay
the share prlce of its shares of TTSL out of a845ocrores payable to
DoCoMo. Since Sterling has not turned up to pay its share out of
award amount paid to NTT-DoCoMo, Mr. Nitin Nohria, Trust
Nominee Director on the Board of Directors of the company
proposed to initiate legal action against Siva for his Group failed to
contribute its part in making payment to NTT DoCoMo. No sooner
the resolution was passed on 15.9.2016 to initiate legal action
against Siva Group Company; it is either by coincidence or by
leakage of information, on 19.9.2016, Siva issued legal notice to
TTSL alleging mismanagement of TTSL reserving its right to seek
damages to recover Sterling's losses. Thereafter, on 15.6.2017, the
company sent arbitration notice to Siva Group for recovery of its
part of Rs684.34crores recoverable from Siva Group Company.

222. It is true that Siva wrote a letter on 3.10.2013 to Mr. Cyrus

seeking an exit from TTSL so as to reduce its group companies'
burden as Siva Group was reeling under financial strain, for which
he had sought resolution of his grievance. As to the letter written
by Mr. Tata to Mr. Cyrus on 8.10.2013, it reflects that one Mr. Arun
Gandhi and Ishaat Husaain were in direct contact with Mr. Siva by
saying that some of the events which mentioned in the Ietter
written by Mr. Siva to Mr. Cyrus are somewhat different from the
reality for which Mr. Tata has clarified as follows:

his investment in TTSL was not made by him because

TTSL was in dire need of funds. He wanted to invest in TTSL

because he believed the telecom sector was fast growing and

he could sell his stake at a sizeable profit. Investments by
Temasek was being considered at that time.

- White Siva was offered shares at par, to the best of my

knowledge he did not purchase them and when Temasek
transaction was imminent it was awkward that he would be
altotted shares at par at the same time Temasek was paying
24. I believe that was the reason why Ishaat suggested that

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we reprice the shares offered to him at {18 (to which he

agreed ).

-I am unaware of any desire on our side to fund his

acquisition. The only thing I can remember is that the
transaction needed to be completed before Temasek paid their
money and presumably, if he asked for accommodation, this
may have been temporarily given.

- I understand that he is under considerable pressure as he had

to refund approx. USDB11 million to Batelco when the
Supreme Court cancelled his Tel-operating licenses. I
understand he has also been seeking rescheduling of his loan
from Tata Capital. He has asked for a meeting with you and in
view of the help he gave us in bringing down acquisition prices
in TTSL's history, I hope you will consider agreeing to his
request for a meeting."

223. It is a fact that TTSL contracted with Siva Group since 2003,
as a proof to it, minutes of the Board Meeting of TTSL dated
21.1.2003 discloses that benefits and cost savings have accrued to
TTSL by way of such engagement with Siva Group.

224, As to Tata Capital's loan of {200crores to Siva, it has not

been raised in the Petition, but it has been raised by Mr. Cyrus in
his reply to the Petition, the fact of the matter is, this loan was
given on pledge over the shares of TTSL on arm's length basis,
when Siva group defaulted on its loan, Tata Capital pledged over
the TTSL shares and acquired the TTSL shares pledged to it. After
acquiring shares in
TTSL, Tata Capital has entered into
Shareholder's Agreement with Slva Group which interalia gives
TTSL the right to sell TTSL shares held by it back to Siva Group at a
minimum threshold price in order to protect its interest. For which
Mr. Siva himself has provided personal guarantee to secure the
amounts due to TTSL. Thereafter, TTSL has exercised the put
option and also invoked the personal guarantee granted by Mr'
Siva, following which, Tata Capital has already taken steps to

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recover these amounts from Siva Group and also initiated legal
proceedings against the Siva Group.

225. As to acqulsltlon of Dishnet DSL (DDSL) from Siva Group, it is

a fact that this transaction took place in the year 2004, that time
DDSL in fact had the highest revenue from among its peers. This
transaction took place in the year 2004, Mr, Cyrus was aware of
this fact since 2013.

226. In respect to the letter dated 27.71.2005, it has been heavily

relied upon by the petitioners as well as Mr. Cyrus to attribute close
contacts in between Mr. Tata and Mr. Siva and Siva suggesting Mr.
Tata to conceal arranger fee, discloses that this context of arranger
fee is in respect of sale of business oF Maxus to TTSL and that
arranger fee was payable by Maxus to Sterling. In fact, TTSL was
not going to pay arranger fee to Siva; however, this deal in
between TTSL and Maxus never went through. Moreover, it is a
letter written by Mr. Siva to Mr. Tata but there is no any
reciprocating reply from Mr. Tata either agreeing for arranger fee or
making any statement in respect to the averments of that mail.

227, On perusal of these facts, it is undeniable that TTSL shares

were acquired in the year 2006 with the approval of the Board and
the shareholders of TTSL, almost after 10 years, now it can't be
said as the grievance of the petitioners to attribute malafides
against Mr. Tata in respect to acquisition of shares by Sterling. As
to the argument of the Petitioners, that they have no issue with
respect to the transaction but having the same being continued as
legacy, the company is suffering therefore, it is to be treated as
conduct causing prejudice to the company and in turn to the
petitioners. It has been said umpteen times that Mr. Cyrus was
continuing at the helm of the affairs of the company ever since he
had become Executive Chairman of the company therefore, it is the
fact that he remained in that position for four years until before he
was removed as Chairman. Itis not the case that Mr' Tata entered
into the transaction thereafter he did not put his efforts to make it
good while continuing as Executive Chairman. He was relieved from

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the Executive Chairman position in the year 2012; therefore, it

could not be treated as past action of the persons presently dealing
with the affairs of the company. Had it been the case that Mr. Tata
did not permit 14r. Cyrus to recover dues from Siva, it is

understandable that Mr. Tata trying to put his weight in favor of

Siva In not paying share value paid to NTT DoCoMo.

228. No materlal has been placed either by the petitioners or by

Mr. Cyrus saying that the petitioners moved some action against
Mr. Siva for recovery of the monies to which Mr. Tata raised an
objection. The Petitioners chiefly raised two aspects saying that one
of the group companies of Tatas, i.e. Kalamati provided a loan of
?132crores to Siva Company for buying shares from TTSL and
another argument is the company provided guarantee for taking
loan of {684crores from Standard Chartered Bank for paying
towards the shares acquired from TTSL. There is no merit in this
argument because the loan taken from Kalamati was already paid
back by Siva Group Company, the undertaking given by the
company was expired in 2009 itself and the company was relieved
from such undertaking for Siva himself provided personal guarantee
for the loan taken from Standard Chartered Bank. For no money
has been paid by any of the Tata group companies for the
acqulsitlon of TTSL shares by Siva Group, it cannot be attributed
that the company incurred Ioss by acquisition of shareholding of
TTSL by Sterling (Siva Group Company).

229. As to another argument of the Petitioners that TTSL, at the

behest of Mr. Tata, allotted shares at discount when compared to
the allotment made to Tamasek immediately one month after
shares were allotted to Siva group companies @ ?17.

23O. To which, the Respondents gave two answers, (i) the

acquisition price of TTSL shares for both Siva and Temasek was
within the prlce band of ?17 to ?40 per share approved by the
Board of TTSL and unanimously approved by the shareholders at
EOGM of TTSL. Besides this, it is also a fact that these very
petitioners had acquired same TTSL shares two months before for

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115 per share. By this explanation, it is clear that it is not a

transaction that happened behind the back of the petitioners, it is
not a transaction that is lower than the rate at which the TTSL
shares were allotted to the petitioners. The answering Respondent
further submitted that the reason for the difference in the
respective acquisition prices between Temasek (?26 per share) and
Siva Group (?17 per share) was because Temasek had more rights
such as right to nominate a director on the board of TTSL and
affirmative rights on certain matters. As to allegation that Siva
made a big profit by selling shares to NTT DoCoMo @ ?117 per
share, it is evident from the record, these shares were
subsequently in the year 2008 sold to NTT DoCoMo while NTT
DoCoMo acquiring shares in bulk from TTSL as well as from some of
the shareholders of TTSL who are none other than brother of
Mr. Cyrus and father of Mr. Cyrus and also from Siva. They also
equally gained benefit just as Siva group gained from selling shares
of TTSL to NTT DoCoMo. These things have not been said by the
petitioner either in the petition or in their rejoinder. The petitioners
as well as Mr. Cyrus tried to impress upon this Bench as if the
company incurred heavy loss by the acquisition made by Siva in
TTSL. The rate at which the petitioners acquired shares of TTSL is
less than the rate at which Siva Group acquired, the gain the
petitioners made by selling shares to NTT DoCoMo is more than the
gain Siva group got from selling shares to NTT DoCoMo. For all
these transactions that happened in the year 2006 have become
oppressive and prejudicial to the interest of the petitioners' u/s
247, we have not seen any action that could be called as unfair
warranting invocation of jurisdiction u/s 241. Moreover, Mr' Tata
retired as an Executive Chairman in the year 2012 ever since
Mr. Cyrus continued until before his removal.

231. Another allegation the petitioners made ls that when

Mr. Cyrus caused a resolution passed to initiate action against Siva

group, Siva Group Company issued notice within 3-4 days since
resolution was passed by the company on 15'9'2016' Their
allegation is this information would not have gone out causing Siva

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to give notice to the company unless that information was leaked

by somebody from the side of Tata Trusts. First of all, no material
has been placed either by the petitioner or Mr. Cyrus showing that
such information has been leaked to Siva Group either by Mr. Tata
or from the answering Respondents except a guess work spun off
by the Petitioners and Mr. Cyrus. Such leakage if any there, what
proof the petitioners placed before us? Nothing is placed. Such
allegation, shorn of any material proof, cannot be attributed to the
Trust or its Nominee Directors, on the top of it, Mr. Cyrus did not
propose the resolution to proceed against Siva, it is 14r. Nitin Noria,
trust Nominee Director proposed to initiate legal action against
Siva. The petitioners as well as Mr. Cyrus have kept on and on
shifting their stands from the petition to rejoinder then to written
arguments, no proof nothing to any of these ever changing
allegations - grasping at straws.

232, Moreover, if that payment has not been made by Siva Group,
who will get more affected? Is it the petitioners or the Tata Trust? It
is obvious the Trusts would get more affected. It could be
understood that Mr. Tata had leaked this information to Mr. Siva by
getting some monetary benefit personally to him. But that is not
the case of the petitioners. It is not the case of the petitioner in
respect to any of the allegations raised by them that either Mr. Tata
or Mr. Soonawala did something so as to get monetary benefit out
of such tra nsaction.

233. Another allegation that is against Mr. Tata is that Siva is very
close to Mr. Tata, therefore Siva not paying money to the company
has to be construed as conduct prejudicial to the interest of the
Petitioners. The question of Siva coming under obligation to pay to
the company has come into picture only after an award was passed
against TTSL until such time, Siva was continuing as any other
shareholder in TTSL. Indeed Mr. Siva himself wrote a letter to Mr.
Cyrus on 3.10.2013 that he may be provided exit from TTSL
because he was in financial trouble, in case his shareholding was
taken back by TTSL, he would be In a position to come out of the
financial difficulties. When the same issue was brought to the notice

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of Mr. Tata on 8.10.2013, he clarified his stand in respect to the

issues raised by Mr, Siva and the only request he made to Mr.
Cyrus was to allow Mr. Siva to speak to him giving the background
picture of Siva acquiring shares of TTSL. It happened long before
DoCoMo issue. This DoCoMo issue has cropped up in 2016, when
the award was passed for payment of t8450crores. Mr, Tata wrote
a letter in the year 2013. That letter cannot be by anyway linked to
DoCoMo issue to say as if Mr. Tata encouraging Mr. Siva not to pay
money to the company.

234, As to Tata Capital giving loan of {200crores to Mr, Siva, it is

evident from the correspondence in between Mr. Cyrus and the
officer of Tata Capital, that Siva group pledged TTSL shares with
Tata Capital to get a loan of ?2OOcrores, due diligence has been
done for providing such loan to the Siva Group. When Siva group
failed to make payment, Tata Capital invoked the pledge over TTSL
shares and acquired the same @ {23. In the correspondence in
between Mr. Pravin Khadle and Mr. Cyrus, it is evldent that Tata
Capital converted Siva's loan exposure into TTSL shares and taken
the value of TTSL shares in their book in line with the arbitration
award. While converting this loan, Tata Capital said they took
overall valuation hit of ?53crores if any further impediment in TTSL
shares value, it is said that they will have to take further hit, it is
being said that technically they have no further exposure on Siva
account. In this correspondence in between Mr. Pravin Khadle and
Mr. Cyrus, it has not been said anywhere that Mr. Tata involved in
ensuring loan was granted to Siva Group Company over the TTSL
shares. Merely by giving loan by one of the group companies on
due diligence, can never become an issue to be tainted as a
transaction giving undue advantage to somebody else' Had it been
said that Mr. Tata influenced Tata Capital to provide loan to Siva
Group Company, there is chance at least to believe that at some
polnt of time, Mr, Tata tried to help Mr. Siva. Therefore on this
allegation one of the group companies on due diligence providing
loan to Siva Company, Mr. Tata's involvement has not been seen
anywhere in the loan given to Siva Group, everything has been

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properly audited and accounted from time to time, moreover, it

cannot become an allegation falling u/s 241, much less against Mr.
Tata, thereFore, we don't find any merit to say that Tata Capital
giving loan of ?20Ocrores on the pledge of TTSL shares acquired by
Siva Group as an affair conducted by Mr. Tata prejudicial to the
interest of the petitioners or prejudicial to the interest of the
co m pa ny.

235. The petitioners tried to make an allegation that acquisition of

Dishnet DSL (DDSL) from the Siva Group is an act of Mr. Tata
causing prejudice to the company as well as the petitioners. It need
not be said again and again that Mr, Tata has not been conducting
the affairs of the company ever since he retired from the position of
Executive Chairman. Moreover, this acquisition happened in the
year 2004 that is more than one decade before filing this Company
petition. it is not the case of Petitioner or Mr. Cyrus that they were
not aware of this acquisition. It is not the case of the petitioners
that they opposed to this acquisition. It is not the case of the
petitioners or Mr. Cyrus that Mr. Tata made illicit gain out of it. It's
a commercial decision taken by TTSL when DDSL had the highest
revenue from amongst its peers at that point of time. Even
according to the petitioners as well as Mr. Cyrus, this issue was
brought to the notice of Mr. Cyrus in the month of October,2013
itself, had it been really prejudicial to the petitioners, why did they
not raise this issue immediately after it was brought to their notice,
It is a transaction completed in the year 2OO4. In a company like
this and lts group companies, various decisions involving crores of
rupees are being taken on daily basis. Some may fetch benefit to
the company; some may not.

236. In any business, there will be minimum two parties. If both of

them remain on ad idem and as long as other external factors, like
market trends and timings go well, business go well, at times even
if both the parties are on ad idem, by virtue of market conditions,
social conditions, time, natural calamities, business failures, every
such failure cannot be measured up on judicial scale. Dealing with
eq u ity itself is risk.

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237. When any case ls filed u/s 247, the basic element that is
requisite to be shown in the case of oppression and
mismanagement is, unfairness of the management against the
members who are not in a position to take a call in respect to the
management of the company. It is not that whenever profit comes,
quietly enjoying, when loss comes, filing case u/s 247.As to TTSL
acquisition is concerned, it's a decision taken long before basing on
the valuation of that company and it
being the fact that TTSL
getting highest revenue from amongst its peers at that point of
time, it
could not be said as a careless decision taken by
management at that point of time. It appears that the petitioners
and Mr. Cyrus, because of the heart burn they had for Cyrus being
removed as Executive Chairman of the company, they tried to
steamroller all these business decisions upon lYr. Tata as
mismanagement of the affairs causing prejudice to the company, so
as to bully the answering Respondents by using Section 24t as a

device.

238. In view of the reasons aforementioned, we are of the view

that these allegations on demur do not constitute any case u/s 241,
assuming all are correct they fall uls 247, then also, no case is
made out to invoke 241. & 242 of Companles Act 2013, besides the
above, the petitioners have not made TTSL or Kalamathy or Tata
Capital or their management as parties to these proceedings,
knowing well section 241 speaks of the affairs of "a Company", the
petitioners making allegations against Mr. Tata in respect to the
companies aforesaid shall fail on the basic principle of non-joinder
of parties, henceforth, this issue is decided against the petitioners
herein.

239, Whether occurrence of some acts in Air Asia India Pvt.

Ltd. amounts to R2rR74 and R2O conducting the affairs of
the company causing preiudice to the interest of the
Company/ Petitioners or public interest?

240. In this issue also, AirAsia India Pvt. Ltd, has not been made
as a party to the proceedings nor its management, which is fatal to

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the maintainability of the petition on the ground of non-joinder of

parties, moreover, it is a joint venture with Malaysian company,
AirAsia Ltd., and the management is run by AirAsia Ltd., therefore,
the directors of AirAsia India Ltd. appointed on behalf of the
company cannot be blamed for something happened in that
company. This kind of judicial dispensation which the petitioners
expecting without even making the parties who allegedly done
something will not happen even in village panchayats.

241. As to this issue is concerned, the observations of this Bench

are as fo llows:

1. Air Asia India Pvt. Ltd. is a joint venture company

incorporated on 28.03.2013 in between Air Asia Berhad
(Malaysian Company) and the company with 49olo each,
remaining 2o/o has been acquired by others. Over a period of
time, the shareholding of the company has come down to
30o/o, the remaining shareholding has been acquired by
Taesl Pvt. Ltd. owned by one Mr. Bhatia. Neither Air Asia
Indla Pvt. Ltd., nor are its directors made as parties to this
proceeding. It is not a subsidiary of the company. It is the
company managed by Air Asia Berhad. The allegations
leveled against the Respondents are mostly based on the
emails sent Mr. Bharat Vasani, who is not a party to this
proceeding and these allegations have never been put to
test to find out the veracity of the correspondence relled
upon by the petitioners and Mr, Cyrus. On the contrary, Mr'
Vasani filed an affidavit disputing the e-mail correspondence
of him filed by Mr. Cyrus.

2. A Board meeting of the company was held on 06.12.2012

presided over by Mr. Tata as Chairman and wherein Mr'
Cyrus participated as Dy. Chairman in passing a resolution
to incorporate this joint venture for entering Into aviation
business. In the said meeting, it has been informed that the
company had received a proposal from Air Asia to start a
new domestlc airline operation in India. For which, Mr' Tony

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Fernandez, Group CEO, AirAsia (Malaysian Co.) made a

representation to the Board regarding airline's history and

proposed business plan for india. After Mr. Fernandez'
departure from the meeting, the board discussed the
proposal in some detail and finally felt that airline business
would be viable and provide investors appreciation on their
investment. Accordingly, the board decided to give its
approval to participate in the business with the condition
that the company capital infusion would be capped at US

$9million and that there would be no recourse to guarantees

by the Tata Group and that the company would get
appropriate representation on the board of Air Asia India. In
the said meeting, Mr. Cyrus did not raise any objection for
such approval and subsequently also was there never any
objection either in continuing in the joint venture or in
infusing funds in Air Asia India until before Mr. Cyrus was
removed as Chairman of the company.

3. Now the issue raised by the petitioners as well as Mr. Cyrus

is that Mr. Venkat at the behest of Mr. Tata indulged in the
diversion of funds from Air Asia India and when Mr. Cyrus
raised this issue, surprisingly Mr. Cyrus was removed as
Executive Chairman of the company. The petitioners pleaded
that the deal with Air Asia was thrust upon Mr. Cyrus as fait
accompli in the Board Meeting held on 06.12.20L2. Mr.
Cyrus says that after having noticed that Mr. Venkat
indulged in fraud in dealing with Air Asia, a forensic
investigation was carried out, since by the time this CP was
filed, no report came out, the petitioners believed that the
forensic report would reveal the fraudulent transaction of up
to a22crores were carried out with the Involvement of non-
existent parties in India and Singapore. The petitioners
pleaded that they believe that the aforementioned fraudulent
transaction of an amount of {22crores were routed through
hawala transactions to avoid coming under the Regulatory
Scanner. The petitioners submit that this deal was struck

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with one Mr, Hamid Reza Malakotipour, who has been

classified as "suspected and UN-sanctioned alleged global
terrorist" by the Govt. of United States of America. The
petitioners believe that details of the dealings of AirAsia
India Ltd. with such third parties are contained in the
forensic report issued by the Deloitte. Under this belief, the
petitioners nailed Mr. Tata, saying that Mr. Tata indirectly
financed terrorism and by doing So, he has caused
irreparable harm to the age old image of Tata group in
addition to the breach of trust of not only the shareholders
of Tata Group but also its employees. It is a serious and
demeaning allegation against Mr. Tata. They made another
allegation that Mr. Venkat would be one of the beneficiaries
of {22crores fraudulently taken from Air Asia India. For
which, the petitioners heavily relied upon the email
correspondence from the end of Mr. Vasani to say that Air
Asia India completely left the corporate governance to winds
and it is full of regulatory infractions and it has become like
a department of Alr Asia Berhad and not as a joint venture.

242. Over the allegations made by the petitioners and Mr. Cyrus,
the respondents side has placed the board meeting of the company
held on 6.t2.2072 to deny that the decision for starting this joint
venture was thrown upon Mr. Cyrus as fait accompli, on perusal of
the minutes of the said board meeting, it is evident that Mr. Cyrus
was present in the said meeting as Dy. Chairman of the company,
indeed that minutes was signed by Mr. Cyrus himself, On reading of
the minutes, no iota of material was present disclosing Mr. Cyrus
raising objection over the decision to enter into joint venture with
Air Asia Berhad. Today, Mr. Cyrus had no sooner been removed as
Executive Chairman of the company, the decision of Air Asia
became fait accompli upon Mr. Cyrus and the petitioners. On which,
the respondents submitted that the petitioners in their desperate
attempt to make a case out of nothing, on one hand they submit
that Mr. Cyrus had no say in the Air Asia transaction and he was
given a fait accompli situation, on the other hand, they state that

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Mr. Cyrus protected the interest of the company by limiting its

exposure to 30o/o equity of USD3omillion and by ensuring no fall
back liability came on the company.

243, If at all this decision was fait accompli on him, he would not
have been conscious of the discussion happened in the meeting, on
the contrary, if his second statement stating that he was the person
instrumental in ensuring the company exposure is limited to 30o/0,
then it ought to be construed that Mr. Cyrus was very much active
in the discussions where a proposal was approved to incorporate
joint venture company with Air Asia Berhad. Since both the
statements are contrary to each other, no relevance could be
placed on either of these statements.

244, Mr. Cyrus was subsequently also instrumental in all Board

meetings including the meeting where it was unanimously resolved
to set up Vistara, the joint venture with Singapore Airlines, he has
further stated in his drafted framework for communications and
decisions making between Tata Trusts and the Board of Tata Trusts
that he would take Mr. Tata's advice in relation to Defence and
Aviation before placing them to the board of the company owing to
Mr. Tata's domain knowledge in the said field. Throughout his term
as Executive Chairman, Mr. Tata had been kept apprised of
governance and compliance of issues of Air Asia, As to further
capital infusion into Air Asia, on 2L.L2,2015 in the Board Meeting of
the company, Mr. Cyrus as Executive Chairman agreed to enhance
investment in Air Asia by purchasing the shares of Telstra Trade
place, a shareholder of Air Asia, which was desirous of selling its
stake in Air Asia, similarly, in another meeting dated 15.09,2016,
just before his removal in the following month, the Board of
Directors of the company, presided by Mr. Cyrus approved the
release of funds to Air Asia India to meet its most urgent external
requirements. In the same minutes, Mr. Cyrus himself suggested
that he did not understand that the airline industry and therefore,
he would refer to the judgment of Mr. Tata.

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245. As against this story present on record, could it be

conceivable to say that AirAsia decision is fait accompli upon him;
all investment to AirAsia has been done by the company in his
tenure without being known to Mr. Cyrus. It is fundamental in law
that the person privy to a transaction estopped from denying it, but
unfortunately today the petitioners and Mr. Cyrus have made all
kinds of allegations with impunity flouting all legal principles. They
stated as if they did not take active part in AirAsia incorporation, as
if Mr. Cyrus did not preside over meeting on 15.09.2016 in further
funding it, they went ahead to make a scurrilous statement, without
a shred of paper, that Mr. Tata funded one Terrorist through hawala
with diversion of AirAsia india funds.

246. Without going any further, I can say that the petitioners
miserably failed to atleast set up a case basing on this allegation,
all are abominably baseless allegations thrown at a reputed person/
and not knowing what consequences follow when such scurrilous
allegations are not supported by any material paper. In view of the
same, we hereby dismiss this allegation against the answering
respondents holding no case is made out against Mr Tata, Mr
Venkat.

247, Whether the business transactions between Mr. Mehli

Mistry and Tata Power Co Ltd taken place when Mr, Tata was
Chairman of the Company amount continuation of
conducting the affairs of the company in a manner
prejudicial to the interest of the company or in a manner
oppressive/prejudicial to the interest of the Petitioners as
stated by the Petitioners and Mr, Cyrus or not? Will other
rbsues like selling Bhakthawar flat and buying Alibaugh land
have any bearing to link them as issues relating to the
interest of the company?

248. The issue for discussion is in relation to the allegations made

by the Petitioners and Mr. Cyrus are in relation to awarding of
dredging and shipping contracts to Mehli's companies by Tata
Power for long periods of time making renewals several times

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without any competitive bidding, Mr. Tata buying an agricultural

land at Alibaug, Maharashtra in the year 1993 wherein Mr. Mehli
stood as conforming party to the said Sale Deed between Mr. Tata
and the original seller and Sale of Bakhtawar Apartment
(Apartment No.202 in a Building called "Bakhtawar" at Colaba) to
MPCPL alleged to have been belonging to Forbes Gokak Ltd
(successors to FFC) through Mr. Tata.

249. As to Colaba Flat tenancy is concerned, the Petitioners submit

Mr. Tata used to reside in Bakhtawar Apartment since the year
1968 which belonged to Forbes Forbes Campbell & Co. (FFC) the
then Tata Company, the terms under which Mr. Tata was permitted
to occupy the flat specifically prohibited any transfer of tenancy
rights in favor of Mr. Tata which was captured in FFC's letter dated
8.10.1968 to Naval H. Tata (father of Mr. Tata). In the said letter
there was an express understanding between FFC and Naval Tata
that should Mr. Tata decide to vacate the said flat, the same would
revert to FFC such that flat could be given for occupation to another
employee of FFC. This is how Mr. Tata occupied the said flat and
stayed there for several decades.

25O. Now the allegation is, in the year 2000, when Mr. Tata was
the chairman of the company , FFC (Tata Group company) sold the
said flat to MPCPL, owned by t'4r. Mehli for he happened to be close
confident of Mr. Tata but whereas Mr. Tata received compensation
of ?3crores from Mehli's company though no tenancy rights in favor
of Mr. Tata in respect of this flat were ever envisaged, therefore,
the Petitioners submlt the compensation taken by Mr. Tata in all fair
means should have gone to FFC, by doing so Mr' Tata enriched
himself at the cost of FFC, which being then a subsidiary of the
company ultimately causing loss to the petitioners as well'

251. As to this allegation, on reading the reply and documents filed

by the answering Respondents, it appears that it ls true that Mr'
Kemple of FFC wrote letter to Mr. Naval Tata on 8' 10' 1968 that Mr'
Tata would occupy Bhaktawar until further notice on the
understanding that should he decide to vacate Bhaktawar the flat

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would revert to Forbes for occupation of the member of the FFC

staff with an agreement that Mr. Tata would be responsible for all
outgoings in connection with that flat. In the same letter, it was
mentioned that Mr. Kemple who was at that time heading FFC
stated that Mr. Mehli Kersasp Mistry (father of Mr. Mehli) had
already intimated his approval to Mr. Tata occupying Bhaktawar
and as soon as various arrangements had been confirmed saying
that he would put this on record with Kersasp. On such letter of
arrangement came from Mr. Kemple, on 10.10.1968 Mr. Naval Tata
wrote a letter to Mr. Kemple for letting Mr. Tata have Bhaktawar
flat for his use, in a reciprocal arrangement, Mr. Naval stated with
regard to the flat in "Everest", he mentioned that it was originally
occupied by Mr. Stew Nelson of Tata Hydro Electric Company and
subsequently occupied by late Mr. Fale Pentochi for it was under
repairs by the owners of the trustees of R.D. Shetana, Mr. Naval
Tata has agreed to bear their share of repairs. On 11.10.1968,
another letter was written by Kemple that should Mr. Tata vacate
Bhaktawar, the occupancy rights would revert to FFC. In the same
letter, Mr. Kemple mentioned that Mr. Naval indicated that Forbes
would be given a flat in Everest which was at that time under
repairs. So it is one kind of reciprocal arrangement happened
between FFC and Mr. Naval Tata. To say that as to this transaction,
whatever that happened in between Forbes FFC, Mr. Tata and
MPCPL, the answering Respondents relied upon a Sale Deed dated
28.8.2000 executed in favor of MPCPL to show that prior to March
1975, one Pallonji Meherji Bhoy Mistry and four others were the
joint owners and landlords of this Building known as "Bhaktawar",
at that time FFC was the monthly tenant of the said Pallonji Meherji
Bhoy Mistry and 4 others in respect of the impugned Bhaktawar
apartment, that time, Mr. Tata was shown as the sub-tenant of FFC
in respect to the said premises, while things standing as stated, a
Deed of Declaration dated 11.3.1975 was registered as Mr' Pallonji
Meherji Bhoy Mistry and 4 others sold the said premises to FFC,
subsequently, by virtue of a Deed of Agreement dated 19'6 1975,
Mr. Tata became monthly tenant to FFC and continued to be in use,
occupation and possession of the said premises as the monthly

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tenant thereof. Thereafter. in the year 1992 FFC was amalgamated

with Golak Patel Volkart Limited with a new name called Forbes
Golak Limited. So by reading this document, the points emerging
out of this document are that this property originally belonged to
Mehli's father and others, by that time, that is in the year 1968,
FFC was only a tenant of the said property subsequent thereto, it
was purchased by FFC by virtue of that purchase Mr. Tata, being a
sub-tenant became a tenant in the year 1975, as to FFC became
Forbes Golak Limited again on 28.8.2000 an Agreement for Sale
was executed Forbes Golak Limited selling this apartment to MPCL
by showing Mr. Tata as confirming party. In the said Sale Deed, it
has been clearly mentioned that the sale consideration was
-5crores, out of which, {2crores should be paid by MPCPL to Forbes
Golak Limited, ?3crores to the confirming party, i.e. Mr. Tata for
surrendering of his monthly tenancy in respect of the premlses and
for handing over the possession of the premises to the purchaser.
When this property was sold to MPCL, the valuation report dated
12.5.2000 issued by Dr. Roshan H Nanavati undertaken prior to the
sale valuing the Bhaktawar apartment providing a ratio of 30:70 for
splitting the sale consideratlon between the landlord and the
tenant, but the actual consideration of ?Scrores was split in the
ratio of 40:60 payable to landlord and the tenant Mr. Tata. This was
put to registration, tax liabilities were cleared simultaneously
despite this transaction is clear and transparent. Mr. Cyrus and the
Petitioners simply throw this allegation against Mr. Tata as if he was
unjustly enriched by surrendering his tenancy rights to MPCL.

252. On seeing the historical facts, we have not seen anything

indicating Mr. Tata getting enriched at the cost of the company.
Moreover, as I
said earlier, again these Petitioners have not made
Forbes Golak as a Party, not disclosed all these details given by
answering Respondents disclosing as to
how this transaction
happened. It happened somewhere in the year 2002, now this
allegation was raised in the year 2076, for all these 16 years there
was no whisper over it. These Petitioners did not ever say how
much shareholding the company has in Forbes Golak. On the top of

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it, Mr. Tata retired from the company in the year 2012, therefore,
firstly it could not be an affair related to the company, secondly,
Mr. Tata has not been in the management since 2012, in any event
even the facts are assumed as happened, this cannot become an
allegation falling under Section 241 to say that the conduct of Mr.
Tata is related to the affairs of the company or such conduct caused
prejudice either to the Petitioners or to the company. Therefore, we
have not seen any merit in the allegation raised by the Petitioners,

253. As to other allegation of Mr. Tata getting a favor from

Mr. Mehli in respect to Alibaug land, it is evident that this Sale Deed
was executed in the year 1993 to which Mr. Mehli was Conforming
Party. This was a regular transfer, no relevance to this Petition.
Inspite of it, for the sake of completeness,the answerlng
Respondents mentioned that Aqua Farms - a firm in which
Mr. Mehti was a partner, was the Conforming Party for the Sale
Deed under which Alibaug land was purchased by Mr. Tata, why
Aqua Farms became confirming party to this sale deed was that
Aqua Farms had prevlously made certain payments to the original
land owner to purchase the Allbaug Land but the sale never
fructified. When Mr. Tata purchased Alibaug land, payment had to
be made by Mr. Tata to Aqua Farms reimbursing further payments
it had made to the original land owners, therefore Aqua Farms was
made as Conforming Party to the Sale Deed with a recital in the
Sale Deed saying that the vendors executed Sale Deed directly to
the purchaser for the consideration, at which they agreed to sell
and transfer to the conforming party and the conformlng party
upon reimbursement of consideration paid by the conforming party
to the vendor from the purchaser, confirmed the said sale and
transfer from the vendor and then to the purchaser. This is a sale
on consideration, moreover it is a transaction in between
individuals, but these Petitioners went to an extent to hold out this
transaction as a precursor for providing contracts to Mr. Mehli in
Tata Power. This transactlon happened in the way back in the year
1993. Merely, selling and buying something on consideration cannot
be said as a ground for bestowing contracts to Mr. Mehli. It is not

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the case of the Petitioners that Tata Power gave contracts to

Mr. Mehli without making any due diligence and without the
a pprova I of the Board.

254. The Petitioners and Mr. Cyrus submit that for having Mehli
developed close intimacy with Mr. Tata for Mr. Tata and Mr. Mehli
happened to be residents of Bhaktawar Building since long, and
Mehll having helped Mr. Tata in buying agricultural land at Alibaug,
Tata Power from the year 1993 onwards awarded long term
contracts spanning across 20 years to various Mehli companies
namely, MPCL, M. Pallonji Shipping Pvt. Ltd.(MPSPL) and M. Pallonji
Shipping Singapore Pte. Ltd. (MPSSPL) ranging contracts from
painting works to dredging and international shipment of coal for
TPC without having any tenders for most of them. By doing such
business, Mr. Mehli companies reserves grow from ?3.29crores in
the F.Y. 1994-95 to Reserves of {114crores by F.Y. 2003-03, i.e.
within 10 years thereafter, in the following 10 years those reserves
have gone upto t917crores. All these happened only because
Mr. Mehli was considered for getting all these contracts without
having any proper bidding. They say that these contracts were
awarded despite Mehli not having any prior experience in the
contracted job scope, many of them given for abnormally long
period, which were then extended without any fresh competitive
bids. But whereas under the Executive Chairmanship of Mr, Cyrus,
all Tata Group companies including TPC adopted a policy of
awarding such contracts only through competitive bidding so that
Tata group companies receive maximum benefits possible from
their contracts with third parties. When the price of Mehli's
contracts got re-negotiated, the scale of benefits to Mr. Mehli fell by
more than 509o, resulting in a cost saving of more than {200crores
per year for TPC. The Petitioners and Mr. Cyrus submit that if it is
one, two deals, they could be termed as business decisions, but
when such decisions making favor to Mr. Mehli time and again over
the course of two decades considering windfall proflts over the
party, mismanagement would stand established. They further
submit that Mr. Mehli had initiated arbitration over the measures

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taken to save the company from such windfall profits to Mr. Mehll
by enforcing existlng contractual provisions.

255. As to these allegations are concerned, the only document the

Petitioners and Mr. Cyrus filed and relied is an email Mr. Mehli
addressed to Mr. Padmanabhan of TPC among others, pressurize
the company to persists with old policy of dealing with Mehli's
companies highlighting a portion of Mehli email that is "Tata Power
should understand that they are in the business of producing and
distributing power and should leave all barging logistical issues fo
the contractors who have been awarded the job. We know what to
do and what is best for the company. Tata Power inputs are of
course always welcome". By showing this email, the Petitioners
submit that it reflects the audaciousness of Mr. Mehli's email to an
Executive Director of TPC (Mr. Padmanabhan) shows the extent of
power that Mr. Mehli enjoyed at TPC prior to the appointment of Mr.
Cyrus as Executive Chairman.

256, As against these allegations, the answering Respondents gave

elaborate explanation by annexing various papers to disclose that
all these transactions have been happened in compliance with the
provisions of Companies Act and these transactions have never
caused any loss either to Tata Power or to the company.

257. At threshold they have submitted Tata Power has not been
made as party, all these transactions are passed and concluded
several years ago therefore they are time barred and hit by delay
and latches.

258, The answering Respondents, basing on the information given

by Tata Power on 4.1.2017, submit that in respect to 1993
dredging contract for dredging at cooling water jetting for Trombay,
it was awarded by Tata Power to MpCL for g years choosing MpCL
from amongst three vendors who quoted namely S,K. Dhonde,
Sunder Underwater and MpCL. Thereafter it was extended 5 times
for various tenures from October 2002 to September, 2014 after
obtaining requisite approvals. While these approvals were being

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given, Mr. Cyrus who was continuing as Director of Tata Power from
1996 to 2006 and again from 2011 to 2016 never raised any
objection, indeed approved every extension that was given in his
tenure therefore, this could not become grievance either to the
or to Mr. Cyrus after he was removed as Executive
Petitioners
Chairman. When this extension was given on 1.7.2013, the
Executive Committee of the Board was chaired by Mr. Cyrus.

259. As to 2004 barging-cum-dredging contract, it is being said

that Tata Power awarded this contract to MPCL for construction of
jetting and transportation of coal to the Jetty in 2004. This was
awarded to MPCL under the single party process approval after
bench marking prices, when it was terminated on 4.1.2017;
Mr. Mehli initiated arbitration in respect to the dispute between Tata
Power and MPCL. This was subsequently resolved through
resolution in October, 2017. Since there is no material to say
whether it has been rightly done or wrongly done, it couldn't be
taken as allegation to come to a conclusion that it has caused loss
to TPC, in any event, this contract has been terminated, nothing
has been left to take it as an action to be complained of u/s 24L of
Companies Act. It has also not been shown as to whether any loss
has been incurred to TPC by virtue of this contract.

26O. In respect to 2006 shipping contract the answering

Respondents submit that TPC awarded the consortium of MPSPL

and Mercator Lines Limited for the sea freight for Trombay for a
period of two years on bidding where five bidders participated
namely, Torvald Klaveness, NYK Bulkship, Dalchi Chou Shipping,
Noble Pacific and MPSPL/Mercator Lines Limited. For which internal
approvals were taken for showing bids to the shortlisted parties. It
was agaln re-priced on commercial considerations, amending the
contract in June,2008 from 1.9 million metric ton per annum to a
total of 3.2 million tons per annum and extended up to May,2012.
Since Tata Power was unable to fully utilize the quantity of coal
shipped from December, 2008 to 2012, it was extended up to
March, 2013 to cover the left over coal. Tata Power in its letter
written to the company has made it clear that all these extensions

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and biddings took place in accordance with law therefore, today for
Mr. Cyrus being removed on 25.10.2016; these transactions could
not be seen as something that has caused loss either to the
company or prejudice to the Petitioners.

261. As to painting contracts given to MPCL, it has also been said

that they were given to Mr. Mehli's company after obtainlng
requisite management consents, approvals and necessary price
discovery processes.

262. Of course/ though the Petitioners and Mr. Cyrus made

allegations not supported by any kind of document, the answering
Respondents have dealt with each issue saying all those contracts
were granted to Mr. Mehli companies stating that no contract has
been given to Mr. Mehli companies without having requisite
approva ls and compliances.

263. As to letter dated 4.5.2013 written by Mr. Mehli, relied upon

by the Petitioners and Mr. Cyrus to state that Mr. Mehli pressurized
Tata Power to persists with dealing his own company, as we have
gone through this letter, we have noticed that when Tata Power
made MBPT completely stopped the storage of coal within their
premises, Mr. Mehli wrote this email airing his grievance regarding
the issue of storage of coal raising his objection to Tata Power
changing the terms of a particular contract. By seeing this letter,
we don't find anything to conclude that Mr. Mehli either
expropriated somethlng from Tata Power or bullied Tata Power to
do somethlng which it is not supposed to do. For his company being
the contractor, according to him, that permission to storage in
MBPT area came to this contractor, he said it would be difficult to
them to do the business in case place of storage is not opened for
them to keep the coal. He only asked Tata Power to ensure proper
coordination and joint decision taken to ensure that coal supply
chain to Trombay Power House should not be affected. But the
Petitioners instead of reading those lines put in italics in the context
of the remaining text, taken out from the text so as to give an
impression that Mr. Mehli was audacious towards Tata power' is it

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that if anybody says that something is objectionable, it will become

a ground u/s 241 to make an allegation against Mr. Tata? It is not a
letter from Mr. Tata, it's only a letter come from a contractor to
Tata Power. This is the only document that has been placed by the
Petitioners and Mr. Cyrus to say that Mr. Tata did favors to Mr.
Mehli at the cost of the company, at the cost of Tata Power in turn
causing dent to the dividend that is to come to the Petitioners. All
these arguments are for fetching without any point or material, we
can with all humility can say it is futile exercise made by the
petitioners as well as Mr. Cyrus putting this Bench through all these
voluminous documentation, inspite ofit, not even a mole is present
after digging the mountain. Therefore, we hereby hold that the
Petitioners as well as Mr. Cyrus utterly failed to say that these
allegations are maintainable under Section 241 and also failed at
least to prove these allegations that they have caused loss to Tata
Power in turn causing loss to the company which is likely to cause
difference to the dividend that comes to the Petitioners. Though it is

repetition, I must say that whenever any allegation saying that the
action of somebody else causes loss to the members of the
company, it has to be shown that the actions of the persons are
unfair and solely aimed at the members complaining. Here, in this
case, let alone unfairness to the Petitioners, the allegations made
against Second Respondent are not supported by any material or
even falling under Section 241. Accordingly, these allegations in
respect to Mr. Mehli and Tata Power are hereby dismlssed against
the Petitioners.

Tata Motors - Nano Proiect

264, Whether or not, the loss, if any, still incurring by Tata

Motors (including Nano proiect) can be related back to the
affairs of the company conducted by Mr. Tata as Executive
Chairman in the past relating to Tata Motors and if so,
incurring such loss bY Tata Motors can be attributed to Mr.
Tata, still discharging his duties as chairman of Tata Trusts
holding majority shareholding in the company; continuing as
Chairman Emeritus to the companY on being asked, and

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giving advices to the company and group companies' well-

being could be said as proclivity to intertering with the
affairs of the company resulting to causing prejudice to the
interest of the company or oppression / prejudice to the
interest of the petitioners?

265. Before golng into nitty-gritty of the factualities relating to

these issues, I must place that Tata Motors Ltd., the company
manufacturing various cars and other motor vehicles of Tata, is not
made as respondent in this case, nor even directors of Tata Motors
are made as respondents to this case, so the people who really
dealt with these business transactions are not before this Bench, no
board meetings minutes of Tata Motors have been placed before
this Bench by the petitioners. If any member of the holding
company or associate company wants to make his grievance or
their grievance in the subsidiary company as grievance of the
holding company, it is fundamental to make such subsidiary
company and its directors as parties to the case but that has not
been done.

266. Mr. Tata has not been the director of Tata Motors at any point
of time during which that actions complained of happened. Mr. Tata
remalned as an advisor as and when the officials of either the
respective companies or the company came to him seeking his
advice. It so happened at some point of time Mr. Tata volunteered
his suggestions for the betterment in the interest of the company,
but one thing to remember is, if his unsolicited advice is
accomplished through board approval, the persons privy to that
approval cannot complain over the same, if his unsolicited advice is
not considered, then there cannot be any grievance over such
advice for it has not been considered, Of course, almost all
suggestions have come from Mr. Tata and Mr. Soonawala on being
solicited. The petitioners so disgustingly tried to drag in the
concept of shadow directors to tag Mr. Tata and Mr. Soonawala
advices as work of shadow directors, that is a concept in fact put in
to bring underlying actors promoting defaults or unlawful actions,
which is alien to the concept of oppression and mismanagement. As

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I say, this relief is double edged weapon, it can make or mar the
company, for this reason, while employing this concept, we shall be
conscious of the fact that our order shall not militate against the
basic tenet of that is majorlty rule based on the
governance,
doctrine of corporate democracy, relief shall seamlessly fit into the
corporate governance, so that it could become prevention as
envisaged in the section. The petitioners' counsel tried to
hypothesize a concept as if corporate governance has brought in to
end corporate democracy, it is not so, because corporate
democracy is genesis, corporate governance is species, so even in a

fit of imagination also it will never contemplate corporate

governance is set against corporate democracy, indeed it has come
for strengthening corporate democracy - to streamline rule of
democracy, not to stamp out rule of democracy. I fear that it can
be said that rule of democracy goes when lift of corporate veil set
in, it is true, but question of lifting corporate veil is a last resort,
when it is found that management itself which has come in for with
a fiduciary duty to protect the aggregate interest of shareholders
started devouring the company, then it will come, because the
management comes into power saying they discharge their
fiduciary duties for the cause of the company. That concept cannot
be mixed up with every situation. One must be remindful of the fact
that Mr. Tata and Mr. Soonawala were not heading the
management; their directors were only limited not to approve the
agenda not for the cause of the company and majority. I must be
candid that the deliberations in this order are overlapping on one
another, indeed they are sporadically dealt with wherever need
arose

267,lt need not be said separately that Mr' Tata has not been in
the management of either Tata Motors or the company ever since
he retired from the company, If we read section 241 to raise a
grievance under the said section, it is imperative that the actions
complained of must be relating to conducting the affairs of the
company. First it ls not directly in relation to the affairs of the
company; secondly since he advises in relation to affairs of any

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other company cannot be construed as conducting the affairs of the

company because conducting the affairs of the company always
remain in the hands of board of directors. Whether advice is good
or bad, unless such advice is put into action, it cannot be called as
conducting the affairs of the company; merely for having the advice
of Mr. Tata taken into consideratlon by the board cannot be said as
action taken by Mr. Tata. Is there any one instance in the history of
the company or in Tata Group Company, at least in the regime of
Mr. Cyrus that Mr. Tata's advice has been directly put into action
without placing before the respective board? At least I have not
found any such action which has not been approved by the Board of
respective companies in relation to the issues raised by the
petitioners or by Mr. Cyrus. Of course, Mr. Tata is heading the
Trusts holding more than 660lo shareholding i.e. 2/3'd of the
shareholding, by virtue of this majority as per rule of democracy,
these companies have to be run at the wish of majority i.e. the
Trusts headed by Mr. Tata. Whether it is by getting majority
directors appointed in the board by the majority shareholder or by
virtue of afFirmative vote to have the majority say in the board. It
makes no difference whether they opt for aFfirmative vote or
electing majority directors in the company, the result is one and the
sa me.

258. For Mr. Tata advises or suggestions either solicited or

unsolicited cannot be called as actions falling within the ambit of
section 241, these allegations in respect to Tata Motors are not
maintalnable against Mr. Tata, however, to give completeness to
the allegations made agalnst Mr. Tata, the allegations made by the
petitioners and Mr. Cyrus have been discussed in the paras below:

269. The whole argument of the petitioners as well as Mr. Cyrus is

that Mr. Tata conslstently obstructing Mr. Cyrus from taking any
decision for closure of Nano project which has been causing
consistent loss to the company which ultimately having bearing on
the dividend supposed to come to the petitioners. They further
submit that Mr. Tata, through Mr. Venkat, sought and obtained
commercially sensitive information of Tata Motors whlch had the

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potential benefit to Jayem Auto in which Mr. Tata made a significant

investment which is in conflict of interest with Tata Motors.

27O, To establish this allegation, the petitioners and Mr. Cyrus

relied upon a record note of l4r. Tata and Mr. Cyrus visiting Jayem
Automotive, Coimbatore on 06.08.2012 unfolding that the purpose
of the visit was to evaluate test vehicle prepared by Jayem
reflecting the recent development project regarding engine and
handling upgrades for Nano and also to determine the direction of
future cooperation between Jayem Automotive and Tata Motors.

27L, Ithas been answered by the answering respondents that

Jayem Auto is one of the leading Indian companies involved in the
design, development, testing and manufacturing of wide range of
automotive components, systems and prototype since 1969 and
Tata Motors has been engaged in doing business with Jayem Auto
since 2004 for carrying out engine performance improvements by
other OEMs and suppliers for local and global market. The aforesaid
note was of 6.8.2012, when Mr. Tata was Executive Chairman of
the company. Besides him, Mr. Cyrus was also present when the
visit was made to Jayem Auto to discuss about various issues
relating to engine and handling upgrades.

272, flad there been any issue over the visit that was made by Mr.
Tata and Cyrus to Jayem Auto, what prevented Mr. Cyrus to raise
an objection over that visit immediately after the said incident, but
there is no whisper about such visit made by both of them nor any
allegation over such visit at any point of time until Mr. Cyrus was
removed as executive chairman, therefore the petitioners now
making it as an issue as if Mr. Tata did some business behind the
back of the company is bereft of any merit.

273. The petitioners and Mr. Cyrus relied upon two letters dated
23.6.2013 and 15.09.2013 written by Mr. KarlSlym, MD of Tata
Motors to Mr. Cyrus stating that Mr. Tata had called upon him to
rely more upon J. Anand of Jayem and also to ensure faster
payment to layem, side by side indicating a proposal for special

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vehicle centre outside Tata Motors Ltd. expressing his will to spend
{60crores personally to set up the special vehicle.

274. These letters were written by Mr. Karl in the year 2013
directly addressing to Mr. Cyrus by the time he was Executive
Chairman, he did not revert to the said letter saying that Tata
Motors Ltd. should not have any connection with Jayem Auto. This
allegation for the first time has come up only after he was removed
as Executive Chairman. The Petitioners as well as Mr. Cyrus tried to
relate back Mr. Tata investing {10crores in Jayem Auto in February
2016 to the visit Mr. Tata and Cyrus made in the year 2072 and
thereafter Mr. Karl writing letters in the year 2013 so as to impress
upon that Mr. Tata is interested in layem Auto with an idea to
invest money in Jayem Auto.

275. To this, the answering respondents replied that Tata Motors

has not started doing business with Jayem in the year 2012
onwards, it has been doing business with Jayem since 2004, for
Mr, Tata was executive chairman in the year 2012, by virtue of that
position he made a vlsit to Jayem Auto Coimbatore along with
Mr. Cyrus in the year 2012, thereafter, when Mr. Karl, it appears,
went to make some presentation to Mr. Tata, there it so happened
that Mr. Tata spoke about fast-tracking the process for bringing in
special vehicle for new product introduction (NPI), there it was
mentioned that I\4r. Tata willing to spend ?60 cores personally to
set up this vehicle. In the letter dated 15.09.2013 written by
Mr. Karl to Mr. Cyrus, it has not been said anywhere that Mr. Tata
resisting for closure of Nano project, as to the new product
introduction, Mr. Tata's suggestion was slightly different saying that
they must move fast as in China's model. It is not something
expressed in the board meeting, as to Nano project, Mr. Karl has
made it clear that he would talk to Mr. Tata in a week as a follow up
to the meeting dated 15.09.2013. If you read these letters closely,
we can ascertain that not only the people of the company but also
the other group company have kept meeting Mr. Tata to get
advices and suggestions from time to time. It is also not the case of
Mr. Cyrus that meeting of various officials of Tata Group companies

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wlth Mr. Tata is not in the knowledge of Mr. Cyrus, If payment is to

be made to some business partner is delayed, it is quite natural
asking the respective company to make it fast. As to Mr, Tata's
indication of investing ?60crores in a special vehicle, it cannot be
touted as an indication of Mr. Tata investing money in layem Auto.
In fact, in respect to the special vehicle which was discussed in the
letter dated 15.09.2013, it has become a reality in July 2016 - Tata
Motors and Jayem in July 2016 incorporated a joint venture
company named J.T. Special Vehicle Pvt. Ltd. with 50:50
shareholdings in that joint venture. This joint venture was
incorporated under the stewardship of Mr. Cyrus himself. It is
therefore entirely incorrect to say that Jayem has benefited unduly
from any patronage extended by Mr. Tata. Accordingly, we are of
the view that nothing is present in the letter written by Mr. Karl to
say that Mr. Tata did something so as to have any gain to himself
or to cause loss to the company. Since the special vehicle has come
into existence under the stewardship of Mr. Cyrus, in the year
2016, it could not be said that Mr. Tata did or advised something
against the cause of the company or Tata Group companies.

276, The petitioners and Mr. Cyrus relied upon an e-mail dated
29.OL.20t4 written by Mr. Tata to Mr. Cyrus to say that Mr. Tata,
despite Tata Motors incurring losses on each Nano car that was
being sold, contlnued to suggest ways in which the sales of Nano
car could be bolstered and did not once entertain the idea that
Nano, a commercial project with no profitability in sight ought to be
shut down.

277. As against this allegation, the answering respondents counsel

replied that Mr. Tata expressed his helplessness in seeing Hundai
Santro taxis sprang up in Bombay instead of Tata Cars, he felt
unhappy of seeing Hundai managed to get a large contract to
replace all the older taxis, for this reason, he sent a letter on
08.01.2014 to Mr. Karl querying whether Tata Motors marketing
team had tried to make similar offer for a bulk sale of the first
Indica or the current Nano to the taxi fleet owners in Mumbai and
other cities. What all he said in the letter dated 29.1.2014 is that

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Tatas have failed to catch up the opportunity that has come to roll
out their cars into the market. What is the benefit Mr. Tata gets if
cars of Tata Motors are sold as taxis? He would not get anything
into his pocket. Indeed, it would become profit to the company. He
principally spoke about Indica and he also tossed out an idea that
offering Nano as a taxi would also become an attractive proposition,
what is wrong in it? Is it the idea of Mr. Cyrus that the majority
shareholders should not say anything about the business of the
company wherein Trusts have majority shareholder? There is fleet
of letters from Mr. Cyrus asking advice on various issues, when
such is the case, can it be held out that Mr. Tata suggesting
business idea for the cause of the company is wrong? Could it be
the case that Nano should not be put out for sale? If giving such a
suggestion is oppression, majority shareholders should remain keep
quiet leaving everything to an employee appointed as Executive
Chairman. If this is the oppression and prejudice to the minority
shareholder, every minority shareholder will come in line with a
company petition u/s 241 saying that the decision of the majority
shareholder is oppressive against the minority. Another wondering
feature in this case is there is not even a single board meeting or
shareholder meeting these petitioners differing to any decision that
has been passed till the date of filing Company Petition except the
minutes of the meeting dated 25.10.2016. Can it be said that a
shareholder voted in favor of a resolution could subsequently make
a dispute over the said resolution except in the circumstances
mentioned u nder Contract Act?

278. Mr. Cyrus made an allegation that Tata Motors had to take
nearly {4,000crores write-down arising from easy financing scheme
and large discounts given to artificially boost the sales of Nano cars.

279. As to this point, it is being shown as TM Finance which has

financed TM vehicles Incurred NPAs of ?4000crores, this entire NPAs
are being held out as loss incurred in lieu of financing Nanos, but
the fact of the matter is the losses suffered by TM Finance was
primarily due to financing for commercial vehicles, the loss caused
by financing Nanos is only a part of the total losses suffered. It is a

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note sent to Mr. Tata disclosing historical liabilities, this is a

document annexed to the reply filed by Mr. Cyrus under the head of
"financing liabilities on TML/TMF on account of 100o/o loss cover
scheme".

Financing by
TMF Limited under 100o/o loss cover
scheme, for commercial vehicles and passenger vehicles,
was stated in April 2008 and December 2010 respectively
amounting to
Rs. 11,556 crores. Due to tough economic
environment, abnormally high defaults in payments led to
huge losses for Tata Motors and TMF. Total estimated loss
- based on actual loss, provisions and estimated future
/osses - adds up to Rs. 2,000crores. Key products that have
led to these /osses under this scheme are Magic
(Rs.853crores), Nano (Rs. 392 crores), 207 Pick-up (Rs.
313crores) and Ace (Rs. 214crores).As on March 31, 2014
Tata Motors and TMF have provided for a loss of Rs.l,
21lcrores. With expected improvement in macro economy,
it is estimated that actual loss may not go beyond the
amount provided in the books.

The scheme had been discontinued for Passenger

vehicles in March 2013, whereas for commercial vehicles it
was discontinued for most models only in the later part of
the financial year 2014. (P.416 in the reply filed by Cyrus
dtd.29.12.2016)

28O. On looking at this document, it is clear that TMF had loss of

only ?392crores towards Nano out of ?2,000crores. Can it be said
that since TMF incurring a loss of {392crores for financing Nano
cars as mismanagement against Mr. Tata, when total loss is around
?2,000crores, to my understating it will not be so.

281. The petitioners as well as Mr. Cyrus relied upon an email

dated 07.04.201.4 (page no. 435 of reply of Cyrus dated
29.12.2016) sent by the head of product engineering at TM i.e. Dr.
Tim Leverton Frengto say that R2 kept on visiting Jayem Auto

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alluding to Mr. Tata sharing information with Jayem Auto. On seeing

such bizarre allegation, when the document is perused, we have
noticed that Dr. Tim was asked to take Mr. Tata through to Jayem
projects i.e. Nano 2 cylinder TCIC and 3-cylinder diesel engines.
The response of Mr. Tata has been written in this email to the
Jayem project presented before him. Perhaps, by seeing such
project, Mr. Tata might have expressed that he wanted to make a
personal visit to have an inspection of those projects, that's why
Dr. Tim might have mentioned that he would likely to visit layem in
the next two weeks. If the entire letter is read, it is understandable
that he has made lot of enquirles about technical point, to bring out
low cost car and also desire to bring their product in to the market
very quickly. By reading this letter, can it be said that Mr. Tata
visiting Jayem Auto is to have some personal benefit to him or to
cause some loss to TM? It is not that TM sensitive information is
given to Mr. Tata and Mr. Tata trying to take sensitive information
to layem Auto. What all happened is, since Dr. Tim has reported to
Mr. Cyrus, for that, Mr. Cyrus himself must have asked Dr. Tlm to
present these projects to Mr. Tata, after having gone through all
those projects, may be, he must have made up his mind to inspect
those projects to have his own assessment. For whose benefit he
it is for the benefit of TM in turn to Tata Sons.
has done all these,
Whose company is Tata Sons? It is the company of Tata Trusts,
because majority of the shareholding is held by them. It is really
disquieting to take out one line from this entire document to hold
out as if Mr, Tata carried some secret information so as to benefit
iayem Auto.

282, The Petitioners, upon email correspondence between Dr. Tim

and Mr. Cyrus, made an allegation that Mr. Tata was regularly
meeting Mr. Anand (Jayem Auto). If this email correspondence in
between Tim and Cyrus (page No. 437 of reply flled by Cyrus on
29.L2.16), is read, it is ascertainable that every time when Mr. Tata
met Mr. Anand, it was on a purpose for getting information from
Mr. Anand, the same is evident in this document. Meeting two
persons can never be called as conspiracy between them, unless

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such meeting has happened with a sinister design to cause harm to

somebody. Is there any material from these documents to say that
Mr. Tata met Mr. Anand to do some harm to TM or to Tata Sons? Is
there any material with them to say that Mr. Tata got benefit out of
it or Jayem got some benefit causing loss to Tata companies? Is
there any underhand dealing in any of the correspondence that has
been mentioned here?

283. The petitioners and [t4r. Cyrus relied upon an email dated
10.05.2014 comprising of Tata Motors related liabilities, they say,
this need to update the Trustees on key matters stem from an
incorrect interpretation of the Articles of Tata Sons, whereby Mr.
Tata required pre-consultations of several matters of interest to
him. (page No. 415 of reply filed by Cyrus on 29.12.16)

2a4, By showing this, the petitioners tried to impress upon this

Bench saying some unpublished price sensitive information (UPSI)
has been provided to
Mr. Tata and Mr. Tata misused that
information causing prejudice to the interest of Tata Motors.
Whenever such an allegation has been made, few points that have
to be considered are as to whether it is a UPSI as covered under
SEBI (Prohibition of Insider Trading) Regulations and then to see as
to whether the party received such information traded/misused for
personal gains viz. either to make gains or to avoid losses. But to
orJr sense/ this issue will not fall under either of the points. Second
thing, when it has been said UPSI has been taken out, then it is the
duty of the person making allegation first to prove that it is UPSI,
second, if so, that is compulsorily to be proved by the person
making allegation that the person recelved such information has
used/passed on/traded based on that UPSI in order to make profit/
avoid loss. If you test this allegation in the proposition placed
above, it is not said anywhere it is a sensitive information, it is not
said anywhere that information has been misused by Mr. Tata,
Interestingly there is no record provided evidencing that Mr. Tata
traded in the securities of Tata Motors and made gains/avoided loss
based on the UPSI. Moreover, Mr. Tata being the Chairman of Tata
Trusts, by virtue of Article 121(A), Tata Sons is bound to provide

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information of the Tata Group companies to Tata Trusts prior to

bringing the same before board of directors of Tata Sons. Another
surprising aspect is there is no material saying Tata himself asking
some information, it has been voluntarily provided by lt4r. Cyrus or
by his officers, may be by virtue of Article 121(A) or by virtue of
their need to take advice from Chairman-Emeritus, such
information must have been provided. In this back drop, it is
inconceivable to understand how providing such information will
become interference with the affairs of Tata Sons or flouting SEBI
Regulations. That apart, to say that it is an oppressive conduct, first
of all, these petltioners should file proceeding before SEBI then if
SEBI is of the opinion that some violation happened reflecting that
such conduct is prejudicial to the interest of either the company or
the petitioners, then only there is a possibility to look into it in the
surrounding circumstances, because as I said umpteen times it is
not violation of some law that amounts to prejudice the interest of
either the petitioners or the company, it is the unfairness causing
prejudice to the aggrieved is the deciding factor to decide the case
under section 241 and 242 of tl-te Companies Act.

285. In fact, I can say that seeking information will never amount
to conducting the affairs of the company. Yes, when majority
shareholder is there and majority shareholder himself is not a
director and majority shareholder nominate someone as director, it
is obvious such majority shareholder must have prior information to
take informed decision to advise his nominee director to take a
right call on the said point. The same is happening here. In fact,
these petitioners as well as other shareholders of Tata Sons
unanimously approved Article 121(A) to provide the information of
not only Tata Sons but also group companies prior to taking any
decision even by the group companies. Such being the case, there
is no point in saying that Mr. Tata has kept on interfering with the
affairs of the company. It cannot be said as interference, in fact, it
is nothing but exercise of their right by virtue of the Article and by
virtue of the majority they have been enjoying in the company. Is
there one incident in the past Mr. Cyrus writing to Mr. Tata that

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Mr, Tata not being director of the company, he would not share
inFormation to Mr. Tata? Not, once.

286. The petitioners as well as Mr. Cyrus relied upon the email
correspondence in between Dr. Tim and Mr. Cyrus to say that
because of the closeness with Mr. Tata, Jayem Auto was able to get
stable revenue streams and cover their fixed cost from Tata Motors
Ltd., to pep up the same, it has been further said that in the
financial year 2014-15, Jayem has got B5o/o of their revenues from
Tata Motors that is aggregating to {62.1Scrores.

287. It might be that layem Auto must be getting major revenue

from TM, when big business houses run their businesses, so many
other companies will get business, it is quite natural when a
business is run, to feed that business, there will be so many
accessory buslnesses. The company that is getting business may
not be in a position to run all the accessory businesses on their
own, so in a situation like that, it has to give business to some
other companies. In a process like this, Jayem must be one out of
them. The only point to be seen is whether the business happening
between two companies is at arm's-length or not. Is it the case that
the business with Jayem Auto not transparent? Is it the case that
Jayem taking money and not providing services? When long
relationship is there in between two businesses, to sustain
themselves, they sometime provide loan to each other, sometimes
one company may provide loan to other company, if it is not
reflected in the record and if it is not paid by such parties, then only
there could be a chance to attribute aspersions on somebody else.
Here, no such situation is existing, then how come Jayem Auto
getting business from TML could be seen as Mr. Tata doing favor to
Jayem Auto at the cost of TML or Tata Sons.

288. The petitioners and Cyrus relied upon other emails dated
31.8.2015 and 16.9.2015 to say that ['4r. Tata was unhappy about
the fact that TM was not dealing with Ola since Mr, Tata had a
personal investment in Ola, despite Mr. Tata knowing that TM and

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other group companles were in advanced talks with Uber, a

competitor of Ola.

289. To cut long into short, let us come directly to the letter
written by lYr. Tata to Mr. Cyrus on 16.9.15, which is as follows:

"You will recall when we were together in Pune on September

lst I mentioned to you that Mr. Bhavish Aggarwal, Co-Founder
of OLA cabs told me that they were very keen to immediately
acquire 10,000 Nanos and Indicas/Indigos from Tata Motors
on outright purchase, lease or joint venture. On as annual
basis they had plans to acquire 150,000 such vehicles. He
mentioned that while OLA was keen to do the transaction with
Tata Motors, there was no positive response from Tata Motors.
By contrast Maruti Suzuki was chasing him everyday.

In my view, given Tata Motors' current inability to register

sales in the market and the lack of expected market
acceptance of the newly introduced bolt and zest, I would
expect that Tata Motors should be vigorously pursuing such an
option. You responded saying that Mr. Aggarwal had sought
the meeting with you which was being scheduled shortly.

Unfortunately, it
would appear that not much in terms of
positive direction has happened. I understand that Tata
Motors is in the process of entering into a comprehensive
agreement with Uber involving a similar quantity of vehicles
from Tata Motors and on an exclusive basis and that this was
considered to be a better proposal from Tata Motors'point of
view. Ola cabs apparently seem to have now gone ahead with
Maruti Suzuki, based on what has been reported in the media.

Iam writing this to you in the light of our conversation in

Pune on Tata Motors itself and the seeming lack of concern
about its declining market position. The company has denied
the shareholders of their dividend, and has considerable
unutilized capacity due to its law sales, Its new product

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launches have not resulted in expected volumes and I am

unaware of a product portfolio strategy that is in place. My our
personal experience in trying to help on new variants of the
Nano at )ayem Automotives seems to confirm that the
decision-making process within the company is extremely
slow. A proposal to offtake 150,000 Indicas and Nanos should
be welcomed by the company, as it constitutes about 15
months' production at current sales levels. If Tata Motors
could execute both the Ola cabs and Uber proposals it would
be even better and would be a real shot-in-the-arm for the
company. How will Tata Motors justify turning away any
proposal for a guaranteed offtake? And how would such a
decision be viewed in the public domain? The company has
allowed such a potential business opportunity to go to Maruti,
I am raising this with
While Tata Motors is gasping for breath.
you as these would be issues with which you would be
involved operationally as you are in fact the de-facto CEO or
Executive Chairman of the company.

While Tata Motors has turned away the Ola cabs proposal as
being inferior, I hope for your sake and for that of Tata Motors
that the Uber proposal for a similar number of vehicles, which
Tata Motors is pursuing, does indeed get concluded.

With Regards,"

29O. I must also give introduction what made Mr. Tata to write
such a letter to Mr. Cyrus. It is apparent on record from the reply
filed by Mr. Cyrus dated 29,L2.2016 that Mr. Tata wrote a letter to
Mr. Mayank Parekh on 31.8.2015 stating that the CEO of Ola Cabs
Mr. Bhavesh Agarwal met him and mentioned that Ola Cabs have
been very keen to procure large number of passenger cars from
Tata Motors saying that he would immediately procure 10,000 and
his eventual forecast would be that it would take 1,50,000 cars in
one year period and it is also expressed that the response from TM
is slow and if TM is not interested in his business, he would transact
this with Suzuki who were chasing him constantly. Knowing this

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information, Mr. Tata immediately dashed it to Mr. Mayank, Officer

of TM that selling 1,50,000 vehicles would constitute approximately
10-months business, if this went to Suzuki, then how TM
management would explaln, how and why they turn away from
such business in offing, he has doubted that there was some
disconnect somewhere in getting through, Therefore, he put it to
Mr. Mayank and Mr. Mayank immediately brought it to the notice of
Mr. Cyrus. Then one man called Shailesh Chandra at the instruction
of Mr. Cyrus put it to Mr. Mayank saying that they were in touch
with Ola till the month of June 2015 for a potential deal regarding
purchase of about 8,000 Nanos and 6,000 Indicas in a period of 3
months, since Ola put a condition that vehicles to be financed by
TMF with a right of refusal and exclusivity for them, in the
meanwhile, as an offer came from Uber with a requirement of
1,20,000 Indicas and Indigos with an offer to keep security deposit
with TM agreeing to take the entire risk of default beyond 2o/o, and
since Tata Sons was on the verge of finalization of definite
agreement with Uber, he asked Mr. Mayank to understand their
inability to respond fast to Ola. When nothing happened as stated
by Mr. Shailesh at the behest of Mr. Cyrus, Mr. Tata wrote the letter
dated 16.09.201ssuggesting Mr. Cyrus to become fast to grab the
opportunities either with Ola or with Uber, if possible to have with
both because in given TM current inability to register sales in the
market. He says that they should not lose this opportunity, but
ultimately what happened, neither Uber business has come to TM
nor has Ola business come to TM. The anxiety of Mr. Tata asking
Mr. Cyrus to catch up to the situation and grab the opportunity has
been bounced against Mr. Tata saying that Mr. Tata, since having
his personal investment in Ola, tried to interfere in the business
decisions so as to ensure that buslness is given to Ola.

29L, If the letter written by Mr. Tata is understood in totality, the

endeavor of Mr. Tata is only to ensure business come to TM, I could
not understand how such a suggestion by Mr. Tata to grab that
opportunity amounts to Mr. Tata interfering with affairs of Tata
Sons. Has it been said anywhere that Mr. Cyrus should not have

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any deal with Uber and only to have deal with Ola? Nothing of that
kind ls apparent In the letter written by Mr. Tata. He only said, try
to get the business either with Ola or with Uber or with both before
others have grabbed the business. Whether Mr. Tata ignored
Mr. Cyrus and directly had a deal with Ola? It is not so. Ultimately,
what happened is his anxiety has remained as suggestion only.
Business has not come to TM.

292. The petitioners and Mr. Cyrus sounded that since lvlr. Tata
had an idea to invest his money in Jayem Auto, he initially
supported it like anything, thereafter made investment in that
company, which has serious conflict of interest with the interest
Trusts have in Tata Sons.

293, It has been answered by Tata Sons as well as Mr. Tata that
Mr. Tata wrote a letter to Mr. Cyrus on 09.02.2016 i.e. o the same
date I believe Mr. Tata invested in layem Auto, stating that he
made a minor investment of 10 cores in Jayem Auto in the form of
debenture. He has openly put to Tata Sons that he made an
investment in Jayem Auto. Is it the case of the petitioners that
Jayem Auto is a competitor to the business of TML; is it the case
that Mr. Tata made a substantial investment in Jayem Auto shifting
its interest from Tata Sons to Jayem Auto? Moreover, this
investment was done only on 9.2.16 but all these allegations of Mr.
Tata helping are far before Mr. Tata made investment.

294. There is an allegation from Petitioners and Cyrus saying that

TM supplied 69 gliders to Jayem Auto during the period Sep-Dec
2017, to which the answer from the respondent side is those gliders
have been provided for the development of its own electric car sold
under the brand name "Neo" the role of TM in this project has been
limited to being the supplier of Nano gliders to Jayme Auto. Of
course, it is an allegation made subsequent to filing this company
petition because it happened only between sept-dec 2017.
14oreover, it is inconceivabre to understand how these petitioners
could attribute everything that has been done in TM as is done by
Mr. Tata. It is a listed comoany, having its own board and TM

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decisions are put to the scrutiny of Tata Sons in view of Article

121(A). Is it the case of Petitioners that Mr. Tata did something
directly dealing with Jayem Auto? Doing business with anybody is
not prohibited under law; the only requisite is such business
transactions should be at arm's length? As we said many times, for
the sake of repetition I say that, to invoke section 241, it has to be
proved that the deal/action complained of has to be proved as
unfair and prejudicial either to the interest of the company or
oppressive against or prejudicial to the members of the company,
of course, prejudicial to the interest of the public as well, Has it
been said anywhere that such and such act is unfair and prejudicial
causing prejudice either to the petitioners or to Tata Sons? Mere
saying prejudicial or oppressive 10 times will not become prejudice
or oppression, material has to be provided, figures have to be
given, on the top of lt, it has to be proved. Here, in the given case,
let alone proof, there is no material saying that Mr. Tata indulged in
doing some loss to the company or to the petitioners. All these
discussions that have been done over the factualities, without
prejudice to the basic arguments that these allegations are not
maintainable against Mr. Tata because Mr, Tata has not conducted
the affairs of either Tata Sons or TML ever since he stepped down
as executive chairman of Tata Sons, TML has not been made as
party as I said earlier, therefore, we have not found any merit
either to say lt is maintainable or to say that there is material
proving that actions of Mr. Tata are prejudicial to the interest of
either the company or the petitioners.

Tata Steel - Corus

295, Whether Tata Steel acquiring Corus in the year 20O6,

thereafter Corus, owing to various external reasons, such as
2OO8 recession and China steel business impact over steel
industry, causing rosses to Tata Steel coutd today become a
cause to attribute to Mr. Tata that he has become an
obstacle to Mr. Cyrus, in his tenure from December 2Ol2 to
October 2076, in salvaging Tata Steel from losing by
entering into ioint-venture with ThyssenKrupp and other

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business entities basing on an unfounded allegation against

Lord Bhattacharya allegedly making statement in the
Parliament of UK and other frivolous allegations not
supported by any material papert which according to the
petitioners resulted into conducting the affairs of the
company prejudicial to the interest of the
company/ petitioners or not?

296. The Petitioners submit that Tata Steel is a listed company, in

which the company is the promoter along with its associated
companies holding 31.35olo share capital of its equity capital.
Sometime in 2007, Mr. Tata led the purchase of Corus Group PLC
by Tata Steel for a sum in excess of USD 12 billion, which was at
that point of time largest global acquisition by Indian company, this
bid was valued at over USD 12 billion which was more than 33o/o of
its original offer price. By virtue of this acquisition, the shares of
Tata Steel on Indian exchanges came crashing down, clearly
suggestive of the fact that this transaction was not in the best
interest of Tata group.

297. The petitioners submit that they have consistently highlighted

the overpriced acquisition of Corus, not to assail a decade old
transaction as has been oppressive but to show the persistent
refusal and frustration of any attempt to resolve this old mistake,
despite having been given decade time to turn it profitable,
constitutes oppressive conduct and at least mismanagement, The
petitioners questioned Mr. Tata bidding for a value that was more
than 33olo of its original price offer for a company that was not
performlng well. This they could not say because they themselves
said that they are not assailing acquisition as oppressive to the
Petitioners. Mr. Cyrus says despite infusion of funds into the Corus,
the plants at UK continue to incur heavy losses and the bleeding at
Tata Steel increasing significantly towards the beginning of 2016. In
order to turn around the dismal performance of Tata Steel UK,
during his period as the Chairman, he says, he had initiated
discussion with UK government, the pension Trustees, the pension
Regulators and the Labor Unions to restructure the operations of

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Tata Steel, UK. Infurtherance of it, when Mr. Cyrus was

considering the posslbility of merging Tata Steel Europe with
ThyssenKrupp, Mr, Tata remained adamantly opposing to any
decision to restructure Tata Steel UK operations, in fact, Mr. Tata
was instrumental in jeopardizing the talks to merge Tata Steel
Europe with ThyssenKrupp, even though the company was suffering
staggering losses that warranted urgent action.

298. To which, the answering respondents submitted that

acquisition of Corus was a collective decision of Tata Steel, it was
competitively priced, dismal performance of Corus was due to
'Black Swan' event of the global financial crisis and its impact on
steel industry and they say that Mr. Tata did not ever interfere in
the decision to sell Tata Steel UK or its merger with ThyssenKrupp.
To explain this aspect, the answering respondents relied upon
va rious dates and events.

299. On 72.10.2006, it
came before directors of Tata Steel to
make a proposal for the acquisition of Corus Group Plc with a
resolution to submit an indicative offer of up to 500 pence per
share, then on 18.10.2006, the board of directors of Tata Steel
granted in principle approval for part financing the Corus
acquisition. Mr. Cyrus also attended this meeting and approved the
resolution. This was formally approved by the board of directors of
Tata Steel on having Tata Steel UK announced a cash offer of 455
pence per share of Corus. In the next meeting dated 26.11.2006, it
was informed to the board that a Brazilian Companhia Siderurgicia
Nacional (CSN) had approached the Corus management with a
proposal to acquire its shares. On having the competitor come, the
bid price was revised on 9.12.2006, t0.l2.2006, 11,12.2006. As
there were competing bids for Corus from Tata Steel UK and CSN,
the Takeover Panel of the UK, on 26.01.2007 issued a note setting
out the auction process for bidding Corus under UK Takeover Code.
On auction process set out by the Takeover plan, Tata Steel held
board meeting on 30.01.2007 authorizing committee of directors to
revise the offer up to 650 pence per share for Corus recording that
the transaction was in the best interest of rata steer and it is the

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commercial interest of Tata Steel, Finally, Tata Steel UK emerged

as winner in the Corus auction process. On 02.02.2007, Tata Steel
announced USD 12 billion acquisition of Corus at a price of 608
pence per share, this acquisition made Tata Steel the world's 2nd

most global steel producer with a

combined presence in 45
countries, then Tata Steel had gone for Rights Issue of ordinary
equity shares and Cumulative Convertible Preference Shares
(CCPS), thereafter another increase of CCPS happened on
74.8,2OO7, For the annual financial year of 2007-08, there was year
on year consolidated EBIDTA growth for Tata Steel from USD 1,553
million in fiscal 2007 to USD 2,910 million in fiscal 2008. Thereafter
from the year 2008-20012, 'Black Swan' event of the global
financial crisis structurally impacted the underlined demand
conditions in Europe, which caused hardship to the entire steel
industry in Europe (including Corus). Globally, the steel sector as a

whole has been affected on account of macro-economic factors.

Recognizing the impact of macro-economic conditions, the board of
Tata Steel took various initiatives as early as January 2009. This
was reflected at large in all the papers of the company. The
answering respondents submit thatit is not correct to say that Mr.
Tata has been causing obstruction to the proposed sale of Tata
Steel UK business to ThyssenKrupp.

300. On perusal of the submissions of the either side, it is evident

that acquisition of Corus was a collective decision of Tata steel
which was time to time approved by Mr. Cyrus as a director of
board of Tata steel. This entire acquisition was undertaken following
the due governance process under the supervision of the board of
directors of Tata Steel without any dissent from any of the
s ha re ho lde rs of Tata Steel.

301. By seeing the dates, events and the material papers on

record, it
appears that Tata Steel did not buy it on over price, it
was so happened that Tata Steel took unanimous decision to bid for
the shares in the auction process for 60g pence per share while
CSN final bid was 603 pence per share. Normally, an allegation
would come against the management when the management took a

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decision on its own without even giving a chance to the minority

shareholders to participate in the approval process, here when this
proposal of Corus acquisition placed before the board of Tata Steel
Mr. Cyrus was present as director, he continued approving every
resolution of Tata Steel, for entering into auction thereafter
confirming the acquisition share price of 608 pence per share.

3O2. For Mr, Cyrus having approved all these resolutions, since he
could not say today that acquisltion of Corus itself is bad, the
petitloners and Mr. Cyrus have come out with a novel allegation
that Mr. Tata consistently refusing Mr. Cyrus to enter into a merger
with ThyssenKrupp, therefore it is oppressive and prejudicial
against the petitioners and the company.

303. Ifyou go through all these allegations, not even a single

material paper is available to say that Mr. Tata objected Mr. Cyrus
from entering into merger with ThyssenKrupp. Since the petitioners
and Mr. Cyrus themselves saying that Mr. Tata has been acting as
shadow director getting approvals as he wanted, Mr. Tata would
have got an approval from the board even on this issue as will
stopping Mr. Cyrus from entering into merger with ThyssenKrupp. If
at all Mr. Tata was really interested to cause such objection, at
least there should have been some correspondence from Mr. Tata
asking Mr. Cyrus not to go ahead with merger with ThyssenKrupp.
Mere making a pleading without any material paper will never
amount to an action causing prejudice to the person complained of.

3O4. Mr. Cyrus or these petitioners have not placed any letter or
email, Mr. Cyrus making persistent demand for divesting or
fundamentally restructuring Corus or any material from Mr. Tata
side showing obstruction or opposition to the stand of Mr. Cyrus.
Absent the satisfaction of the aforesaid cumulative conjoined
conditions, it could be easily held that there is not even a case to
answer regarding oppressive conduct or mismanagement qua Corus
acquisition. The petitioners have direcuy imputed this to Mr. Tata
without even impleading TSL as party to this proceeding. If at all
any member of the company is to raise any allegation in respect to

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any action of the associate company, it is the bounden duty of that

member to make Tata Steel whose action is impugned by the
complaining party. They have not made it as a party. There is no
material before this Bench to say that Mr. Tata conducted the
affairs of the company ever since he retired from the company. As
to this aspect is concerned, Mr. Tata has neither given a solicited or
unsolicited advice to Mr. Cyrus. It is a basic proposition that since
Mr. Tata has not been in the management of Tata Sons, Mr. Cyrus
having felt that Mr, Tata was instrumental in jeopardizing the
progress of merger with ThyssenKrupp, he should have placed this
issue before the board, when he was Chairman, nothing of that sort
has happened. These petitioners as well as Mr. Cyrus have come
out with unfounded allegations against Mr. Tata so as to settle their
score for Mr. Cyrus was removed as Executive Chairman of the
company. In view of the reasons aforementioned, none of these
allegations fall within the ambit of section 241, therefore, all these
allegations are untenable under law against Mr. Tata, even
otherwise also, we have not found any merit in any of these
allegations raised by the petitioners and Mr. Cyrus, whereby we
hereby dismlss all these allegations against Mr. Tata and other
respondents.

305, Since the petitioners and Mr. Cyrus themselves stated that
they are not assailing acquisition of Corus, but they are on Mr. Tata
raising an objection to entering into merger with ThyssenKrupp, we
are of the view that we are not required to deal with as to whether
Corus acquisition is a business decision or not.

eottversion

306. Whether action of passing a special resolution and

filing an application for conversion of the company, without
altering any of the articles of the company so as make it
private from public u/s 14 of Companies Act, 2Ol3 and
continuation of Article 75 amounts to conducting the affairs
of the company in a manner oppressive/prejudicial to the
interest of the Petitioners or not?

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3O7, Before going into discussion about this issue, it is pertinent to

mention that this issue has been raised by the Petitioners and Mr.
Cyrus only after this Company Petition was filed, because of which,
It ls obvious that the Petitioners could raise this issue only after
filing this Petition because the company filed this application for
conversion only after the Petitioners have filed this Company
Petition, therefore, this Bench, considering this as an issue
subsequently come into existence after filing of the Petition, we
hereby decides this issue as part of this Company Petition by taking
additional Affidavit filed by the Petitioners on record.

308. The argument of the Petitioners' Counsel is that since this

company was declared as public company upon the advent of
Section 43(1A) of the Companies Act, 1956 with the characteristics
of private company existing as on the date Section 43(14) came
into existence, and the same being repealed by Companies
(Amendment) Act, 2000 with effect from 13.12.2000, this Company
should be treated as public company without characteristics of
private company because the special provision carved out to
consider the company with characteristics of private has been
repealed on 13.12.2000, whereby the present action and the timing
of the management of Tata Trust seeking conversion of public into
private is solely an action to invoke Article 75 of the company
against the Petitioners. Invoking such right by converting the
company into private, the Counsel says, will certainly cause grave
prejudice to the Petitioners, henceforth such action must be
declared as oppressive against the Petitioners by rejecting the plea
of conversion sought by the company management.

3O9. On this point, the Petitioners' Counsel elaborated this

argument saying that if a private Limited Company is proposed to
be incorporated for the first time under 2013 Act and the proposed
draft Articles of Association did not have the ingredients set out in
Section 2(68) of the 2013 Act, such company would not be
registered as Private Limited Company. As to the Companies
already in existence at the time of 2013 Act taking effect, there
could only be two types of companies - viz. a public Limited

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Company or a Private Limited Company. Since this company as of

now has been continuing as Public Limited Company on the file of
ROC, even if
any of the Articles of such company falling under
Section 2(68) of Companies Act, 2013, such Articles have to be
treated as repugnant to the provisions of Section 6 of Companies
Act,2013.

3lO. The Petitioner Counsel has also relied upon Section 2(77) of
the 2013 Act to say that whichever company that is subsidiary of a
public company shall be deemed to be public for the purposes of
2013 Act even where such subsidiary continues to be a private
company in lts Articles, therefore, he submits there cannot be any
situation for considering any company as deemed public company
after advent of 2013 Act because under this new Act, no provision
is made for deemed public company. He says that it does not
matter as to whether Section 465 of the Companies Act, 2013
dealing with repeals and savings is notified or not/ especially when
the provisions in the new Act relating to public and private have
already been notified. For the notified provisions having dealt with
the repealed provisions analogous to the new provisions, there
cannot be any argument to say that since Section 465 of
Companies Act, 2013 has not been notified, the old provisions will
still rema in in force.

311. The Petitioners Counsel further relied upon General Circular

15/2013, dated 13.9.2013 (Ministry of Corporate Affairs), giving
clarification on the Notification dated 12.9.2073 saying that under
Section 2(68) of the Act, 2013, the Registrar of Companies will
register those Memorandum and Articles of Association received till
11.9.2013 as per the definition clause of the private company under
the Companies Act, 1956 without referring to the definition of
private company under Companies Act, 2013.

312. He has also relied upon General Circular 23/2002, dated

30.9.2002 (Ministry of Corporate Affairs) to say that though time
line has not been prescribed in the statute for the companies to
revert from the position of Section 43A, the Department has given

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a clarification saying that those companies which do not approach

the Registrar of Companies, seeking reversion to their original
status are deemed to have chosen to remain as public companies.

313. The Counsel further argues that for Section 43A of 1956 Act
was repealed on 13.12.2000, the company should have applied for
conversion of its status from public to private basing on the then
existing provision, i.e. 43A(2A) by virtue of insertion of Section 43A
(11) of the Act, 1956, but the company consciously remained quiet
for more than 13 years, until before notification of 2013 Act without
seeking any conversion of its status from public to private. Even
after 2013 Act has come into existence, the company has until
before filing Section 14 Petition that is in the year 2077, no
information has been given to RoC seeking such conversion. The
Petitioners' Counsel submits that filing of this Company Petition
under Section 241 of the Act, 2013 has become a pre-cursor to the
management of the company to make it private from public so as
to invoke Article 75 of Articles of Association to shunt out the
Petitioners who questioned the governance of the company through
exit route envisaged in Article 75. If such change has been allowed,
the Petitioners' Counsel submits, it is for sure that the answering
Respondents would exercise the powers under Article 75 of the
Articles of Association. Now this company being public, any Article
that is restricting the transfer of shares of a public company being
repugnant to Section 6 of the Act, 2013, the answering
Respondents could not invoke Article 75 so long as it has continued
as Pu blic company.

314. Before recording the reply submissions of the answering

Respondents and giving findings over the submissions, I believe it
is relevant to place the text of various provisions under 1956 Act
and 2013 Act to understand the legal history and development of
law in respect to private and public and also in respect to
conversion of public into private.

315. The definitions of 'private company, and .public company, in

the Act, 1956 and in the Act 2013 are as follows:

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The Companies Act, 1956 The Companies Act, 2013

I

Section 3 ( 1): Section 2(68): "Pilvate

company" means a company
(iii) "private company" [means a having a minimum paid-up
company which has a minimum share capital as may be
paid-up capital of one lakh prescribed, and which by its
rupees or such higher paid-up articles, -
capital as may be prescribed,
and by is articles, -l (i)Restricts the right to transfer
its shares;
(a) restricts the right to
transfer its shares, if any; (ii) Except in
case of One
Person Company, limits the
(b) limits the number of its number of its members to
I

members to fifty not two hundred:

I
including -
I
Providedthat where two or
(i) persons who are in the more persons hold one or
employment of the more shares in a company
company; and jointly, they shall, for the
purposes of this clause*, be
( ii) persons who, having
treated as a single member:
been formerly in the
employment of the Provided further that -
companY, were
members of the (A) Persons who are in
company while in the employment of the
that employment and company; and
have continued to be
members after the (B) Persons who, having
employment ceased; been formerly in the
and employment of the company
were members of the
(c) prohibits any invitation to company while in the

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I the public to subscribe for employment and have

any shares in, or continued to be members
debentures of, the after the em ploy ment
com pa ny; ceased,

(d) prohibits any invitation or Shall not be included in the

acceptance of deposits number of members; and
from persons other than its
members, directors or (iii) Prohibits any invitation to
their relatives: I Provided the public to subscribe for any
that where two or more securities of the company;
persons hold one or more
shares in a company
jointly, they shall, for the
purposes of this definition,
be treated as a single
member;

[(iv) "public company" means Section 2(71): "public

a company which - company" means a company
which-
(a) is not a private company;

(b) has a minimum paid-up

capital of five lakh rupees or (a) Is not a private company;
such higher paid-up capital, as
may be prescribed;

(c) is a private company which (b) Has a minimum Oaid-uOl

is a subsidiary of a company share capital as may be
which /s not a private prescribed:
i

compa ny.l
I
Provided that a company which t

a subsidiary of a company, I

'lis
not being a private company, l

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shall be deemed to be public

company for the purposes of this
Act even where such subsidiary
company continues to be a
private company in its articles

316, Looking at the comparative table given above, we have not

noticed any big difference in the characteristics of public company
and private company between 1956 Act and 2013 Act, since we are
concerned in respect to the restriction to the right of transfer of the
shares of private company, it has been simply lifted from 1956 Act
to 2013 Act without even a letter of difference, therefore, as to this
right or other characteristics of private company is concerned, it
could be safely inferred that whichever company that has continued
with characteristics of private company under 1956 Act is permitted
to continue with the same characteristics under 2013 Act without
any cha nge.

317. As to public company also, the definition given under 1956

Act has been allowed to continue in 2013 Act as well. The proviso
highlighted by the Petitioners'Counsel as if some change has been
taken place in the 2013 Act is not of any different from Section
3(1)(iv)(c) of the Companies Act, 1956.

318. It
is also relevant to see as to how in the past, private
companies by operation of law were qualified as public limited
companies under 1956 Act. Initially, Section 434 in the year 1960,
43A(1A), (18) and (1C) on 7.2.t975 were brought into existence
flagging private companies to be deemed as public companies
falling under the respective sections brought into existence at the
respective timings mentioned above. in these amendments, Section
43A(1A) is the section that says if turnover is more than ?1.00
crore, even if it is a private company, it has to be treated as
deemed public company, the text of section is as follows:

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Section 43A ( 1A) :"Without prejudice to the provisions of

sub-section 1, where the average annual turnover of a private
company, whether in existence at the commencement of the
Companies (Amendment) Act, 1974 or incorporated
thereafter, is not, during the relevant period, less than (such
amount as may be prescribed i.e. {1.00 crore), the private
company shall, irrespective of
its paid up share capital,
become, on and from the expiry of a period of a period of
three months from the last day of the relevant period during
which private company had set average annual turnover, a
public company by virtue of this sub-section:

Provided that even after the private company has become a

public company, its Articles of Association may include
provisions relating to the matters specified in Clause 3 of
Sub-section 1of Section 3 and the number of its members
may be, or at any time be reduced, below seven.

Section 43A (2): Within three months from the date on which
a private company becomes a public company by virtue of
this Section, the company shall inform the Registrar that it
has become a public company as aforesaid, and thereupon
the Registrar shall delete the word "private" before the word
"limited" in the name of the company upon the register and
shall also make the necessary alteration in the Certificate of
Incorporation issued to the company and its Memorandum of
Association.

Section a3A@): A private company which has become a

public company by virtue of this section shall continue to be a
public company until it has, approval of the Central
Government and in accordance with the provisions of this Act,
again become a Private Company."

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319, On reading these provisions and the background history of

Section 43A, it appears that looking at private companies getting
exempted from the operation of several sections and enjoy certain
privileges, with large capital doing extensive business and
controlling number of public companies, Cohen Committee in
England felt that such companies should be treated as public
companies, retaining with the characteristics of private companies
so as to subject them to the restrictions and limitations as to
disclosure applicable to public companies. In the same line, in the
year 1960, an amendment to the Act, 1956 was brought in stating
whichever private company that has not less than 25o/o paid up
share capital of one or more bodies corporate, such company shall
become by virtue of Section 43A, a public company with a proviso
saying that it can retaln the characteristics of Section 3(1)(iii) of
1956 Act. Subsequent thereto, on 1.2.1975 another amendment
was notified bringing in Section 43A (14) (quoted above) to cover
the private companies having more than ?1.00crore as deemed
public companies with private company characteristics as
mentioned under Section 3(1)(iii) of 1956 Act.

32O. Over a period of time, the Companies Act, 1956 has again
been amended addlng two sub-sections to 43A of the Act, 1956
which are as follows:

The Companies (Amendment) Act, 2000

Dated 13.12.2000

1-11.....,....

12. Amendment of section 43A of the Principal Act -

(a) after sub-section (2), the following sub-section Shall be

inserted, namely:

"(2A): Where a public company referred to in Section 2

becomes a private company on or after the commencement of

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Companies (Amendment) Act, 2000, such company shall

inform the Registrar that it has become a private company and
thereupon the Registrar shall substitute the words "private
company" for the words "public company" in the name of the
company upon the register and shall also make the necessary
alteration in the Certificate of Incorporation issued to the
company and its Memorandum of Association within four weeks
from the date of application made by the company

(b) after sub-section ( 10), the following sub-sections shall be

inserted, namely

Section 43A (11): Nothing contained in this Section, except

sub-section (2A), shall apply on and after the commencement
of the Companies (Amendment) Act, 2000".

321. On giving combined reading to Section 43A (14), Section 43A

(2), Section 43A (2A)- (Amendment notifled on 13.12.2000) and
Section 43A (11)- (Amendment notified on 13.12.2000), we are
given to understand that sub-section 11 has been brought into
declaring that Section 43A shall not apply on and after the
commencement of the Companies (Amendment) Act, 2000, i.e.
from 13.72.2000, except sub-section 2A that has simultaneously
come into existence on the same day. On reading Section 43A
(2A), it is evident that whichever private company registered as
public company under Section 43A (1) (1A) (18) and (1C) shail
inform the Registrar that they have become private companies and
thereupon the Registrar shall substitute the words "private
company" for the words "public company'/ upon the Register and
shall also make necessary alteration in the Certificate of
Incorporation issued to the company and its Memorandum of
Association within 4 weeks from the date of the application made
by such company.

322. So by virtue of these provisions, it is to be understood that

the mandate of the legislature is, (i) Section 43A shall not be
applicable from 13.12.2000, (ii) the private company already

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registered as public company under 43A (2A) can revert to the

status of private company, therefore, ROC is directed to substitute
the words "private" for the word "public" within four weeks from the
date on application made by such company, (iii) timeline as to
within what period, the private company registered as public
company under Section 43A (2A) shall apply for substitution of the
tag of the word "public", with the word private has not been
mentioned in the statute, (iv) it has nowhere mentioned in section
43A (11) that the companies registered as "deemed public
companies" under Section 43A will either become public company
or private company, (v) in the same sub-section 11, it has not been
mentioned that this sub-section will have retrospective effect, but it
has been mentioned that it will have prospective effect saying that
it will be applicable from 13.12.2000. The only thing said under
sub-section 11 is that except Section 2A other sub-sections of
Section 43A will not apply on and after 13.12.2000. It has also not
been envisaged that section 43A is repealed, it has only been said
in sub-section 2A, 43A shall not apply hereafter,

323. In a scenarlo like this, what will happen to the Company

which was originally registered as private company has become
public company by operation of Section 43A (1A), if it has not been
reverted to private as enunciated under Section 43A (2A)?

324. It is pertinent to note that private Companies which have

become public by virtue of Section 43A, have not become public on
their volition, but by section of law, they are permitted to continue
with the characteristics of private company under Section 43A.
Therefore, mere non applicability of Section 43A from 13.12.2000
will not make them as public because by virtue of their characters,
they have to be treated as public companies with private
cha racte ristics. Had those companies not been converted as public

by operation of law Section 434, they would have remained private

only.

325. Since newly inserted Sub-section 11 has categorically stated

that Section 43A is not applicable from 13.t2.2OOO, therefore, in all

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respects the companies converted to public by vlrtue of Section 43A

are given liberty, by virtue of section 43A (2A), to get back to their
original status, i.e. "private", or to remain as deemed public
companies as stated under sec 43A because nothing has been
stated that the companies registered u/s 43A until before
13.12.2000 have become public or private. Since timeline for
becoming private has not been mentioned in the amended
legislation, it cannot be treated that its characteristics of private
have become redundant for having not availed recourse uls 43A
(2A). As to sub-section 4 of Section 43A, since this sub-section has
not been included under sub-section 11, it cannot be said that
because conversion as mentioned under sub-section 4 is not
sought, it will remain as "public" forever,

326. In the backdrop of it, the Petitioner Counsel has put forward
an argument that since the Ministry of Corporate Affairs has given a
Departmental Circular No.3/2002 stating if the private company,
which had become deemed public company when Section 43A of
the Companies Act was in force, does not approach for re-
conversion, it is deemed to have chosen to remain as a public
company. Remember, it is only a Circular given by the Ministry
having no statutory force. It has not been mentioned anywhere that
this is a notification given under Section 642 of Companies Act,
1956.

327. If you see the history of this company, it was incorporated in

the year 1917 as a private limited company with characteristics of
private company, ever since it continued as private company until
before Section 43A (1A) was notiFied on 1.2.1975, from that date
onwards, by virtue of that amendment, this company continued as
deemed public company (Section 43A (1A) company) from
01.02.1975. It is also fact that this company till date has not made
an application for deletion of its status as public company as
enunciated under Section 43A (2A) of the Companies Act, 1956.
Now the present status of this company is, it has been continuing in
the records of ROC as Section 43A company continuing with

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characteristics of private even after the advent of Companies Act,

2073.

328. To say that the company is still deemed public company or

Section 43A company, Sr. Counsel, Dr. Abhishek Singvi relied upon
Darius Rutton Kavasma Neck vs, Gharda Chemicals Ltd and
Ors. (2O13) 14 SCC 277 to say that these deemed public
companies/43A companies have been considered by the Hon'ble
Supreme Court of India in the aforesaid case as hybrid companies
with characteristics of private company as defined under Section
3(1)(iil) of the Act, 1956.

329. Going through this case, we have noticed that the Appellants
in that case are minority holding 17o/o of equity in Gharda
Chemicals incorporated in the year 1962 as a private limited
company having Article 57 in the year 1967 with restriction on
rights of all the shareholders to transfer their shares with a definite
clause stating that any shareholder desiring to sell his shares must
offer his shares to the other shareholders of the company pro-rata
to the holding of each of other shareholders respectively at a fair
value, but by virtue of turnover clause in Section 43A (1A) of 1956
Act, with effect from 17.8.1988, Gharda became a public company
as its turnover exceeded the limit prescribed there under. When the
Company Petition was filed before Company Law Board in the year
2009 on some information that second Respondent in this case was
proposlng to sell his shares, committing breach of the pre-emption
Agreement contained in Article 57, on such prayer Company Law
Board granted ad-interim injunction restraining Second Respondent
from alienating his shares without permission of Company Law
Board, upon which, when an appeal was filed, the Hon,ble High
Court of Bombay held that once it is held to be a public company,
its shares are freely transferable and the Articles could not restrict
transfer of shares as they are contrary to the statute.

33O, On which, the holding of Hon,ble Supreme Court is that if

Parliament really wanted to put an end to the existence of all
(deemed public companies/43A companies), parliament would have

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deleted all references to the hybrid companies in the Act, but

Section 111(14) still continues to make reference to Section 43A.
This has been held so because in Section 111(14) of the Companies
Act, 1956, it
has been said that "company" means a private
company, including the company which has become a public
company by virtue of Section 43A of the Act, 1956. Section 111(14)
has been referred by Hon'ble Supreme Court because, Section 111
deals with refusal of registration of shares in respect to private
company. It has been explicitly held in Para 67 of this judgment
that hybrid companies created prior to 13,12.20OO are public
companies which in law are entitled to retain features of the private
companies if the shareholders chose to retain those cha racte ristics.
Against the argument the Respondent side raised saying if that two
classof private companies that is private companies and Section
43A public companies continued, that would have discriminatory
results. As to this argument, the Supreme Court held that the said
argument is held on a wrong premise.

331. This judgment was given by Hon'ble Supreme Court on

28.10.2014, by that time already Companies Act, 2013 has come
into existence. Inspite of it, the judgment recognized companies
with characteristics of private company, therefore, these companies
cannot be equated to public companies to say that the Articles of
the company are in breach of the provisions of Section 9 of
Companies Act, 1956/Section 6 of Companies Act, 2013.

332. Another Sr. Counsel of the Respondents' side, i.e. Mr. Mohan
Parasaran has gone further to say that there is no provision
analogous to Section 43A (2A) of the Companies Act, 1956 in
Companies Act, 2013 and the Section dealing with repeals and
savings, i.e. Section 465 having not yet been notified, therefore it
cannot be said that Section 43A (24) has not been in force.

333. It is true that there is no provision in the new enactment

stating that if turnover is more than tlcrore, such company,
though having characteristic of private has to be treated as public
company. So under new establishment, there is no company like

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Section 43A company therefore, the companies which have the

characteristics of Section 2(68) of the Companles Act, 2013 will
become private companies. What is the definition of public
company? The definition of public company says whichever
company is not falling under the definition of Section 2(68) will
become a public company. Registration of a company with ROC is a
recognition taken from the Government that such and such
company is a public company or a private company, but the basic
definition to say which company is what company, one has to go
back to Section 2(68) only, Even after Companies Act, 2013 has
come into existence, for the characteristic being same as that of old
enactment, this company is still construed to be a private company,
the only tag that has been put to this company by the legislation
under the old enactment, i.e. under Section 43A (1A) (which was
said as not applicable from 13.12.2000) has to be taken out from
the records of ROC, for which only, their company has filed an
application to make it private.

334. Since the Petitioners Sr. Counsel Mr. Aryama Sundaram

argued for Companies Act, 2013 has come into force in a staggered
manner from 1.4.2014 and having all provisions in respect to
Articles have been notified, though Section 465 has not been
notified, 1956Act has to be considered as impliedly repealed. And
by considering so, for this company has been continuing as a public
company, whatever Articles which are dealing with characteristics
of private company, more specially Article 75, dealing with
restriction on transfer of shares, shall be construed as repugnant to
Section 6 of the Companies Act, 2013,

335. To counter this argument, Mr. Mohan Parasaran, Sr. Counsel

stated that when there is a repeal of statute either
expressly/im pliedly accompanied by re-enactment of a law on the
same subject, Section 6 would be attracted unless the new
legislation manifest the contrary intention. Referring to the way
how such incompatibility with preservation of rights under old
enactment is to be ascertained, the Hon'ble Supreme Court in

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State of Punjab vs. Mohar Singh (1955), SCR 893, 899 &
9OOstated:

"Whenever there is a repeal of an enactment, the

consequences laid down in section 6 of the General
Clauses Act will follow unless, as the section itself says,
a different intention appears. In the case of a simple
repeal there is scarcely any room for expression of a
contrary opinion. But when the repeal is followed by
fresh leqislation on the same subiect we would
undoubtedlv have to lo ok to the provisions of the new
Act. but onlv for the ouroose of de terminino whether
thev indicate a different intention. The ne of eno uirv
would be. not whether the new Act exoresslv keeos
alive old riqhts and liabilities but whether it manifests
an intention to destrov them. We cannot therefore
subscribe to the broad proposition that Section 6 of the
General Clauses Act is ruled out when there is repeal of
an enactment followed by a f resh legislation. Section 6
would be applicable in such cases also unless the new
legislation manifests an intention incompatible with or
contrary to the provisions of the section. Such
incomoatibilitv would have to be ascertained from a
consideration of all the relevant orovisions of the new
law and the mere absence of a savinq clause is bv itself
not material."

The orovisio n s of section 6 of the General Clauses

Act will. in our opinion. aoolv to a case of repeal even if
th ere is simultaneous enac ent unless a contrarv
inten f on can be aathered from th e new enactment
(Emphasis su pplied )

336. Looking at the ratio decided by Hon'ble Supreme Court of

India, even if an enactment is repealed, under new enactment an

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analogous provision is not given equivalent to the provision under

the repealed enactment, by virtue of Section 6 of the General
Clauses Act, the provision under old enactment is to be construed
as applicable.

337. Sr. Counsel Mr. Mohan Parasaran has further relied upon the
same case which the Petitioners relied upon to say public company
cannot become private, i.e. Ram Parshotam Mittal v. Hillcrest
Realty Sdn. Bhd., (2009) 8 SCC 709 at page 724, parc 73, for the
records of the Registrar of Companies is not an indicator to say
which company is a private company which company is a public
company/ it has to be seen whether it falls within the definition of
private company or public company as defined in the Companies
Act. The same being held by the Hon'ble Supreme Court in the case
above, he has referred the para which is below:

"73. We are unable to aqree with the contention canvassed

on behalf of Hotel Queen Road f hat f ill <t t.h fimP ac f hP
records of the Reqistrar of Companies were not altered to
q h ow fhaf Hofcl Otpcn Road hacl heco m
comDanv, it could not be treated as such. It is not
the
records of the Reqistrar of Comoanies which
determines the status of a comoanv but whether it
falls within the def inition of a "orivate comoanv" or
"oublic comoanv" as defined in Sections 3(7l(iiil and
3(7)(iv) of the Comoanies Act. On the other hand, the
records of the Registrar of Companies reflect the status of
the company as per the information received from the
company in accordance with the provisions of the aforesaid
Act. " (Emphasis supplied )

338. On having gone through the judgments referred by the

Respondents Counsel, we are of the view that Section 43A (2A) is
still applicable to say that the company is at liberty to inform ROC
that it has become private company and thereupon Registrar shall
substitute the words "private company" for the words "public
company". In the citation above referred, it appears that repeal

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provision has been notified, here in the Companies Act, 2013,

repeal provision 465 of Companies Act, 2013 has not yet been
notified. For there is no analogous provision incompatible to Section
43A(1A) &(2A), the company is still entitled to inform the ROC to
make it private. Doing such will never become oppressive against
the Petitioners because law itself directing the company to become
private as per Section 43A (2A) of the Companies Act, 1956. Now
there is no deemed public company provision under 2013 Act, only
two classes, one is public company and another is private company.
If the Articles of the company are looked into, it falls within the
definition of private company under new regime as well, therefore,
it is quite obvious that it will continue as private company, for
which since it has to restore its original position, it has applied to
become private.

339, Another point to be noted is from 13.12.2000, application of

section 434 (24) and non-application of 43A has started, but
section 43A is still in the books of the statute, it has not gone,
therefore, there cannot be a construction that 43A companies
registered up to 13.12.2000 have derecognized as 43A companies.

34O. Now when the company filed an application for conversion

under Sectlon 14, i.e. after filing this Company Petition, the
Petitioners have come out with an argument that for this company
has filed Section 14 application for conversion after having
remained quite from 2000 till date, the timing of filing this
conversion application clearly indicates that the answering
Respondents have filed this application with a malafide intention to
make it private and then to invoke Article 75 against the petitioners
he re in.

Let us see what is said in Article 75 of the Articles of

Association.

,,75,
COMPANY'S POWER OF TRANSFER

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the Company may at any time by Special Resolution resolve

that any holder of Ordinary shares do transfer his Ordinary
shares. Such member would thereupon be deemed to have
served the Company with a sale-notice in respect of his
Ordinary shares in accordance with Article 58 hereof, and all
the ancillary and consequential provisions of these Articles
shall apply with respect to the completion of the sale of the
said shares. Notice in writing of such resolution shall be given
to the member affected thereby. For the purpose of this Article
any person entitled to transfer an Ordinary share under Article
69 hereof shall be deemed the holder of such Share."

341. This Article has been there in the Articles of Association ever
since this company has come into existence, i.e. from the year
1917 onwards, till date, this provision has never been invoked
against the Petitioners. The petitioners have come into this
company as shareholders somewhere in the year 1965 knowing
fully well restriction of transfer of shares is present in the Articles of
Association. It need not be separately reiterated that the
shareholders of a company are bound by the Articles of Assoclation,
so is the case with the petitioner, therefore, they could not expect
more than what is accrued to them under the Articles of
Association. This share restriction under Article has never been out
of the books, it was there before it had become public by virtue of
amendment on 1.2.1975, it was there even after 1975, it is there
even today as well, therefore, there cannot be an argument that
since Article 75 is in the Articles of the Company, if it has been
allowed as private company, the answering Respondents are likely
to invoke Article 75 against the Petitioners. The Petitioners Counsel
as well as the Respondents Counsel relied upon various citations to
develop their case but this Bench having felt that the above
referred citations are suffice to conclude this point, however, both
sides having referred to various judgments, they have also been
dea lt with for completeness.

342. The Petitioners'Counsel relied upon Cricket Club of India &

Ors. vs Madhav L Apte I (1975) 45 Comp Cas 574 to submit

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that any Article restricting a right repugnant to the provision of law

will become void in respect to public company, since Tata Sons is
also a public limited company, Article 75 of the Articles of
Association of Tata Sons restricting the free transferability of the
shares repugnant to Section 6 and Section 58 (2) of the Companies
Act,2013, the same shall be declared as null and void.

343. In the light of thesubmission made by the Petitioners'

Counsel, when this citation above referred is perused it appears
that Cricket Club of India Ltd is a public limited company, limited by
guarantee, it is a point decided on this company proposed to amend
its Articles of Association by passing a resolution to amend Article
74 to make the members continued continuously for six years not
to stand for re-election at least for three years. When such an
Article has been moved for amendment, on the Civil Suit filed by
one of the members, the said Article has been struck down stating
that it is repugnant to Section 6 and Section 283 of Companies Act,
19 56.

344. This ratio cannot be applied to the present case because Tata
Sons is a Section 43A Company holding characteristics of Private
Limited Company, more so, the Respondents have not proposed for
any amendment or alteration to any of the Articles already in
exlstence. The relief sought in Cricket Club of India and the relief
sought in this case are altogether different, former one is in relation
to seeking declaration that alteration of Articles 74 is in violation of
Section 6 and Section 9 read with Section 283 of the Companies
Act, 1956, whereas here the case is not in respect to an alteration
of an Article In vlolation of the provisions of law, moreover, it is a
settled proposition of law that oppression and mismanagement
deals with fairness of the actions of the parties not in relation to
whether action is lawful or unlawful. It has been vividly held in a
judgement the
Petitioners themselves relied upon, i.e.,Seth
Mohanlal Vs. Sayaji Jublee Cotton & Jute Mills (7964) 34
Com Cas 777, therefore, the ratio decided in that case is not
applicable to this case, moreover, the issue involved in that case is
in respect to requisition for re-election whereas here it is in respect

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to restrictlon over transfer of shares, in Cricket Club case, it is

about seeking alteration of an Article here no such alteration has
been sought to any of the Articles. In the present case, the
company is not a public limited company like Cricket Club of India
therefore this ratio is nowhere applicable to the present case.

345, The Petitioners Counsel further relied up Brown v British

Abrasive Wheel Limited (7919 B. 97), Dafen Tinplate v.
Llanelly Steel Company Ltd. (7919 D. 63), Assenagon Asset
Management SA v lrish Bank Resolution Corpn Ltd (formerly
Anglo Irish Bank Corpn Ltd) (2012) EWHC 2O9O (Ch), AIG
(Mauritius) LLC vs Tata Televentures (Holdings) (2OO3) 1O3
DLT 25O, Rolta India Ltd & Another vs Venire Industries Ltd
2OOO (1OO) Comp. Cas 19 (Bom), to submit that Article 75 of
Tata Sons being repugnant to the provisions applicable to public
limited company, the same shall be struck off from the Articles of
Association.

346, On perusal of all these citations, the common line of relief

sought in all these cases is for Alteration of Articles of Association
which has been discussed in some cases it has been rejected on the
ground that alteration is against the legitimate expectation of the
parties and the provisions of law, whereas, in the present case, no
alteration proposed by the Company herein except seeking deletion
of its status as Public Company on the ground that it was registered
as deemed public company by virtue of the mandate given under
Section 43A (11) of the Companies Act, 1956 without seeking any
alteration to any of the Articles of it. As to English cases, referred
by the Petitioners herein, they are cases filed under Section 13 of
the Companies (Consolldation) Act, 1908 and another English case
that is of 2012 case, it is not in relation to alteration of Articles but
it is in relation to expropriating the rights of minority noteholders in
respect to Bank notes which is not permissible under the terms and
conditions in between the bank and noteholders, whereby it has
been decided against the proposal for holding such a meeting for
passing a resolution against the interest of the minority noteholders
which is nowhere applicable to the facts of the present case.

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Henceforth, we hereby distinguished the ratio decided in all those

cases holding that they are not applicable to the facts of this case.

347, To counter the argument of the petitioner side, the

respondents counsel relied upon Borland's Trustee vs. Sfee,
Brothers & Co. Ltd,, (1901) 7 Ch 279t Inland Revenue
Commissioners vs. Crossman, (7937) AC 26, Albert Philips
and Albert Philips Ltd. Vs. Manufacturers' Securities Ltd,
(1917) 716 LT 29O and Brown vs. British Abrasive Wheel
Company Ltd., (1979) 7 Ch 29O to say that the Articles of
Association is a contract between the shareholders and the
company and once it is a contract, the shareholders are bound by it
because rlghts and obligations emerge from such contract, in this
case also, the petitioners having come into the company despite
knowing that the shareholders are bound by Article 75 which has
been in existence as on the date they have come into the Company,
the same shareholders cannot expect a right more than what has
been accrued to them by virtue of articles of association.

348, The respondent counsel further relied upon V.B. Rangaraj

vs. V.B. Gopalakrishnan and others (1992) 7 SCC 760,
Sambu Charan Bhattacharya vs. The Statesman Ltd, (1993)
ILR 7 Cal 7272, Claude-Lila Parulekar vs. Sakal Papers
(2OOS) 71 SCC 73, Gothami Solvent Oils Ltd. vs, Smt. Mallina
Bharathi Rao (2OO1) 7O5 Comp Cas 77O (AP), to say that the
restriction on the transfer of the shares of the company is not a
unique phenomenon to this company alone, it has been recognised
by the Hon'ble Supreme Court and Hon'ble High Courts that a
restriction on the transfer of shares is one of the fundamental
characteristics of a private company.

349. As to restriction in article 75 over transfer of shares is not a

total restriction, the company has an option to purchase those
shares on fair value as envisaged in Articles 58of the Articles of
Association of the Company, in any event, for the petitioners have
become shareholders agreeing to the covenants present in the

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Articles of Association, they cannot now say that such article is per
se op pressive/p rej ud icia I to the interest of the petitioners.

35O. The petitioners relied upon an English case in between John

Victor Constable vs. Executive Connections Ltd, (2OOS)
EWHC 2 (Ch), to say that Article 75 has to be nullified for it has
been restricting the right of transferability of petitioners'shares.

351. On perusal of the judgement above referred it appears that

there is a shareholders agreement and Articles of Association in
difference to the Article of the respondent company intending to
introduce so as to compel the shareholder of the company to sell
his shares if an offer were made to purchase 100o/o ordinary shares,
the case supra referred is a case where the company intended to
bring a resolution to compel the existing shareholder to sell his
shares in suppression of his pre-existing rights under the
shareholders agreement and articles of associatlon, which is not the
case in the given facts, in as much as, the respondents neither
altering the existing articles nor introducing new articles thereby
the ratio in the case supra is not applicable here. In the case supra
the article proposed to introduce militates against the rights already
in pre-existence in favour of the shareholder.

352. The petitioner counsel relied upon Ratan Lal Adukia and
Ors. vs. Union of India (7989) 3 SCC 537 to say that when old
provision is irreconcilable to the new provision that has come into
existence, though old provision is not explicitly repealed it has to be
treated as impliedly repealed for which the petitioner counsel relied
upon the para from the case supra mentioned below:

"The doctrine of implied repeal is based on the postulate the

legislature which is presumed to know the existing state of
the law did not intend to create any confusion by retaining
conflicting provisions. Courts in applying this doctrine are
supposed merely to give effect to the legislative intent by
examining the object and scope of the two enactments. But in
a conceivable case, the very existence of two provisions may

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by itself, and without more, lead to an inference of mutual

irreconcila bility if the later set of provisions is by itself a
complete code with respect to the same matter. In such a
case the actual detailed comparison of the two sets of
provisions may not be necessary. It is a matter of legislative
intent that the two sets of provisions were not expected to be
applied sim ulta neously. "

353. Ithas already been discussed while discussing some other

case saying that if the provisions are in conflict with each other,
then this concept of implied repeal comes into existence here Tata
Sons by operation of law under Section 43A ( 1A) has become Public
Limited Company retaining private company characteristics, the
only provision that has been shown as not repealed is section 43A
(2A) and 43A (11) of 1956 Act on the ground till date section 465
of the Companies Act, 2013 has not been notified. Section 43A (2A)
or 43A (11) are not in conflict with any of the provisions of the
Companies Act, 2013 more particularly with Section 2 (68) and
section 2 (7O) of Companies Act,2013. Under the old regime as
well as new regime, the definition for private company is almost the
same, the only thing is that Tata Sons has not applied for
substitution of the word public with the private to ROC therefore by
virtue of the provisions of both the enactments, though it has be
captioned as public company in all respects it falls within the
definition of private company as envisaged under section 2 (68) of
2013 Act as well as section 3 (1)( c) of 1956 Act, therefore in any
respect this company cannot be deciphered as public limited
company except the caption that has come to it by virtue of section
43A (1A) of the 1956 Act. As there is no conflict in between the
provisions of both the enactments, this citation is not applicable to
the present case.

354. The petitioners counsel has relied upon Commissioner of

Sales Tax, Lucknow vs. Parson Tools & Plants (1975) 4 SCC
22 Paragraph 76 at Page 28, which is as follows:

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"If the legislature wilfully omits to incorporate something of an

"analogous law in a subsequent statute, or even if there is a
casus omissus in a statute, the language of which is otherwise
plain and unambiguous, the Court is not competent to supply
the omission by engrafting on it or introducing in it, under the
guise of interpretation, by analogy or implication, something
what it thinks to be a general principle of justice and equity. To
do so would be entrenching upon the preserves of
Legislatures."

355, Looking at the ratio placed by the Petitioners, it appears that

the above ratio is in relation to supply of the omissions in the new
enactment from the repealed enactment, here nothing has been
taken from 1956 Act to say that Tata Sons is a Private Company in
substance, this company is a private company by the definition of
old enactment as well as new enactment whereby nothing is to be
supplled from old enactment to new enactment to say that this
company is a private company except the tag that has come by
operation of Section 43A (2A) of the Companies Act. Therefore, this
ratio is not applicable to the present case.

356, The Petitioners also relied upon /Veedre Industries (India)

Ltd vs, Needle Industries Newey (India) Holding Ltd. (1981)
3 SCC 333 Para 758 at Page 427-422 to say that when a
provision is made for renunciation of shares in favour of a non-
member, it will become an invitation to the public to subscribe for
the shares in the company, being an infringement to the structure
of the private company, such company giving an invitation to the
public has to be construed as public company.

357. To make long into short, instead of discussing what is the

deliberation went on this issue in the Needle supra, we say it is not
applicable to the present context because in Needle Industries, it is
in relation to issue of shares therefore the context arose to say how
the company is to be considered in a scenario where shares are
renunciated in favour of any non-member of the company, but
whereas Tata Sons has not come out with any rights issue similar

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to Needle Industries scenario, that ratio cannot be taken into

consideration to say that this company is public in nature
henceforth we have not found any merit to apply that ratio to this
co m pa ny.

358. The Petitioners Counsel relied upon Peterson Dafen

Tinplate Company Limited v. Llanelly Steel Company (7907)
Limited case to say that the Resolutions in conferring an
unrestricted and unlimited power on the majority of the
shareholders to expropriate any shareholder they might think
proper at their will and pleasure could not be bonafide are
genuinely For the b'enefit oF the company as a whole and was not
such a power as could be assumed by the majority.

359. At the outset it should be dealt with that this was the ratio
decided under Companies (Consolidation) Act, 1908 of UK, as we
go through the facts of the case, it is evident that the Defendant
Company (Llanelly Steel) had no power under its original Articles of
Association to acquire compulsorily the shares of members, passed
special resolution altering its Articles and introducing a power
enabling the majority of the shareholders to determine that the
shares of any member (other than a certain named company)
should be offered for sale by the Directors to such person or
persons (whether a member or members or not) as they should
think fit at the fair value to be fixed from time to time at stated
intervals by the Directors.

360. The point that was decided in this case was that the
impugned Article, i.e. Article 42(b) ls not the original Article but a

new Article introduced by special resolution, and if their

introduction involve any oppression of the minority by the majority,
it has been held that the method of ascertaining the price is also
objectionable; it is an unfair method because the possible
purchaser themselves fix the price, any element of unfairness in
fixing the price is sufficient to vitiate the resolution. This ratio was
held solely on the ground that court is unable to find any adequate
reason for saying that the exemption of Briton Ferry company from

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the operation of the new article is or was for the benefit of the
Llanelly Company

361. By seeing this case, it appears that the Plaintiff Company

(Briton Ferry Company) challenged passing a special resolution
approving Articles of Association prejudicial to the interest of this
Plaintiff Company, here in the company , the majority shareholders
have neither opted for any alteration of Articles diluting the rights
of the Petitioners herein, the time when the Petitioners became
shareholders of this company, the Article presently impugned was
very much present, it remained good for more than 100 years,
now it could not be said just by showing this case where the
majority tried to impose some new obligation upon the minority
shareholders, therefore, we are of the view that this finding is not
applicable to the present case.

362. On the same proposition the Petitioner further relied upon

Sridhar Sundararajan vs Ultramarine & Pigments Limited
(2O16) (4) Mh,. L.J. 59O, Para 75-22, Pages 594-6OI, we are
of the view that this ratio is also in line with the ratio already
discussed from the citations placed by the Petitioners side,
therefore it is hereby held this ratio as well is also not applicable to
this case.

363. On the contrary, the Respondents also relied upon Needle

Industries supra taking para No.154 from the judgement to say
that the privileges and exemptions of a private company are very
much available to Section 43A company as well for which the
Respondents relied upon the following para:

"Private companies enjoy certain exemptions and privileges which

are peculiar to their constitution and nature. Public companies are
subjected severely to the discipline of the Act. Companies of the
third kind like NILL< which become public companies but which
continue to include in their articles, the three matters mentioned in
sub-clauses (a) to (c) of Section 3(1)(iii) are also, broadly and
generally, subjected to the rigorous discipline of the Act. They

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cannot claim the privileges and exemptions to which private

companies which are outside Section 43-A are entitled."

364. On examination of every aspect, we are of the view that this

argument of the petitioners'counsel on this point is preposterous
primarily on three grou nds:

(i) As per law, the only requisite to make it private is as per

Section 43A (2A), the company has to apply for making it
from public to private. If you see Section 43A (2A), it is
only said to inform the Registrar that it has become private
by virtue of non-application of Section 43A (14) to make it
as public company. Therefore, it is evident that the
Registrar of Companies even cannot go into as to whether
it is in compliance with Section 31 of the Companies Act,
1956 or not because under Section 31 of 1956 Act, it has
been said subject to the provisions of the 1956Act, and to
the conditions contained in its memorandum, a company
may, by special resolution, alter its Articles when it is to
convert from public to private, but it has to be approved
by Central Government. Now on the advent of 2013 Act,
this power has been conferred upon National Company
Law Tribunal. Perhaps the legislature thought that since
the companies under Section 43A were private companies
before 43A ( 1A), the only requisite that has been
mentioned in Section 43A (2A) is to inform ROC that it has
become private company and thereupon the Registrar shall
substitute the word public into private, accordingly, made
necessary alteration in the Certificate of Incorporation. It
is only mere information that has to be given to ROC as
per sub-section 2A. What this company today doing is, i.e.
filing petition u/s 14, i.e. more than what has been
directed under sub-section 24 of Section 43A, perhaps
they have done it because Section 14 has come into
existence on the advent of 2013 Act.

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(ii) The company has not altered any of the Articles of

Association so as to bring any new entrenchment to the
Articles already in existence. Therefore, it cannot be said
that the management in the company has applied to slap
some action upon the Petitioners herein so as to cause
prejudice to the rights already in existence. Of course
majority is always at liberty to alter the Articles, but that
has also not happened here.

(iii) Of Course legally, nothing available on record to say that

the company by filing an application to declare it as
Private is unlawful or in violation of the Articles of
Association, as to fairness part is concerned, it is again
reiterated that to seek a relief under Section 241 (1)(a),
the complainant has to prove that some action has been
taken prejudicial to the interest of the complainant
member or other members, here, an application under
Section 14 is in no way can be construed as action to
cause prejudice or oppression against the Petitioners,
therefore filing an application under Section 14 to get back
its original status will never become a cause of action to
invoke Section 241.

365. As to interplay of old and new enactment, as I said earlier,

section 43A has never been repealed, it has only been said in
section 43A (11) that sectlon 43A, except (2A), will not remain in
force from 13.72.2000, for section 43A has not been repealed in
the year 2000, it cannot be said that section 43A companies
registered before 13.12.2000 would not continue as deemed public
companies, its time limit has been mentioned under section
43A(2A) of 1956 Act, Repeal Provision Sec 465 has not yet been
notified, therefore, we don't find any interface between old and new
enactment. For this company has become deemed public company
by operation of law, and there being no other definition to private
company under new Act other than old definition, it cannot be
called that it has to be treated as public company.

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355. On having the Petitioners Counsel quoted one order passed

by Hon'ble NCLAT on 27.07.2017 in Dr. M.A,M. Ramaswamy
Chettiar of Chettinad Charitable Trust vs. M/s. Chettinad
Cement Corporation Ltd, we have noticed that Hon'ble NCLAT
has dismissed the plea of the Ap pe lla nt/Objector/o usted
shareholder of the Respondent company, holding that conversion
proceedings cannot be stayed or stalled on the Appellant asking for
stay on the ground he would initiate 241 proceedings against the
company. This is no way helpful to the Petitioner indeed it is a
finding suicidal to the case of the Petitioners

367. In view of the same, this Bench hereby decided this issue
against the Petitioners he re in.

368. Whether Articles 7048, 727, 727A and 75 of the

Articles of Association, as stated by the petitioners, are per
se oppressive against the petitioners and whether the same
Articles were/have been used or expected to be used as
tools of oppression and mismanagement by the answering
respondents against the petitioners or not?

369, The petitioner's counsel, the answering respondent counsel

and Mr. Cyrus counsel having elaborately argued over this issue
breaking it into sub-issues lining them as battle front against each
other centering us in between to defend ourselves from the battle
pitched against each other, let us see how we have come through.
In this discussion, intermittently the interplay of corporate
democracy against corporate governance has also got into.

37O. Before going into discussion in respect to this aspect, I

believe it is essential to place the text of articles and their existence
to refer them in the progress of discussion; henceforth the Articles
have been placed as below:

"86, Quorum at General Meetings

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No quorum at a general meeting of the holders

of the Ordinary Shares of the Company shall be
constituted unless the members who are personally
present are not less than five in number including at
least one authorised representative jointly nominated
by the Sir Dorabji Tata Trust and the Sir Ratan Tata
Trust so long as the Tata Trusts hold in the aggregate
at least 40o/o of the paid-up Ordinary share capital, for
the time being, of the Company

Explanation: the words "jointly nominated" used

in this Article shall mean that the Sir Dorabji Tata
Trust and the Sir Ratan Tata Trust shall together
nominate the authorized representative. In the case of
any difference, the decision of the majority of the
Trustees in the aggregate of the Sir Dorabji Tata Trust
and the Sir Ratan Tata Trust shall prevail."

" 104. General Provisions

A. Number of Directors

B. Nomination of Directors

So long as the Tata Trusts own and hold in the

aggregate at least 40o/o of the paid up Ordinary share
capital, for the time being, of the company, the Sir
Dorabji Tata Trust and Sir Ratan Tata Trust, acting
jointly, shall have the right to nominate one third of
the prevailing number of Directors on the Board and in
like manner to remove any such person so appointed
and in place of the person so removed, appoint
another person as Director.

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The Directors so nominated by the sir Dorabji Tata

Trust and the Sri Ratan Tata Trust shall be appointed
as Directors of the Company

Explanation: the words 'acting jointly' used in

this Article shall mean that the Sir Dorabji Tata Trust
and the Sri Ratan Tata Trust shall together nominate
such Directors.In the case of any difference, the
decision of the majority of the Trustees in the
aggregate of the Sir Dorabji Tata Trust and the Sir
Ratan Trust shall prevail.

"118. Appointment of Chairman

For the purpose of selecting a new Chairman of

the Board of Directors and so long as the Tata Trusts
own and hold in the aggregate at least 40o/o of the
paid up Ordinary Share Capital of the Company for the
time being, a Selection Committee shall be constituted
in accordance with the provisions of this Article to
recommend the appointment of a person as the
Chairman of the Board of Directors and the Board may
appoint the person so recommended as the Chairman
of the Board of Directors, subject to Article 121 which
requires the affirmative vote of all Directors appointed
pursuant to Article 1048.

The same process shall be followed for the

removal of the incumbent Chairman.

The Selection Committee shall comprise - (a) Three

(3) persons nominated jointly by the Sir Dorabji Tata
Trust and the Sir Ratan Tata Trust who may or may
not be Directors of the Company. (b) one (1) person
nominated by and from amongst the Board of
Directors of the Company and (c) one (1) independent
outside person selected by the Board for this purpose.

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The Chairman of the Committee will be selected by the

Sir Dorabji Tata Trust and the Sir Ratan Tata Trust
from amongst the nominees nominated by the Trusts.

The quorum for a meeting of the Selection

Committee shall be the presence of a majority of
members nominated jointly by the Sir Dorabji Tata
Trust and the Sir Ratan Tata Trust.

Explanation: The words "nominated jointly used in this

Article shall mean that all Trustees of the Sir Dorabji
Tata Trust and the Sir Ratan Tata Trust acting together
shall decide the nominees in the case of any
difference, the majority decision of all the Trustees
acting together of the Sir Dorabji Tata Trust and the
Sir Ratan Tata Trust shall prevail."

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 7O4B
present at the meeting and in the case of an equality of
vote's the Chairman shall have a casting vote.

**727A, The following matters shall be resolved

upon by the Board of Directors:

(a) a five-year strategic plan that should include an

assessment of the proposed strategic path of the
Company, business and investment opportunities,
proposed business and investment initiatives and a
comparative analysis of similarly situated holding
companies, and any alterations to such strategic Plan;

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(b) an annual business plan structured to form part of

the strategic plan, that should include proposed
investments, incurring of debts, debt to equity ratio,
debt service coverage ratio, projected cash flow of the
Company and any alterations to such annual business
pla n"

(c) the incurring or renewal of any debt or other

borrowing by the Company, which debt or
borrowing causes the cumulative outstanding debt
of the Company, to exceed twice its net worth or
which debt/borrowing is incurred/ renewed at a
time when the cumulative outstanding debt of the
Company has already exceeded twice its net
worth, if not already approved as part of the
annual business plan;

(d) any proposed investment by the Company in

securities, shares, stocks, bonds, debentures,
financial instruments, of any sort or immovable
property of a value exceeding Rs. 100 Crores if
not already approved as part of the annual
business plan;

(e) Any increase in the authorised, subscribed, issued

or paid up capital of the Company and any issue
or allotment of shares by the Company (whether
on a rights basis or otherwise);

O Any sale or pledge, mortgage or other

encumbrance or creation of any right or interest
by the Company of or over its shareholding in any
Tata company or of or over any part thereof, if
not already approved as part of the annual
business plan;

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(S) any matter affecting the shareholding of the Tata

Trusts in the company or the rights conferred
upon the Tata Trusts by the Articles of the
Company or the shareholding of the Company in
any Tata Company if not already approved as part
of the annual business plan;

(h) Exercise of the voting rights of the Company at

the general meetings of any Tata Company,
including the appointment of a representative of
the Company under Section 113(1)(a) of the
Companies Act, 2013 in respect of a general
meeting of any Tata Company and, in any matter
concerning the raising of capital, incurring of debt
and divesting or acquisition of any undertaking or
business of such Tata Company, instructions to
such representative on how to exercise the
Company's voting rights.

Explanation: the term "Tata Company" used in

this article shall, as the context requires, mean
each or any of the following companies"

Tata Consultancy Services Ltd., Tata Steel Limited, Tata

Motors Limited, Tata Capital Ltd., Tata Chemicals Ltd.,
Tata Power Company Ltd., Tata Global Beverages Ltd.,
The Indian Hotels Company Ltd., Trent Limited, Tata
Teleservices (Maharashtra) Limited, Tata Industries
Limited, Tata Teleservices Limited, Tata
Communications Limited, Titan Company Limited and
Infiniti 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 1048

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** 7278 Any Director of the Company will be entitled

to give at least fifteen days'notice to the Company or
to the Board that any matter or resolution be placed for
deliberation by the Board and if such notice is received
it shall be mandatory for the Board to take up such
matter or resolution for consideration and vote, at the
Board meeting next held after the period of such notice
before considering any other matter or resolution.

75. Company's Power of Transfer

The Company may at any time by Special Resolution

resolve that any holder of Ordinary shares do transfer his
Ordinary shares. Such member would thereupon be
deemed to have served the Company with a sale-notice
in respect of his Ordinary shares in accordance with
Article 58 hereof, and all the ancillary and consequential
provisions of these Articles shall apply with respect to the
completion of the sale of the said shares. Notice in
writing of such resolution shall be given to the member
affected thereby. For the purpose of this Article any
person entitled to transfer an Ordinary share under
Article 69 hereof shall be deemed the holder of such
Share."

371. The company on 13.09.2000, unanimously, including father of

Mr. Cyrus (Mr, P.S. Mistry) approved modifications to the Articles of
Association of the company in its B2nd Annual General Meeting,
inter alia including following changes:

( 1) a right for two Tata Trusts, namely, Sir Dorabji Tata

Trust and Sir Ratan Tata Trust, to jointly nominate "one-
third of the prevailing number of Directors on the Board"
so long as the Tata Trusts own and hold in aggregate at
least 40olo of the paid up ordinary share capital of Tata
Sons (Article 1048); and

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(2) that all "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 all the Directors
appointed pursuant to Article 104 B present at the
meeting" (Article 121). Article 121 was subsequently
amended by a unanimous resolution of the shareholders
of Tata Sons dated April 9, 2014, pursuant to which the
affirmative vote would only be required from a "majority
of Directors appointed pursuant to Article 1048 present
at the meeting" .

372. Likewise, in the EGM held on December 6,2012, Article 118

was modified so that the person recommended by selection
committee may be appointed as the Chairman of the Board, subject
to Article 121, which requires the affirmative vote of all the
directors appointed pursuant to Article 104B.This resolution was
unanimously passed when Mr. Cyrus was chairman of the company.

373. Subsequent thereto, in the EGM held on April 9, 20L4, again

under the aegis of Mr. Cyrus, Article 1048, tlt9, t2I,l21A and
1218 were altered conferring affirmative right in favour of the
Trusts' directors making it requisite it to the Board for affirmative
vote of the nominee directors for passing resolution, likewise to
place some issues of the specified group companies to be placed
before the board of the company prior to voting on such issues by
any of the group companies mentioned in Article 121A. Minutes of it
were signed by Mr. Cyrus.

374. As to Article 75 is concerned, it has been present in the

Articles of Association ever since this company was incorporated,
the petitioners were not subscribers or members of the company
when it was incorporated, they came as shareholders in the year
1965 by acquiring around 78.34o/o shareholding from erstwhile
shareholders. This Article has been there by the time the petitioners
have acquired shareholding in the company. For they have come
into the company knowing fully well, restriction on transfer of
shares in the mode mentioned in Article 75 is binding on them, it

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has now to be tested as to whether the persons consciously

acquired shares of the company despite Afticle 75 is present, can
they say existence of Article 75 will amount to per se oppression
against the petitioners? As to other Articles impugned above, it is
not the case of the petitioners that they voted against the approval
of impugned Articles, but it is the case of the petitioners that these
Articles were amended with a view to bring in good governance and
protect the interest of Charitable Trusts. Now their explanation for
assailing the continuation of these Articles is that they have been
converted into tools of oppression and device to enable purported
charities to run business without
being amenable to good
governance, which is wholly against public policy and public
interest, therefore they are to be struck off from the Articles. Now
the onerous duty of this Bench is to test as to whether such
argument stands to merit or not.

375. Sr. Counsel appearing on behalf of the petitioners submit that

with the change in various laws over the past two decades, the
focus has turned to ensure that the affairs of the company being
conducted in a manner which is in the interest of the company
consisting of shareholders, both majority and minority.

376. The petitioners counsel has submitted a novel argument

saying that various regulations that have come into existence
regulating the affairs of the company have brought a paradigm shift
to the old concept of majority shareholders taking a march to
conduct the affairs of the company with inclusion of the concept of
independent director and the duties of directors apart from making
section 241 wide open for the protection of minority shareholders
by including "doctrine of prejudice remedy" in addition to the
"doctrine of oppression remedy" already available. He says that
new legislation has brought a signal change in the conduct of the
affairs of a company moving from the earlier belief of "corporate
democracy" embodied by the will of the majority to a more
inclusive scheme where the interest of all have to be duly
safeguarded, i.e., corporate governance.

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377. Basing on this premise, Sr. Counsel Mr. Aryama Sundaram

emphasized that insertion of Article 121-A after the advent of 2013
Act is reflective of the fact that all important matters be brought
and decided by the board inclusive of independent directors, whose
duty is inter alia to protect minority shareholders, as against this,
he says, continuation of Article 121 with an affirmative vote of Trust
nominated directors comprised of 7/3d vote to protect the interest
of majority shareholders would become counter-productive to the
concept embodied in Article 121-A.

378. To the argument of the Sr. Counsel Dr. Singhvi retorting that
the will of majority alone counts in relation to the affairs of the
company, the petitioners' counsel submitted that it is retrograde
belief of the respondent counsel that the company speaks through
its majority is wholly prejudicial, oppressive and stems from total
misrepresentation of what corporate democracy would be in the
present day context.

379. He submits, in the backdrop of this progressive change in the

law, the majority shareholders i.e. Trusts using their might through
their two nominee directors to ensure that important matters
relating to the affairs of the company and Tata group companies
are required to be tabled before the directors of the company
subjecting the final decisions to their affirmative vote. By
application of this affirmative vote, the Trusts through its nominee
directors have made the board meeting as a routine ritual over the
decision already taken by the Trusts. This kind of approach has
given a go by to any meaningful discussion in the board meetings.
The petitioners'counsel submits that granting of affirmative vote to
the majority shareholders is a concept unheard of and not found in
the Articles of any company.

38O. He has placed another argument saying that the petitioners

should have the right to proportionate representation on the board
of directors of the company. And since the current equity
shareholding the petitioners is in excess of 15olo, the petitioners
should have the right to nominate at least two directors

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accordingly, the right to affirmative vote (as contained in Article

121) and quorum requirement (as contained in Article 115) must be
changed in favour of the petitioners and the directors nominated by
them and not the Trust nominated directors. He further submits
that the shareholders of a company indeed have the power to
appoint the board of directors, however, once they are appointed,
the duty to govern the company gets fastened to the board of
directors, by further adding to it, by section 166, the directors are
bound by law to take into account the interest of all stakeholders.
The petitioners'counsel submits that in the matters to be decided
by the board of directors, the intention should be that the entire
board of directors should apply its mind to the matters placed
before it and the collective wisdom of the board of directors is the
fulcrum and the sine qua non of good management of a company,
but by giving an affirmative vote to the Trust nominated directors,
the whole process has become farce, because by virtue of Article
121, the Trusts nominee directors by virtue of the affirmative vote
taking decisions with the pre-clearance that have come to them
from the Trustees, which is virtually in breach of the fiduciary duty
to the company. Because of which, the Petitioner's Counsel says
that the subsequent insertion of Article 121 A has become
red u nda nt.

381. To bolster this argument, the petitioner counsel relied upon

an incident happened in the board room in respect to acquisition of
solar power business of Welspun by Tata Power. The petitioner's
counsel submits that in respect to acquisition of this power
company, on May 31, 2016, a detailed note for information was
sent to all directors of the company about the solar power
transaction. Despite this information was being sent to the
directors, Mr. Tata and Soonawala (R1 ) alleged that there was a
breach of Article of Association and forced the Trust nominee
directors to record their allegation of the Articles being violated,
eventually, the Trusts nominee directors stepped out of the Board
meeting to take instructions as to what is to say and what is to be
recorded; since they were being told to record the breach of the

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Articles of Association, despite Mr. Cyrus firmly refuted the same at

the meeting, they did so. The counsel says that nothing could be
more demonstrative than this to prove bigger abuse of Article 121,
where despite Article 121-A not being attracted, using Article 121,
Tata Trust asserted that they were being denied their right to
approve matters before Tata Power company approved the
resolution.

382. In Tata Motors also the same kind of predicament arose. The
petitioners counsel submits that the argument of the respondents
saying that the aforesaid situations were fait accompli for they were
not being consulted before decisions were taken by Tata group
companies is not sensible as it was already circulated.

383, After having gone through the minutes dated 29.6.2016, in

the light of the pleadings of the respondents and documents
thereof, it appears the facts taken place are slightly otherwise from
the version presented by the petitioners'counsel.

384. It need not be said that as per Article l2l r/w Article 121A, it
is evident that any matter affecting the shareholding of the Tata
Trusts in the company (TS) or the rights conferred upon the
Company by the Articles of the Company or the shareholders of the
company in any Tata company, if not already approved as part of
the annual business plan, shall be placed before the board of
directors of the company, before any of the group company
(mentioned in Article 12lA-(h))has decided in respect to making
any investment exceeding {100 crores. On reading this minutes, it
is clear that no board meeting took place to take a call over this
Welspun acquisition which was costing around ?9000 crores. As
per Article 121-A(h) of the Articles of the Company, such issue
should have come before the Board of the company prior to Tata
Power company had taken a decision to acquire such project,
because it is the Company that has to provide debt to finance
acquisition. Though papers appear to have been sent to the Trust
nominee directors, Mr. Cyrus did not hold any board meeting before
Tata Power Company signed the documents in respect to Welspun

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transaction on 12.06.2016 itself. Since the investment was huge in

thousands of crores that too since money hadto go from Tata
Sons, it was the bounden duty of Tata Sons to hold its board
meeting to take a decision as to whether such investment was to be
made or not, but Tata power company had already signed on the
documents in respect to Welspun transaction on 12.06.2016 itself.
To that group company, Mr. Cyrus was the nonexecutive chairman.
As to this aspect, when Mr. Vijay Singh and Dr. Nitin Nohria stated
that the proposal from Tata Power should have come at an earlier
stage rather than being presented as fait accompli which was at
variance with the understanding between Tata Sons and the
principal shareholders as embodied in the Articles of Association of
the company, the clarification given by Mr. Cyrus was that a note
on the proposed Welspun transaction was circulated to the directors
on 31.05.2016 itself, therefore on the basis of it, he said that Tata
power proceeded with the proposed transaction on 12.06.2016.
Though not holding a meeting to take a decision as to whether such
acquisition could go ahead or not is in breach of Article 121-A, Mr.
Cyrus reiterated that he fulfilled all the requirements under the
Articles. In this piquant situation, Mr. Vijay Singh and Dr.Nohria,
before giving an approval to such acquisition, which was already
signed by Tata Power Co. Ltd., discussed this issue with Mr. Tata
and Mr. Soonawala and then agreed for the same reiterating the
views of the Trusts that this proposal should have come earlier.

385. On looking at this transaction, it is evident that Tata Sons did

not hold board meeting before Tata Power Co. Ltd, proceeded with
the transaction on 12.6.16. Let alone exercising the powers under
Article 121-A, when substantial investment to such acquisition was
to be made by Tata Sons, is it not the duty of Mr. Cyrus to hold
board meeting to take the approval of the board for acquisition of
Welspun before TPCL proceeded with this transaction on 12.6.16? It
is also evident that this approval is really a fait accompli as stated
by the answering respondents because they could not express
anything except approving the acquisition for already TPCL has
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Another interesting thing to be noted is when Mr. Vijay Singh and

Dr. Nohria made a call to Mr. Tata, perhaps he directed them to
approve the resolution. The reason for such assumption is Trust
Nominee Directors approved the resolution only after they spoke to
Mr. Tata. Looking at this incident, can Mr. Tata be called as trouble
maker or trouble shooter? Mr. Tata resolved the issue by asking the
Trust nominee director to approve the resolution. Can giving such
direction to the Trusts nominee directors to proceed with resolution
amounts to interference with the affairs of the company? We have
to observe that Mr. Cyrus went ahead with Welspun proposal
without taking prior approval of either the Trusts nominee directors
or the majority shareholders i.e. Trusts who nominated Trust
nominee directors,

386. Whose action in this episode is prejudicial? Is it Mr. Cyrus's

action or the action of Mr. Tata saying to go ahead with the
resolution is prejudicial? For the petitioners have filed this company
petition, we have not gone any further over this issue leaving it to
the wisdom of the petitioners as to realise that the action of Mr.
Cyrus is prejudicial to the interest of the company, or Mr. Tata.

387. Another star argument of the petitioner counsel and Mr.

Cyrus's counsel is that the liberty given to Mr. Tata by Mr. Cyrus
has been taken as licence to give advices as left, right, and centre
without even being solicited. The petitioner counsel submits, it is
not their case that Mr. Cyrus never sought advice and guidance of
Mr. Tata as Chairman Emeritus, he says, the interference of Mr.
Tata went beyond realm of giving advice and guidance, he says that
the illustrations mentioned above discloses that diktats were being
issued by Mr. Tata, often alleging the breach of Articles of
Association, therefore he says, this conduct bears out that not only
did Mr. Tata's action go beyond the remit of advice but also
Mr. Tata asserting control over the affairs of Tata Sons and other
Tata Group companies, especially in the absence of any defined
governance framework that ring-fenced the interaction between
Trust as shareholders and the management of the Tata Sons.

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388. The petitioners counsel has depicted chronology of various

events referring mostly the letters of Bharat Vasani to indicate that
actions of Mr. Tata as oppressive against the petitioners,

389. Responding to elaborative submissions of the petitioners, the

answering respondents counsel wondered as to how these
petitioners counsel supports the existence of Article 1214 to assail
Article 121 providing affirmative vote to the Trust nominee directors
when in the petition, the petitioners asked for striklng off not only
article 121 but also 121A as well.

39O. Tata Sons counsel has reasoned out that Article 121 does not
give a right to these nominee directors to pass any resolution as
they wish, because the mandate of Article 121 is that for passing
any resolution, affirmative vote of trusts nominee directors is a
requisite but it is not said that these two trust nominee directors
could pass resolution without the support of other directors.
Indeed, the right that majority kept to itself is less than what they
could do as majority in the company, perhaps for that reason only,
the respondents counsel have categorically mentioned that the
petitioners'counsel tried to paint the affirmative vote vested with
the trust nominee directors as tool oppressive against the
petitioners,

391. In this background, we are of the view that these petitioners

made an attempt to portray that these two trusts nominee directors
causing havoc to the functioning of the company, the petitioners'
counsel who vociferously argued this, has not placed single minutes
of the meeting, showing the trusts nominee directors vetoing the
resolution by exercislng their affirmative vote.

392. Of course, the entire argument is abstract argument without

any support of facts, since this Bench has to answer all the points
argued by either slde, we have been pulling through trying to
answer each and every point raised by either side.

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393, As to the Articles of Association, the respondents counsel

rightly said that none of the Articles have been opposed by these
petitioners or Mr. Cyrus at any point of time in the past, indeed all
the Articles were unanimously approved by the petitioners, as to
Article 75 is concerned, it has already been said this article has
been there since incorporation, therefore article that was good for
100 years and good for these petitioners for more than 50 years,
has all of sudden become monster only when Mr. Cyrus was
removed as Executive Chairman of the company. When no rights or
expectations have been conferred upon these petitioners with
respect to the covenants of the Article 75, these petitioners could
not raise any objection to continuation of this Article-75 on the
ground it is oppressive against the petitioners.

394. Normally, oppression and mismanagement petitions will be

filed in myriad situations such as allotment of shares, siphoning of
funds, dilution of shareholding, insertion of new articles, depriving
the rights already in existence, selling of assets, passing resolutions
without putting it to the notice of the minority shareholders and
etc., but normally nobody will file a petition saying that since an
Article is in existence in the Articles of Association and for now the
minority having felt that it is likely to prejudice the interest of the
petitioners, it has to be struck off.

395. This kind of argument is unheard of for two reasons, one -

Article-75 islwas in existence by the time these petitioners have
stepped into this companyf two -now no alteration has been done
to this Article. For action being requisite to file company petition u/s
241, there shall be action, such as either bringing in new Article or
altering the existing article which is prejudicial to the member, that
has not been done. It is right, if any legal action is rightly or
wrongly initiated against the petitioners basing on impugned
articles or an attempt to bring in new insertion to the Articles, then
there would be an occasion to this Bench to look into such issue to
find out as to any expectatlon or covenant conferred upon the
petitioners is frustrated by virtue of exercise of that article. Can
courts, could then be used as leverage to break the back of "X"

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assuming that something may happen tomorrow to "y"? This

argument of the petitioners in respect to the Articles of Association
is not only far fetching and abstract but also misconceived.

396. If we sum up the argument of the petitioners, for them, there

should not be any affirmative vote to the nominee directors
representing majority, there shall be proportionate representation
on the board and all committees to the petitioners. Such law is at
least not present in Indian Law. On what basis are they entitled to?
No answer. What will happen to majority, if they are deprived of
atfirmative vote? Is it that Mr. Cyrus will remain whole and sole and
call the shots in the company by virtue of he being appointed by
the majority as Executive chairman, and keep Mr. Tata representing
majority and the trust nominee directors remain as credit cards in
his wallet to use them whenever board meetings and shareholder
meetings take place?

397. As to the allegation of breach of fiduciary duties by the trust

nominee directors of Tata Sons, the petitioners counsel heavily
relied upon section 149 & t46 of the Companies Act, 2013 to say
that these directors are accountable to the company but not to the
shareholders of them because the corporate democracy in the
present regime has become secondary to the corporate
governance, therefore the majority rule has no place in the present
regime. To establish this argument, the petitioners counsel has
navigated us through section I49, 166 and schedule 4 (code for
independent directors) of the Companies Act, 2013. Let us see
what the text of sec 149 & 166 and schedule 4 says:

749. Company to have Board of Directors

(1) Every company shall have a Board of Directors consisting

of individuals as

directors and sha ll have-

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(a) a minimum number of three directors in the case of

a public company, two directors in the case of a private
companyt and one director in the case of a One Person
Company; and

(b) a maximum of fifteen directors:

Provided that a company may appoint more than fifteen

directors after passing a special resolution:

Provided further that such class or classes of companies as

may be prescribed, shall have at least one-woman director.

(2) Every company existing on or before the date of

commencement of this Act shall within one year from such
commencement comply with the requirements of the
provisions of sub-section (7).

(3) Every company shall have at least one director who has
stayed in India for a total period of not less than one hundred
and eighty-two days in the previous calendar year.

Provided that in case of a newly incorporated company the

requirement under this sub-section shall apply
proportionately at the end of the financial year in which it is
incorporated.

Provided that this sub-section shall apply to a Specified IFSC

public company in respect of financial years other than the
first financial year from the date of its incorporation.

Provided that this sub-section shall apply to the Specified

IFSC private company in respect of financial years other than
the first financial year from the date of its incorporation

(4) Every listed public company shall have at least one-third

of the total number of directors as independent directors and
the Central Government may prescribe the minimum number

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of independent directors in case of any class or classes of

public companies.

Explanation. -For the purposes of this sub-section, any

fraction contained in such one-third number shall be rounded
off as one.

(5) Every company existing on or before the date of

commencement of this Act shall, within one year from such
commencement or from the date of notification of the rules in
this regard as may be applicable, comply with the
requirements of the provisions of sub-section (4).

(6) An independent director in relation to a company, means

a director other than a managing director or a whole-time
director or a nominee director, -

(a) who, in the opinion of the Board, is a person of

integrity and possesses relevant expertise and
experience;

(b) (i) who is or was not a promoter of the company

or its holding, subsidiary

Or associate company;

(ii)who is not related to promoters or directors in

the company, its holding,

subsidiary or associate company;

(c) who has or had no pecuniary relationship with the

company, its holding, subsidiary or associate company,
or their promoters, or directors, during the two
immediately preceding financial years or during the
cu rrent fina ncia I yea r;
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(d) none of whose relatives has or had pecuniary

relationship or transaction

with the company, its holding, subsidiary or associate

company, or their promoters, or directors, amounting to
two per cent. or more of its gross turnover or total
income or fifty lakh rupees or such higher amount as
may be prescribed, whichever is lower, during the two
immediately preceding financial years or during the
current fi na ncia I yea r;

(e) who, neither himself nor any of his relatives -

(i) holds or has held the position of a key

managerial personnel or is or has been employee
of the company or its holding, subsidiary or
associate company in any of the three financial
years immediately preceding the financial year in
which he is proposed to be appointed;

(ii) is or has been an employee or proprietor or a

partner, in any of the three financial years
immediately preceding the financial year in which
he is proposed to be appointed, of-

(A) a firm of auditors or company

secretaries in practice or cost auditors of
the company or its holding, subsidiary or
associate company; or

(B) any legal or a consulting firm that has

or had any transaction with the company,
its holding, subsidiary or associate company
amounting to ten per cent. or more of the
gross turnover of such firm ;

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(iii) holds together with his relatives two per cent.

or more of the total

voting power of the company; or

(iv) is a Chief Executive or director, by whatever

name called, of any non-profit organisation that
receives twenty-five per cent. or more of its
receipts from the company, any of its promoters,
directors or its holding, subsidiary or associate
company or that holds two per cent. or more of
the total voting power of the company; or

(f) who possesses such other qualifications as may be

prescribed.

(7) Every independent director shall at the first meeting of

the Board in which he

participates as a director and thereafter at the first meeting of

the Board in every financial

year or whenever there is any change in the circumstances

which may affect his status as an independent director, give a
declaration that he meets the criteria of independence as
provided in sub-section (6).

Explanation.-For the purposes of this section, "nominee

director" means a director nominated by any financial
institution in pursuance of the provisions of any law for the
time being in force, or of any agreement, or appointed by any
Government, or any other person to represent its interests.

(B) The company and independent directors shall abide by the

provisions specified in Schedule IV.

(9) Notwithstanding anything contained in any other provision

of this Act, but subject to the provisions of sections 797 and

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198, an independent director shall not be entitled to any

stock option and may receive remuneration by way of fee
provided under sub-section (5) of section 197,
reimbursement of expenses for participation in the Board and
other meetings and profit related commission as may be
approved by the members.

(10) Subject to the provisions of section 152, an independent

director shall hold office for a term up to five consecutive
years on the Board of a company, but shall be eligible for
reappointment on passing of a special resolution by the
company and disclosure of such appointment in the Board's
report.

(11) Notwithstanding anything contained in sub-section (10),

no independent director shall hold office for more than two
consecutive terms, but such independent director shall be
eligible for appointment after the expiration of three years of
ceasing to become an independent director:

Provided that an independent director shall not, during the

said period of three years, be appointed in or be associated
with the company in any other capacity, either directly or
indirectly.

Explanation, -For the purposes of sub-sections (10) and (11),

any tenure of an independent director on the date of
commencement of this Act shall not be counted as a term
un de r th ose su b - sect ion s.

(12) Notwithstanding anything contained in this Act, -

(i) an independent director;

(ii) a non-executive director not being promoter or key

managerial personnel, shall be held liable, only in

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respect of such acts of omission or commission by a

company

which had occurred with his knowledge, attributable

through Board processes, and with his consent or
connivance or where he had not acted diligently.

(13) The provisions of sub-sections (6) and (7) of section 152

in respect of retirement of directors by rotation shall not be
applicable to appointment of independent directors.

Schedule IV
ISee section 149(B)]
CODE FOR INDEPENDENT DIRECTORS

The Code is a guide to professional conduct for independent

directors. Adherence to these standards by independent
directors and fulfilment of their responsibilities in a
professional and faithful manner will promote confidence of
the investment community, particularly minority
shareholders, regulators and companies in the institution of
independe nt d irectors.

I. Guidelines of professional conduct:

II. Role and functions:

The independent directors shall:

(1) help in bringing an independent judgment to

bear on the Board's deliberations especially on
/ssues of strategy, performance, risk
management, resoLtrcest key appointments and
standa rds of conduct;

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(2) bring an objective view in the evaluation of

the performance of board and management;

(3) scrutinise the performance of management in

meeting agreed goals and objectives and monitor
the reporting of performance;

(4) satisfy themselves on the integrity of financial

information and that financial controls and the
systems of risk management are robust and
defensible;

(5) safeguard the interests of all

stakeholders, particularly the minority
shareholders;

(6) balance the conflicting interest of the

stakeholders;

(7) determine appropriate levels of remuneration

of executive directors, key managerial personnel
and senior management and have a prime role in
appointing and where necessary recommend
removal of executive directors, key managerial
personnel and senior management;

(B) moderate and arbitrate in the interest of the

company as a whole, in situations of conflict
between management and shareholder's interest.

IIL Duties:

The independent directors shall -

(1) undertake appropriate induction and regularly

update and refresh their skills, knowledge and
familiarity with the company;

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(2) seek appropriate clarification or amplification

of information and, where necessary, take and
follow appropriate professional advice and opinion
of outside experts at the expense of the
com pa ny;

(3) strive to attend all meetings of the Board ol

Directors and of the Board committees of which
he is a member;

(4) participate constructively and actively in the

committees of the Board in which they are
chairpersons or members;

(5) strive to attend the general meetings of the

com pa ny;

(6) where they have concerns about the running

of the company or a proposed action, ensure that
these are addressed by the Board and, to the
extent that they are not resolved, insist that their
concerns are recorded in the minutes of the Board
meeting;

(7) keep themselves well informed about the

company and the external environment in which it
operates;

(B) not to unfairly obstruct the functioning of an

otherwise proper Board or

committee of the Board;

(9) pay sufficient attention and ensure that

adequate deliberations are held before approving
related party transactions and assure themselves
that the same are in the interest of the company;

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(70) ascertain and ensure that the company has

an adequate and functional vigil mechanism and
to ensure that the interests of a person who uses
such mechanism are not prejudicially affected on
account of such use;

(11) report concerns about unethical behaviour,

actual or suspected fraud or violation of the
company's code of conduct or ethics policy;

(12) acting within his authority, asslst in

protecting the legitimate interests of the
company, shareholders and its employees;

(13) not disclose confidential information,

including commercial secrets, technologies,
advertising and sales promotion plans,
unpublished price sensitive information, unless
such disclosure is expressly approved by the
Board or required by law.

IV. Manner of appointment:

V. Re-appointment:

VI. Resignation or removal:

VII. Separate meeti ngs:

VIIL Evaluation mechanism:

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766. Duties of directors

(1) Subject to the provisions of this Act, a director of a

company shall act in accordance with the articles of the
com pa ny.

(2) A director of a company shall act in good faith in order to

promote the objects of the company for the benefit of its
members as a whole, and in the best interests of the
company, its employees, the shareholders, the community
and for the protection of environment.

(3) A director of a company shall exercise his duties with due

and reasonable care, skill and diligence and shall exercise
independent judgment.

(4) A director of a company shall not involve in a situation in

which he may have a direct or indirect interest that conflicts,
or possibly may conflictl with the interest of the company.

(5) A director of a company shall not achieve or attempt to

achieve any undue gain or advantage either to himself or to
his relatives, partners, or associates and if such director is
found guilty of making any undue gain, he shall be liable to
pay an amount equal to that gain to the company.

(6) A director of a company shall not assign his office and any
assignment so made shall be void.

(7) If a director of the company contravenes the provisions of

this section such director shall be punishable with fine which
shall not be less than one lakh rupees but which may extend
to five lakh ru pees.

398, Before going into what Section 149 says, to know the
background in bringing independent director concept, it is pertinent

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to know what corporate governance is meant. Corporate

governance is primarily to have transparency of operation,
accountability towards shareholders and fairness in dealings. It is a
system of rule, practices and process by which a firm is directed
and controlled, corporate governance essentially entails balancing
interest of the company, the stakeholders, such as shareholders,
management, customers, suppliers, financers, government and the
community. Since corporate governance also provides the
framework for attaining company's objectives, it is encompassing
practically every sphere of management from action plans and
internal controls to performance management and corporate
disclosure. This has initially been invoked in UK but it has come into
focus in India after the failure of many high profile corporates more
specially M/s. Satyam Computer Services episode involving fraud
and financial irregularities. In pursuance of the same, Clause 49 of
the Listing Agreement as described by SEBI between the stock
exchanges and the listed companies and mandated induction of
independent directors on their board w.e.f. January 1,2016. This
has become a watershed event for the institution of independent
directors. After several rounds of discussions and debates by the
standing committee and Ministry of Corporate Affairs while
preparing Company Bill 2009-207L, induction of independent
directors in listed companies and public companies has finally
become legislation in the Companies Act, 2013. It has also been
expressed that independent directors, inter alia, play their
designated role to nurture the financial health of the company and
to protect the interest of various stakeholders, particularly the
minority shareholders.

399. Since it is the intendment of the legislation to bring in

transparency of operation, accountability towards shareholders and
fairness in dealing, various functions and duties have been assigned
to the independent directors. Out of all these functions, Role No. 5
has also been the Schedule to safeguard the interest of all
stakeholders, particularly the minority shareholders as well.

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4OO. Likewise, the legislature has brought in another feature that

is recognised in UK i.e. duties and respo nsibilities of directors in
Companies Act 2013 so as to take decisions as reflected in Section
166 of the Companies Act 2013.

4O1. On close reading of Sec 166, the first and foremost clause
mentioned in this section is, subject to the provisions of the Act, a
director of the company shall act in accordance with the
articles of the company. As to other sub-sections are concerned,
it has been said that director shall work for the benefit of its
members as a whole, in the interest of the company, its
employees, the shareholders, the community and for the protection
of environment and exercise his duties with due and reasonable
care, skill and diligence by exercising his independent judgment,
and he should not involve in a situation that is in conflict to the
interest of the company. In between, I must say that this legislation
2013 is much touted as investor/shareholder friendly, transparency
it has been tightened, accountability towards
is first of it, audit side
shareholders more than before, the reason behind it is,
management, most of the times, leaves shareholders high and dry,
now information has to reach to the shareholders. this happens
mostly in the cases where shareholders are more, and to protect
the interest of the minority shareholders. This protection is indeed
designed to the shareholders, off from management, but not to the
minority who uses this protection to pulverise the interest of the
company with this heavy weighted provision (sections 247 &242)
which can even mar the company if its application is not properly
employed. Therefore, by seeing this shareholder/investor protection
under new dispensation, it shall not be mistaken as floodgates are
open to the minority to proceed on any issue against any company
without looking into the applicability of the provision, if that is so, it
can even become red herring to the company for that no company
could be in a position to take decision unless it is acceptable to the
minority, that is not the objective of section 24t & 242 of the Act.

4O2. A director should not make an attempt to achieve any undue

gain or advantage either to himself or to his relatives, if he found

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guilty of any such things, he shall be liable to pay an amount

equivalent to that gain to company. A director is not supposed to
assign his oFfice to anybody. On the top of it, a penal sub-section is
also included for violation of any of the duties aforementioned, if
violated, he shall be punishable with a fine not less than ?1,00,000
rupees extendable to {5,00,000. On analysis of these two new
sections inserted in Companies Act 2013, both have to work for the
benefit of its members as a whole and in the best interest of the
company and other stakeholders and they have to exercise their
independent judgment.

4O3. In the given case, is it the case that the independent directors
and Trust nominee directors in the company have not worked or
discharged their duties as enunciated uls 749/166 of the
companies? The petitioners have not placed minutes of any other
meeting except minutes of the meeting taken place on 24.IO.2076
where Mr. Cyrus was removed as Executive Chairman, to say that
the directors of the company functioned in dereliction of their
duties. The ire of the petitioners against independent directors and
the directors of the company is that they voted in favour of removal
of Mr. Cyrus as an Executive chairman of the company. Can it be
called directors approving a resolution for the removal of an
employee from the company amounts to the directors not
discharging their duties? They have to work for the benefit of the
members as a whole and in the interest of the company and other
stakeholders. As to the role of the independent directors along with
other functions, it is true that they have to safeguard the interest of
all stakeholders particularly the minority shareholders as well, but
to say about protection of minority, it is a pre-requisite to show
minority rights are prejudiced, here in this case we could not
conceive as to what right of minority shareholders is adversely
affected by the action of the answerlng respondents.

4O4. A shareholder right always flows from Articles of Association;

here removal of Executive Chairman is not in deprivation of any of
the rights of the shareholders of the company. Mr. Cyrus was made
as Executive Chairman of Tata Sons, not because he is the owner of

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the Petitioner companies which hold18.34olo shareholding of Tata

Sons. It is very much reflective in the company petition because the
petitioners themselves stated in the company petition in para 25 as
fo llows :

"In 2010, Respondent No. 11 was a member of the

Selection Committee, which was conducting a search for a
replacement to Respondent No.2 as Group Chairman.
After an unsuccessful initial exploration, both Respondent
No.2 and his close personal friend, the said Bhattacharya
approached Respondent No. 11 to be a candidate to chair
the Board of Respondent No. 1. After giving it some
thought, Respondent No. 11 declined this offer. However,
despite interviewing several global leaders, the Selection
Committee was unable to locate a suitable candidate,
Respondent No.71 was again asked to reconsider. After
consulting the promoter family of the Petitioners, and on
being assured by Respondent No. 2 that Respondent No.11
would be given a free hand, he accepted the offer to
become the Chairman, in the broader interests of the Tata
Group."

4O5. In the above para, it is clear that the selection committee of

Tata Sons conducted a search for a man fit to be appointed as
Executive Chairman of Tata Sons in the place of Mr. Tata for he was
in the offing to retire. Thereafter in the second sentence, the
petitioners themselves stated that "after an unsuccessful initial
exploration, Mr. Tata and his friend Bhattacharya approached Mr.
Cyrus to be a candidate to the Chair". By this sentence, can it be
said that Mr. Cyrus was taken as Chairman by virtue of their group
it has been
shareholding in Tata Sons? In the following sentence,
further emphasized even though he initially declined, for the
selection committee was unable to locate a suitable candidate, he
accepted the offer to become the chairman. Therefore, by reading
this para, it cannot be by any stretch of imagination, could be
construed that Mr. Cyrus was made as Chairman on the ground
that their group company has 18.34o/o shareholding in the

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company. Fitness being the criteria to recommend Mr. Cyrus to the

post of Executive Chairman by the selection committee, how could
his removal by the board of Tata Sons would become a grievance to
minority shareholders? When that is not the grievance of minority
shareholders, the petitioners could not even make it an allegation
that removal of Mr. Cyrus as Chairman of Tata Sons as the
grievance of minority shareholders, Mr. Cyrus would be considered
at the most as an employee to the company for servicing his skills.
The board removed him as Executive Chairman for the Trust has
lost confidence in him.

406. If at all Mr. Cyrus felt his removal as executive chairman is in

violation of any of the articles of association or provisions of the
Companies Act, the only recourse available to him is to proceed
against Tata Sons before Court of Civil Law to declare such action
as invalid in the eye of Law. His removal as executive chairman
cannot become a ground to construe it as grievance of minority
shareholder falling within the ambit of section 241 of the
Companies Act for solely on the ground he incidentally happened to
be the person holding 78.40o/o shareholding in the company.

4O7.The Petitioners' Counsel has gone to an extent saying that

this Company is not governed by Corporate Governance, no
accountability to any of the issues happening in the company,
violation of Corporate Governance, he says it to be treated as
conduct falling within the ambit of Section 247. As I said earlier,
though there is no specific definition to Corporate Governance
under any of the sections of Companies Act, 2013, the meaning of
it could be culled out from the historical developments that have
taken place so fa r.

4O8. If we see UK Law as well as the spade work that has been
done for bringing it into Companies Act, 2013, it is primarily to
have transparency of operations of a corporate, accountability
towards its shareholders and fairness in dealings of the affairs of
the company. Is it the case of the Petitioners that transparency is
lacking in respect to the accounts of the company, is it the case

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that there is no accountability towards its shareholders and is it the

case of the Petitioners that fairness is lacking? If at all any of these
things are lacking, according to this corporate governance concept,
the management is liable to be held for it. Who was in the
management until before this company petition was filed? It is Mr.
Cyrus who headed this Company as Executive Chairman up to
24.10.20L6. Had really been there any infraction to any of these
principles, what did he do all along? Is it the case that when
auditors audited the accounts something wrong was found
indicating it against any of these answering Respondents? For that
matter, Mr. Cyrus was answerable to the shareholders of the
company that is what corporate governance says. Does it mean
that shareholders mean only minority shareholders? Is it that
majority will not come into count when accountability is an issue? If
you take Welspun issue, who is the man flouted not bringing
Welspun issue to Tata Sons Board before TPCL took a decision to go
ahead with Welspun acquisition? If at all corporate governance does
not mean that having five years' plan, demarcating roles of Tata
Sons and Tata Trust. Basic idea of the corporate governance is to
have transparency, accountability and fairness. Has it been said
anywhere that so and so thing happened in the company is devoid
or transparency? Moreover, this argument of Corporate Governance
is in fact applicable against Mr. Cyrus because he is the person
continued in the management. However, since there is no Company
Petition from the Respondent side before us asking a relief that Mr.
Cyrus had run the company in violation of Corporate Governance,
we cannot be on that point.

4O9. One basic concept that one should not forget when dealing
with an issue, here as I said, Sr. Counsel Mr. Aryama Sundaram
thumpingly argued that for having corporate governance has been
set in the new Companies Act introducing Independent Director to
safeguard the interest of minority shareholders, the corporate
democracy has taken a back seat. If we go by this kind of
understanding, whenever a new concept comes into existence, then
we have to ignore the concepts already in existence, Yes, such

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argument could be taken into, if the new concept has come into so
as to take away the evils haunting the society or weighing down the
society under the old concept in existence. To go by such
argument, first of all, the old concept and new concept must be on
the same subject and the new concept that has come into existence
must either implicitly or explicitly to remove the flaw existing in the
old concept. The hallmark of progress of any society is to
harmonise old and new with seamless inclusion of one into another.
The common phenomenon is; new concepts keep coming as
collieries to the basic or core concepts already in existence. Today
though this world is being weighed down by the explosion of
population, it is still able to run effectively only and only on one
concept, i,e. democracy. Whether it is political democracy or
corporate democracy, it makes no difference, concept and its
objective is one and the same. Corporate Governance is not an
anathema to corporate democracy, in fact it is corollary to the
Corporate democracy to strengthen corporate democracy, the three
principles set out in corporate governance are transparency,
accountability and fairness. If
you see the word accountability,
transparency and fairness, we have to understand to whom who is
accountable. If you see political democracy, Parliament is
accountable to the people, in turn, Government is accountable to
the Parliament. Whenever Parliament fails to have confidence in the
Government, Parliament will recall the Government, so is the case
here. There in
political democracy, Government comes into
existence to protect the basic rights of the people like right to
speak, right to life and other incidental rights such as property
rights. Here, in corporate field, governance is over the economic
interest of the shareholders. In both the aspects, if we go little deep
into it, it is ascertainable that the persons who are in the
management and the people who are running the Government are
the persons elected to govern the people in case of political
democracy. In case of the company, the persons elected as

Chairman/CEO, likewise Board of Directors are to govern the funds

of the company. It is not out of context to refer Section 244 of
Companies Act to say that corporate management is only to govern

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the funds of the company. If you read this Section, it is very much
evident that in the case of companies other than Section B
companies, share capital is taken into consideration to initiate
action under Section 244. Before that, if you see the election of
Board of Directors, the criteria for voting is equity. Such being the
case, it is inconceivable even to contemplate that by virtue of
introduction of corporate governance, corporate democracy is taken
to back seat. It has to be understood that majority comes into rule
basing on corporate democracy, and such rule shall be in
accordance with rules of corporate governance. Governance is only
a part of democracy.

410. If you go little bit backwards, election of somebody to work

on behalf of them has come into existence to give an ease to run an
institution. It is not that, since somebody is elected to represent
them and safeguarding their interest, the persons selecting the
elected to remain shut their mouths despite their interest has been
put into jeopardy. This ease that is given for the sake of
governance will not give any chance to the elected either to
supersede the people electing or to ignore the interest of the
persons selecting. It
is quite natural that since all people cannot
remain ad-idem on any particular issue, it is inevitable for the
majority to take a call over the aggregate interest of not only of the
company but also of themselves. This is how majority rule has
come into existence. If at all corporate governance alone is the
criteria to govern the company and that too in the perception of the
Petitioners, then it is nothing but putting the aggregate interest into
somebody's hands upon which majority has no control' Let us put
this abstract reasoning into the facts of the present case, In most of
the cases u/s 24t & 242, grievances will come before Court of Law
saying by virtue of the actions of the majority, minority is put to
it is otherwise. The Petitioners have
sufferance. Here in this case,
come saying that the interference (in the perception of the
Petitioners and Mr. Cyrus) of majority is causing dent to the
corporate governance therefore, it is to be considered as grievance
under Section 24t of the Companies Act. Of course, such

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interference, as the petitioners held out, is not present anywhere in

this Company Petition.

411. If you see the Welspun issue, it is evident Mr. Cyrus refusing
to provide space to Tata Trust and, besides this, other issues would
also clearly reveal that Tata Trust has been put to the receiving
end, in fact it is fight for upmanship. Mr. Cyrus tried to have ride
over the majority shareholders by virtue of the position of Executive
Chairmanship given to him. Since we have already set out to
discuss the evolution of the rights of minority shareholders
separately, we can only say here that the existence of Articles of
Association per se will not become oppressive to the Petitioners,
indeed exercise of some action under the Articles to which the
Petitioners agreed ever since they have come into the company,
will never become a ground to raise grievance under Section 241.

412. As we all know, Articles of Association is nothing but an

Agreement between the Company and its shareholders, whoever
becomes a shareholder basing on the Articles of Association already
in existence or whoever becomes a subscriber for constitution of
Articles of Association at the time of incorporation will be bound by
those Articles of Association. When they are bound by such Articles,
can the shareholders of a company raise a grievance saying that
compliance of Articles is unfair or prejudicial to the interest of them.
It is basic ethics of human being, that a person enters into an
agreement with another is bound by such agreement, so is the case
of shareholder, who is bound by the Articles of Association.
Therefore, law does not permit shareholder to seek any remedy
under law against Articles save and except in the cases where it
falls under the exceptions given under the Contract Act, i.e.
competency of the parties, coercion, undue influence,
misrepresentation and mistake (mistake as stated in the Contract
Act, not otherwise) or such article which is repugnant to Companies
Act. It is also known to everybody, if any of the persons bound by
an Agreement raises any issue under any of the heads mentioned
above, heavy duty lies upon him to prove the same. Here it is not
the case of the Petitioners that these Articles should not have

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binding effect upon them by virtue of any of the exceptions

mentioned above.

413. As to fairness concept is concerned, it is not different or

separate from the law in existence. Most of the equity principles.
over a period of time have become statutes. For that matter even
this equity that is given under Section 241 is also brought under
the statute. It goes without saying that those equity principles
shown as exceptions under the Contract Act will not have any
applicability to nullify the Articles of Association binding upon the
petitioners. What after all equity means, it is fairness to each other?
Fairness here is, persons have become shareholders implicitly
agreeing to be bound by the Articles, if any exceptions are carved
out or any expectations are accrued by virtue of their original
stands, then there can be a possibility to say it is not fair to act
otherwise. If anybody enters into an agreement willingly, such
person cannot wriggle out of it with lame excuses. Saying so itself,
is u nfa ir and inequitable.

4L4. For the Petitioner Counsel referred four Articles as likely to be

used as tools of oppression and mismanagement, i.e. to look into
one by one to find out any truth is there in impugning these
Articles.

415. Article 1048 is an Article inserted on 09.04.2014 that so long

as Tata Trust owned 40o/o of the paid up ordinary shares of Tata
Sons, Sir Dorabji Trust and Sir Ratan Tata Trust shall have one
third of the prevailing number of directors on the board. It need not
be reiterated again that Trust hold majority of shareholding,
including the other Trusts, companies and Independent persons
supporting the Trusts, i.e. more than 3/4th of the shareholding of
Tata Sons so they can pass ordinary resolution as well as special
resolution as and when a situation arises for passing such
resolution.

416. In the Companies Act, a separate Chapter has been carved

out under the caption of "Management and Administration" dealing

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with provisions for holding meetings, quorums to be maintained for

meetings, the procedure for voting, the provisions for holding
Annual General Meeting and Extra Ordinary General Meeting,
modus for holding ordinary and special resolutions. This entire
procedure has been set out to decide as to how the company has to
be run and election of the Directors and other issues that fell for
decisions of the shareholders basing on the voting proportionate to
the share capital invested by the shareholders. This entire chapter
has come into existence to have corporate democracy in the
company. By virtue of this election, it is quite obvious that majority
will get control over the company which is called Majority Rule.

4L7.In this Company, i.e. Tata Sons, the majority shareholders,

i.e. Tata Trust instead of electing majority Directors, they have
come out with a different method of controlling the company. As
we all know, the Board of Directors of the Company is the body that
managed the company. Instead of bringing entire board from their
side, Tata Trusts inserted a provision to have l/3'd of Directors on
the Board with an affirmative vote so that no resolution would be
passed without their vote. Instead of having positive control over
the company, for their own reasons, they have opted for a negative
control over the company by having affirmative vote. Though the
result of these two ways of control is not exactly the same, but it is
for sure that no resolution would be passed unless majority accepts
such resolution. The Trusts otherwise can have full control over the
company by virtue of their majority; but because of this
arrangement, they have limited their control through negative
voting to the resolutions that come to Tata Sons Board. In fact,
Tata Sons curtailed their rights to the extent of having negative
vote instead of having total number of directors from their side. We
don't know how the majority having such affirmative control over
the company will amount to oppression against the Petitioners, i.e.
minority shareholders of the company. To me nothing has appeared
to say this Article is per se oppressive against the Petitioners.

418. In between, I must say that we are dealing with this per se
oppressive argument without prejudice to the contention that these

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Petitioners ought not have raised these points for they themselves
alongwith other shareholders unanimously passed resolutions for
bringing in amendments from time to time ever since they have
come into the company. As to Article 75 also, since it has been
there right from the beginning, these Petitioners cannot have any
argument over that Article also, but for the sake of completeness,
we discussed that aspect as well.

419. As to Article 121, it is nothing but furtherance to Article 1048

for saying that the matter that has come before the Board shall not
be decided without affirmative vote of majority of the Directors
appointed pursuant to Article 1048. Yes, to have majority control,
they have opted the route of affirmative vote, since the majority
limited its strength to 1/3'dof the Board of Directors, they have to
have affirmative vote, otherwise how a majority rule will work out.
Had there been directors from the majority side, entire Board would
have been occupied by the directors of the majority, that not being
the situation, to have their majority, they have settled to
affirmative vote. Affirmative right having not given anything more
than majority by strength, we don't see anything as per se
oppressive in this article against the interest of the Petitioners.

420. As to Article 121A, the Petitioners stated that existence of

121 is repugnant to exercise rights under Article 1214 but in the
same breath, the Petitioners sought for striking off this Article as
well in the relief asked, though asking such relief is in conflict to the
pleadings of the Petitioners, for the sake of completeness, let us
look into it as to whether anything is oppressive in Article 1214.

421. It talks of the power of Tata Sons Board Directors to decide

about S-year strategic plan, annual business plan, debt
restructuring, company's investment in securities, shares, stocks,
bonds, debentures, financial instruments of any sort or immovable
property of a value exceeding ?100 crores, if such investment has
not been approved as part of the annual business mentioned in
clause B of this Article, for increase of share capital, for alienation
or encumbrance of properties.

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422. Apart from these rights, another right the Board is conferred
with to exercise is in relation to any matter affecting the
shareholding of the Tata Trusts in the company or the rights
conferred upon Tata Trust by the Articles of the company or the
shareholding of the company in any Tata Company. The words "any
Tata company" means various Tata companies mentioned in Article
tzLA.

423. ln Clause (h) of this Article, it has been categorically

mentioned that the Board of Directors shall resolve in respect to
exercise of the voting rights of Tata Sons at the General Meetings
of any Tata company/ including the appointment of a representative
of the company u/s 113 (1)(a) of the Companies Act, 2013 in
respect of a General meeting of any Tata Company and, in any
matter concerning the raising of the capital, incurring of debt and
divesting or acquisition of any undertaking or business of such Tata
company, instructions to such representative on how to exercise
the company's voting rights.

424. As we know that Tata Sons is an investment company to its

all group companies, normally the funds will flow from Tata Sons to
these group companies as and when any acquisition or any
investment is to be made to these group companies. In a situation
like this, how Tata Sons is to act has been laid down in this Clause.
To our understanding it appears that Tata Sons Board has to decide
how to exercise their vote in a General Meeting of Tata Company
when that company intends to raise capital, or incur any debt, in
divesting or acquisition of any undertaking or business of such Tata
company. To exercise such function, whenever any of these issues
are likely to come before the General Meetlng of any Tata Group
company, it is necessary that such an issue has to come before the
Board of Tata Sons so that the Board would be in a position as to
how Tata Sons would exercise their voting rights in the General
Meeting of Tata Group company. Welspun is a tell-tale example as
to how Tata Sons Board to take the decision in respect to
investment for acquisition of Welspun. It need not be said
separately all these group companies either acquired by Tata Sons

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or promoted by Tata Sons. All these group companies virtually have

been set up by Tata family members to spread its business and to
use the funds for the well-being of the society. Since the
investments of Tata Sons lying in various group companies, it is
always good to take collective decision in the Board of Directors
whenever any money is to be invested in the group companies.
That being the purpose and object of this Article, it is sordid on the
part of the petitioners to plead that Articles have become all of
sudden per se oppressive against the interest of Petitioners. We
remlnd that this is also an Article that has been approved in the
EGM held on 09.04.2014 headed by Mr. Cyrus as Executive
Chairman. To us, nothing appears per se oppressive against the
interest of the Petitioners. Of coLrrse, the petitioners subsequently
filed a memo deleting the relief for annulment of this article.

425. As to Article 75 is concerned, it has been already discussed in

the issue relating to conversion. That discussion may be read as
part of this discussion so as to say per se existence of Adicle 75 is
not oppressive against the interest of the Petitioners. In respect to
restriction in Article 75, Tata Sons' counsel relied upon Gothami
Solvent Oils Ltd, vs. MallinaBharathi Rao (2OO1) 7Os
Company Case, paras 74 & 75, SambuCharan Bhattacharya
vs, The Statesman Ltd (1993) ILR 7 Cal 7272, para 23 & 24
and N C Sanyal vs. Calcutta Stock Exchange (7977) 7 SCC
50, para 77, 73 &74,to say that provisions akin to Article 75
empowering a company to cause a compulsory transfer of its
members shareholding have been found to be perfectly valid and
binding.

426. On the Petitioner Counsel referring Section 235 of the

Companies Act, 2013 for saying that as to public companies in case
any restraint over the transfer of shares is to be recognised, it has
to be only as stated in Section 235 of the Act' When we have gone
through this Section, we have noticed that if any of the
shareholders not assenting to the Scheme approved by not less
than 9/10th in value of the shares whose transfer is involved, the
transferee company, as per law is entitled to give notlce to the

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dissenting shareholders to acquire their shares. It

is a provision
that is an exception to free transferability concept lying in public
company. This is a right conferred upon the company when a
company has gone into Scheme under the head of "Compromises
and Amalgamations". The petitioners' Counsel has submitted that
there cannot be any other restraint for free transferability of shares
of public companies other than the situation enunciated under
Section 235 of the Companies Act. The Petitioners' counsel has
gone to an extent saying, this Article is hit by Article 3004 of the
Constitution of India. Whether share falls within the definition of
property as stated in Article 3004 of the Constitution of India or not
is not a question. It is to be seen as to what rights have been
conferred upon a shareholder governed by Companies Act. If at all
to say it is hit by Article 3004 of Constitution of India, first the
Companies Act that has recognised this Article for the last 100
years has to be challenged. The petitioners can say for the sake of
saying Article 3004 of the constitution is applicable. This argument
is completely misplaced because no state action constituting
expropriation of property rights is even remotely involved.

427. In this case, we have elaborately discussed and made an

observation that it is a company running under the caption of Public
company with private cha ra cte ristics. We have already reiterated
that it was a private company and it has been private company
under the caption of "Deemed Public company/Hybrid company"
after the advent of Section 43A (1A) and even after non application
of Section 43A(14) of the Companies Act, 1956. I again recall the
judgement of Hon'ble Supreme Court in between Ram Parshotam
Mittal v. Hillcrest RealtY Sdn. Bhd, (2OO9) 8 SCC 7O9, to say
that characteristics of the company is a decisive factor to decide
which company is private company and which company is a public
company, not the caption that has remained on the file of ROC.
Since legal intricacy has already been discussed in the issue of
conversion, we need not again say that it is a company running
with characteristics of private, therefore, this company asking ROC
to restore its status as private company cannot make this Article

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per se oppressive against the Petitioners. If at all the Petitioners

feel that existence of such an Article in the company is in violation
of any of the laws in force, they have to seek civil remedy before
Civil Court, of course, how much it stands after passing 100 years is
a million-dollar question. In any event per se existence of this
Article in the Articles of Association will never amount to causing or
likely to cause any prejudice against the Petitioners or oppressive
against the Petitioners.

428. In addition to the argument of the petitioners' counsel, Mr.

Cyrus Counsel Mr. lanak Dwarkadas, Sr. Counsel, referred Re. H.R.
Harmer Ltd. (7959) WLR. 62 - Harmers case referring the
following paras that decisions have to be taken by validly elected
board. For which, he has taken out two paras from Harmer, which
are as follows.

"I think that there may well be oppression from the

point of view of member-directorc where a majority
shareholder (that is to say, a shareholder with a
preponderance of voting power) proceeds on the
strength of his control, to act contrary to the decisions
of, or without the authority of, the duly constituted
board of di rectors of the company."

Lord Romer in Harmers case has held that:

"Members are entitled to expect that their board shall

pertorm its functions as a board and that the
proceedings of the directors shall be carried out in a
normal and orthodox manner. They are entitled to the
benefit of the collective experience of the directorc, and
to expect that the directors and each of them can freely
express their views at board meetings and that regard
shall be had to what they say and to resolutions
properly passed. If the board is browbeaten and either
ignored or overruled by one of its member, in this case
the father who was the chairman, in reliance on his

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superior voting power, the proprietary interests of the

minority shareholders cannot fail to be affected and a
case of oppression within s. 27O is, in my judgment,
made out."

429. Before relying upon these paras, I must say what are the
historical facts of this case and how much reliance could be placed
to apply the ratio decided in this case to the facts of the present
case.

43O. It is a company formed on July t, L947 to acquire a business

run by Harmer and his two sons Cyril and Bernard who joined in
their father's business in the year 1921 and in the year 1931
respectively, by 1935 Cyril has become responsible for the day-to-
day management of the London office, his brother Bernard in the
year 1946 went to New York to take up the office of Vice President
of H.R. Harmer incorporated as an American company. This family
business was merged into the company incorporated on July 1,
1947. In this company, father i.e. Harmer to be the Chairman of
the board of directors for life. He was also to be the governing
director, but the article contained no provision conferring any power
on the governing director or restricting the powers of the other
directors. The shareholding in the company at the date of the
petition was: (a)"A" ordinary shares - the father - 1,028; Cyril -
4,611; Bernard - 4,361; (b)"B" ordinary shares - the father - 491;
Cyril - 4; Bernard - 4; the father's wife - 295; Cyril's wife - 103;
Bernard's wife - 103; (c) preference shares - the father - ll,O29;
Cyril - 5,291; Bernard - 3,23O; Cyril's wife - 150; Bernard's wife -
150, the remaining 14,152 of the issued preference shares were
held by other members of the family, by directors and former
directors of the company and by the American company. Over a
period of time, father became old but remained clinging to the
position of governing director not allowing the board to take any
decision, by doing so, the father used to deal with the affairs of the
company without even consulting any of the directors, more
specially his children. To ascertain the same, instead of mentioning
all the incidents, we mention one instance i.e. Mr. Edward, who was

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with the company from far before this company was incorporated,
was summarily thrown out from the company. The reason for the
purported dismissal was the father's annoyance because Mr.
Edward had written a letter to Bernard about collection of postage
stamps and had not referred it to the father in that letter. Likewise,
when the secretary of the company protested for using the
company money for his wife's expenses, the father replied that he
was the company and the secretary was to do as she was told, in
another incident in the board meeting, he refused to renew the
service agreement of one Mr. Buck whose service was of immense
value at that time, so many incidents, of like nature, were
mentioned reflecting autocrat approach of the father ignoring the
prospects of the company as well. Here, one more fact, I should
mention that the nominal capital of the company was $50,000
divided into 39,000 preference shares of t1, 10,000 "A" ordinary
shares of €1 and 1,000 "8" ordinary shares of €1. Of course, the
preference shares conferred with dividend right, as to "A" ordinary
shares had the right to the residue of the divisible profit, and "8"
ordinary shares conferred no right to participate in the profits but
carried the whole oF the voting power. On going into the details of
shareholding pattern, the understanding I get is, the preference
shares and "A" ordinary shares conferred no voting rights and
holder of "8" ordinary shares were entitled to vote at the general
meetings of the company. Accordingly, the equity of the company
was held as to a little over 100/o by the father and as to the
remainder by Cyril and Bernard approximately equally, but the
voting control of the company was held approximately as to 49o/o
by the father ZLo/o by Cyril and Bernard and their wives and as to
29o/o by the father's wife. Accordingly, the father was down to the
date of original Court order, in a position to control the company by
the use of his and his wife's vote, their combined preponderance of
voting power was sufflcient to procure the passing of extraordinary
and special as well as ordinary resolutions' The Judge Roxborough
found that Mrs. Harmer agreed with her husband, when her holding
of "B" shares were transferred to her, to vote in accordance with his
direction and it was to be assumed that she would in fact always do

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so. It
seems father executed an agreement that on his death the
remaining 3,250 "A" shares and 760 "8" shares allotted to him were
to be allotted to the three sons. The third son was not in the
business of the company. Under the Articles of Association, the
father was to be the chairman of the board of directors and as such
he was entitled to casting votes in the event of equality of votes.
Further by the articles, the father was appointed governing director
for life but no special rights were attached to that office. He also
had a service agreement appointing him as Managing Director for
10 years from 31.08.1946, at a salary of $3000 a year. That
agreement was expired in 1956 and was not renewed. And no
special power was delegated to him in his capacity as Managing
Director. Thereafter, it appears from the judgment, I am given to
understand, the shares that have beneficial interest were rest with
the sons whereas voting power remained with father. Because of
unwise and reckless decisions taken by the father on the premise
he was whole and sole of the company, the company started
degenerating and its prosperity getting drifted. This father was not
even in a position to hear what was being said to him and his
memory power was also lost. In this case, father did not allow his
sons even to have board meeting to discuss over the issues of the
company. Taking the whole episode into consideration, it was held
that father rode roughshod over his sons and everybody else and
dictated the general conduct of the company affairs and its policy
with an intolerant disregard to the wishes of his co-directors and
indeed in some instances, in disregard of the company's best
interest. It is further held that the most dangerous and most
oppressive form of conduct is, the habit that the father had of going
behind properly constituted decision of the board and taking it on
himself to countermand them. The Court felt that such conduct cuts
at the very root of proper company procedure and makes it virtually
impossible for the business of a company to be carried on.

431. This judgment has been heavily relied upon by the Petitioners
as well as Mr. Cyrus to say that Mr. Tata and Mr. Soonawala having
constantly interfered with the affairs of the company, by relying on

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the ratio decided in this case, they should be restrained from

interfering with the affairs of the company. Now the point to see
that whether this ratio is decided in this case is applicable to the
present case or not.

432. As to words oppression and mismanagement is concerned, it

has been time and again said that word oppressive or prejudice has
not been defined anywhere because it all depends upon the facts of
the given case. In Harmer's case, our observation is, one - it is a
family company primarily between father and sons, two - father
almost settled the economic interest of the company to his sons by
giving the shares having right to the residue of the divisible profit of
these shares, three - the shares left to the father are only shares
having voting rights.

433. So, whatever decision that had been taken by the father in
the Harmer case has adversely affected the beneficial interest of
the sons. in England, while dealing with section 210 cases of
English Act, 1948, evidence is taken before giving a judgment. It
has been proved that father has many health problems not in a
position to hear, not in a position to remember, but one thing is
clear that he was very much obsessed in the notion that he is whole
and sole of the company and his sons should not speak anything
until his demise. He could not even tolerate his sons suggesting
anything to him in respect to affairs of the company. Moreover, the
father did not give any chance to sons to have any discussion in the
board because he used to say that he has casting vote whatever he
said should happen. By seeing the attitude of the father and his
actions causing sufferance to the company, his actions were
declared as actions falling within the ambit of section 210 of English
Companies Act, 1948.

434, In Harmer case, no ratio has been decided saying voting

power cannot be exercised. They have decided that case in the
backdrop of the shareholding pattern, family concept and proved
wrong doings of the father causing damage to the company without
even letting the board to take coilective decisions; the arbitrariness

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the Court noticed in Harmer case is the father not allowing the
other co-directors to speak anything. That is not the situation in
this case; what is the instance that prevented Mr. Cyrus from
taking decision, is there any incident where nominee directors
outvoted the resolution proposed by Mr. Cyrus? In Harmer, father
had no economic interest, whereas the Trusts, in this case, have
economic interest five times to the interest of the petitioners.
Therefore, the findings in Harmer case are of no help to say that
Mr. Tata and Soonawala have done something wrong to the
com pa ny.

435. The petitioners counsel and Mr. Cyrus counsel tried to take
out the aforesaid italic paras from the judgment to project that
relying on voting power, the proprietary interest of the minority
shareholders cannot have failed to be effected and oppression is to
be considered as made out. In Harmer's case, it has been
highlighted again and again father had only voting power against
the beneficial interest of his sons. It has also been said that father
considered himself as board without even giving an opportunity to
hold even meeting. Not only that, he used to dismiss the people,
renew the tenancy which were already terminated by the board. By
doing such acts, he had caused irreparable loss to the company.
This has been termed as interference by the father in Harmer case.

436. Now, the petitioners, counsel and Mr. Cyrus. Counsel tried
hard to equate the interference referred to '.Harmer,, to the
suggestions and advices given by Mr. Tata and Mr. Soonawala as
interference with the business of rata Sons. There that father
had
no economic interest, he had almost lost his sense, still adamantly
tried to exercise power and control over the company, therefore
by
taking the motive in doing such things into consideration, the
deeds
of the father were declared as oppressive despite he had voting
power not coupled with any economic interest.

437. Here it is a company worth of ?6, 00, 000 corers,

out of
which, ?5,00,000 crores worth economic interest
is lying with Tata
Trusts and individuals whereas these petitioners
according to the

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petitioners had only ?1,00,000crores economic interest. In Harmer

case, it is a small family company which ultimately to come to his
sons therefore, when Court decides an issue, it will take many
aspects into consideration, in that case, no doubt father taking such
decision just to show up his authority when such conduct causing
sufferance to the company, the court has risen up to resolve this
issue by regulating the idiotic conduct of the father. Here Mr. Tata
has never said that board meeting should not happen, he has never
tried to rewrite any of the minutes of the board meetings, the
petitioners have also failed to show minutes of a single meeting
that either the petitioners or the answering respondents differing
with each other.

438. Per contra, it is evident on record, most of the time, almost

all the times, Mr. Tata as well as Mr. Soonawala gave advises on
being solicited. Even otherwise also, they being majority and it is
being a practice to take decisions on informed basis, for they being
richly experienced over the affairs of company, what is wrong in
giving suggestions. In what way, it has affected the affairs of the
company? Any material that Tata refused to take a call over either
Nano or Corus or for that matter on any other issue? The
petitioners cannot generalize by showing some letters saying that
Mr. Tata and Soonawala jeopardising the interest of the company.
There were instances that their suggestions were also not taken
into consideration. For Tata Trusts having majority that headed by
Mr. Tata and Soonawala, is it not their interest to say if anything is
going to adversely affect the company? Is it the case of the
petitioners that Mr. Tata and Mr. Soonawala gave some wrong
advice to causing unlawful loss to the company or to ensure some
unlawful gain to provide to somebody else? Does Mr. Tata or
Mr. Sooonawala have their own companies in conflict with the
interest of the company or its group companies?

439. Though it is not requisite to mention that the power lying in

any of these Articles is not exercised by the answering Respondents
at any point of time till date, it is a fact no occasion arose to invoke
powers under any of the meetings so far happened. It is true that

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affirmative right and board deciding the issues of Tata Group

companies have come into existence only after Mr. Tata retired
from the company because when Mr. Tata was the Executive
Chairman of Tata Sons, the person manning Tata Trust and Tata
Sons was one and the same. Therefore, since the man in the
driving seat of Tata Sons at that point of time being the man
heading Tata Trust, there was no occasion to have any
apprehension to the Trusts to contemplate that there would be
danger to the rights of the majority, i.e. the Trusts. When the
Executive Chairman post went into the hands of the person who
does not belong to the Trusts, to protect the rights of the majority,
Article 1048, 121 and 127A, l2LB, have been amended and
inserted by Tata Sons when it was under the leadership of Mr.
Cyrus. Protecting the rights of majority in the Articles can never
become either oppression against the Petitioners or
mismanagement of the affairs of Tata Sons.

44O. To establish grievance u/s 247, the complainant has to pass

various tests as stated in Section 241 and 242, and then alone a
relief could be passed. Section 242 reliefs cannot be invoked just by
seeing abstract arguments like this without any proof of oppression
or unfairness and prejudice against the Petitioners. Therefore, we
have not found any merit in the submission of the Petitioner
Counsel saying that existence of these Articles in the Articles of
Association is per se oppressive against the petitioners; henceforth
we decided this issue against the Petitioners.

44L. Whether or not the removal of Mr. Cyrus as Executive

Chairman of the company on 24.7O.2076 and his removal as
Director of the company on 06.02.2017 ,s
oppressive/ prejudicial to the petitioners/the company?

442. For discussion is getting overlapped spreading the

same discussion to various issues, whatever residual issues
such as argument on just and equitable ground, unfair
prejudice, corporate governance, shadow director,
legitimate expectation, equitable consideration, leakage of

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information to outsiders, interplay of sections, development

of law from section 397-398of 7956 Act to section 247-242
of 2073 Act, business judgment rule, non-joinder of parties,
etc. have been discussed along with the issue of removal of
Mr. Cyrus as Director of the company.

443. The story lying to make his removal as Executive Chairman

and subsequently as Director of the company is that the Board of
the company removed Mr. Cyrus working as Executive Chairman of
the company on 24.70.2076 on the ground that Tata Trusts lost
confidence in the functioning of Mr. Cyrus as Executive Chairman,
thereafter on 06.02.2017 he was also removed as Director of the
company in the extra-ordinary general meeting held on
o6.o2.20t7.

444. At the outset, the petitioners counsel clarified that though the
removal of Mr. Cyrus as the Executive Chairman is wholly illegal,
ultra-vires and oppressive, they are not seeking relief of
reinstatement of Mr. Cyrus as Executive Chairman so that the
argument of the answering respondent saying that this petition is in
the nature of directorial complaint is blatantly false and oblique
attempt to divert the attention for the core issues raised by the
petitioners vide their petition. The petitioners though not sought
reinstatement of Mr. Cyrus as Executive Chairman, they have
focused on saying that the underlying reason for his removal as
Executive Chairman as well as director was nothing but retribution
for the incisive attempts at stopping the acts of the
mismanagement and restoring transparency and integrity in the
functioning of the company and its group companies.

445. The grounds, according to the petitioners, to say that this

action of removing Mr. Cyrus as Executive Chairman on 24.10.2016
is oppressive are as follows:

i, The said board resolution and removal of Mr. Cyrus is

contrary to the Articles of Association and in particular Article
1 1B of Articles of Association.

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ii. The said board resolution and removal of Mr. Cyrus is

contrary to and in breach of shareholder resolution of
01.08.12,

iii. The said board resolution and removal of Mr. Cyrus are at the
behest of Tata Trusts and the participation of Tata Trust's
nominee director in the board meeting constitutes a clear
conflict of interest under Companies Act 2013

iv. The removal of Mr. Cyrus was patently harsh and wrongful in
as much as it was in complete breach of norms of corporate
governance and transparency and done in haste to cover up
various irregularities that Mr. Cyrus was trying to address as
Chairman of The company

v. Breach of Shareholders Resolution dated 01.08.2012: -

-The Shareholders Resolution of lstAugust 2012, in its

relevant part, states "Resolved that.......... the Company
hereby approves the appointment and terms of remuneration
of Mr. Cyrus as the "Executive Deputy Chairman of the
Company with substantial powers of management for a period
of 5 years with effect from April 1, 2012 to March 31, 2017....1
llt 249, Petition

446. The petitioners counsel submits that it is thus clear that the
office of Executive Deputy Chairman held by Mr. Cyrus was up to a
fixed date i.e. 3lstMarch 2017. The limited authority and mandate
given by the Shareholders to the Board of Directors was that they
could designate Mr. Cyrus as Executive Chairman during this period
and any removal of Mr. Cyrus by the Board during this period would
on the face of it be in breach of the Resolution of Shareholders and
would logically have to be approved by the Shareholders. In other
words, it was not just a matter for the Board of Directors in view of
the Shareholders Resolution of l.tAugust 2OJ2, and for admittedly,
there has been no Shareholders Resolution in respect of the
purported removal of Mr. Cyrus, the counsel therefore says, the
removal of Mr. Cyrus has become illegal and oppressive act and

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deliberately done so as to circumvent the requirements of

shareholders' approval for the same.

447. fhepetitioners counsel has further relied upon other

instances such as on 28.6.16 nomination and remuneration
committee of the company giving a glowing account after the
review of Mr. Cyrus performance, Mr. Cyrus flagging, as per the
petitioners, the legacy issues ranging from expensive Nano project
to unworkable international hotel and hospitality acquisition,
indiscriminate vehicle financing by Tata Finance cumulatively
creating non-performing assets of {4000crores and increase of
cash-flows by about ?460crores to Tata Trusts and other issues
such as Sivasankaran issue, Nano, Air Asia, Corus, Mehli Cyrus, etc.
to say that for Mr. Cyrus tried to clean up all these legacy issues,
since the same being inconvenient to the answering respondents,
the petitioners counsel submits that the nominee directors
surprised Mr. Cyrus as well as the petitioners by coming out with an
unforeseen agenda on the very day of board meeting i.e. on
24.10.2076 for the removal of Mr. Cyrus as Executive Chairman of
the company.

448. On 24.7O.2076 when meeting was held for taking up various

issues such as cover note on Tata Teleservices, presentation on
Tata Teleservices, for updating of Accounts of Air Asia India,
execution of summary of Air Asia, about annual business and other
various agenda items but at 11th hour before board meeting was to
be held, the Chairman Mr. Cyrus was informed that Mr. Tata would
be joining the board meeting and before commencement of
consideration of items, Dr. Nitin Nohria mentioned that Tata Trusts
had asked its nominee on the board of the company to bring a
motion to the board of the company. No sooner had Dr. Nitin
Nohria mentioned about bringing a motion, Mr. Amit Chandra
mentioned that at the meeting of the Trusts directors held earlier in
the day, it was agreed to move a motion to request Mr. Cyrus to
step down from the position of the Executive Chairman as the
Trusts had lost confidence in him for a variety of reasons. When
Mr. Cyrus did not agree to step down by saying that he needs 15

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days for taking up such item for the consideration, Mr. Amit
Chandra mentioned the Trusts had obtained legal advice stating
that such a notice is not necessary to which, when Mr. Cyrus also
said that he would obtain legal advice since the legal opinion were
not made available to him, inspite of it, the board proceeded further
with their agenda asking that since Mr. Cyrus as an interested party
in relation to the motion, he was asked to abstain from voting.
Since Vijay Singh was elected as the Chairman of the Board
Meeting, when motion was made for replacement of Mr. Cyrus as
Executive Chairman, for seven including independent directors
voted for the removal of Mr. Cyrus as Executive Chairman of the
company, in the said meeting, Mr. Cyrus recorded his objection to
moving the resolution stating that it was not legal for the resolution
to be taken up. Then Mr. Tata mentioned recognizing the services
Mr. Cyrus rendered to the company by further saying that it was
important for the group to move forward in as seamless manner as
one can. It was further put to Mr. Cyrus that it is his choice whether
he would like to continue as non-executive director of the company,
after he was removed as the Executive Chairman, for which, Mr.
Cyrus said he would continue on the board. It is how the meeting
ended.

449. In this historical background, now it has to be seen as to

whether such removal has made out any case u/s 241 and 242 of
the Companies Act, 2013 or not. The petitioners counsel and Mr.
Cyrus counsel submit, it certainly falls within the ambit of section
241 and 242 reiterating that it is not an item in the agenda, it was
not discussed in the meeting, the legal opinion upon which the
nominee director of the trust said to have relied upon was not
placed before the meeting, his removal is not only in violation of
article 118 of the company but also in violation of secretarial
standards mandate i.e. to give 15 days prior notice in regard to any
issue to be taken up before the board of directors and also in
violation of Article 1218 of the company, apart from this, the
petitioners counsel submits the underlying reasons for his removal
is that it had become discomfort to the answering respondents

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when Mr. Cyrus tried to clean up the books of the company by

taking steps against the issues causing loss to the company.

45O. To which, the respondents counsel replied that it is a

directorial complaint therefore it cannot be raised in a petition filed

u/s 24I because the directorial dispute will not have nexus with the
shareholders' proprietary rights, therefore, the same cannot be
agitated or entertained in a petition u/s 397 /398 of the Companies
Act 1956 or sec. 241 of the Companies act, 2013. It has been said
that the provisions of the Chapter oppression and mismanagement
cannot be used to agitate complaints regarding loss of office or
directorship. They have further stated removal of director could
become grievance u/s 247 only when a vested right is conferred
upon the minority shareholders to participate in the management of
the company.

451. As to the argument of the petitioners that the board of

directors did not exercise its independent judgment while taking the
decision regarding the replacement of Mr. Cyrus as the Chairman of
the company, they say it is self-evident in the minutes of the board
meeting held on 24.70.20t6 reflecting that all other directors, other
than Mr. Cyrus, participated and voted in favor of removal of Mr.
Cyrus from the post of Executive Chairman.

452, When such decision being taken by the board of directors, the
petitioners or Mr. Cyrus merely saying that it is not independent
judgment will not vitiate the decision taken in the board meeting for
the removal of Mr. Cyrus as the Executive Chairman.

453. Mr. lanak Dwarkadas, the Sr. counsel appearing on behalf of

Mr. Cyrus said that the removal of Mr. Cyrus was painted with
impropriety reiterating what all the petitioners counsel stated about
the removal of Mr. Cyrus. Looking at this episode, it is evident that
Mr. Cyrus was taken as Executive Chairman as an employee of the
company not as a representation to any of the shareholders, here
appointment is not an issue, the removal is an issue, no direct or
indirect loss to the petitioner by the removal of Mr. Cyrus either as

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Executive Chairman or as the director of the company, no

arrangement or agreement among the shareholders to provide a
position of Executive Chairman to any of the shareholders or to any
of the group of the shareholders of the company.

454. If you see the observation one after another, as to Mr. Cyrus
position as Executive Chairman, as I have already discussed, was a
position given to him to work as Executive Chairman with approval
of the majority of shareholders through its nominee directors. The
time when he was appointed, a selection committee was constituted
as envisaged Article 118 of the Articles of Association of the
Company, which has already been reproduced in other context, In
the said Article, a provision has been made for constitution of
selection committee to recommend the appointment of a person as
the Chairman of the board of directors, on such recommendation,
the board may appoint the person recommended as the Chairman
subject to Article 121 which requires the affirmative vote of all
directors appointed pursuant to Article 1048. If you see this
language, it is pertinent to know that the selection committee
constituted is competent only to make recommendation, on such
recommendation, since the language is employed in such a way
that "the board may appoint", it is to be construed that the
discretion is left to the board as to whether to appoint or not to
appoint such person recommended by the selection committee. If
such appointment is to be made on the recommendation made by
the committee that has to be done only as mentioned in Article 121
where affirmative vote has been given to the nominee directors of
the Trusts. As we all know, whenever any selection is required to
choose one out of many or to search or identify somebody
competent to such an assignment, then only selection process will
come into existence. It is the convention that takes place whenever
anybody has taken for any assignment, because pick and choose is
in the hands of the body that takes in somebody for some
assignment. But when it comes to removal of such person, there
cannot be such convention of constituting selection committee,
because what selection would be done for removal? Selection

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committee is only a recommending authority. Decision of

appointment will always lie in the hands of appointing authority.
Here in this case appointing authority is the board of directors. As
we all know, appointing authority is the competent authority to
remove the person appointed by such authority. Therefore, we have
not seen any merit in saying that since he was appointed on the
recommendation made by the selection committee; he could not be
removed unless selection committee is constituted. If such is the
case, it cannot be called as selection committee. The petitioners as
well as Mr. Cyrus counsel anchored to the argument saying that
since it has been said in the following sentence that "fhe same
process shall be followed for the removal of the incumbent
chairman", for his removal not being recommended by selection
committee, the board removing Mr. Cyrus on their own is vitiated
for non-compliance of the procedure laid under Article 118. This
addition of a sentence saying that same process shall be applied for
removal has to be read and understood in respect to taking a
decision with the affirmative vote of the Trust nominee directors
because ithas been explicitly said that appointment is subject to
affirmative vote of the directors appointed pursuant to Article 104
B, therefore the same subjection is applicable for removal as well.
This language is very clear, no ambiguity, any layman whoever
reads could only understand that the procedure for appointing alone
is applicable to removal, not selection process. Asking for the
recommendation selection committee for removal is an
of
anathema to the doctrine of reasonableness. If at all such reading
is given as ushered into by the petitioners and Mr. Cyrus counsel, it
would become irrational and meaningless, therefore we consider
this argument as bizarre and misconceived.

455. With regard to the contention that the item of agenda for
removal of Mr. Cyrus, which was not present in the original agenda
circulated, the petitioners and Mr. Cyrus counsel submit that
bringing such item for discussion and resolution on the day of
meeting is nothing but flouting the procedure set out in Article
IZLB of the Articles of Association.

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456. In Article 1218, it has been said that any director will be
entitled to give 15 days' notice either to the company or to the
board for deliberation and if such notice is not received by the
board, it shall be mandatory to take up such matter in the following
board meeting. Here no such notice has been issued. In furtherance
of this argument, the petitioner counsel has also stated that
paragraph 1.3.7 of the secretarial standards provides that "the
agenda setting out, the business to be transacted at the meeting
and notes on agenda shall be given to the directors at least 7 days
before the date of the meeting, unless the Articles prescribe a
longer period", in the following paragraph of secretarial standard it
has also been stated that "each item of the business requiring
approval of the meeting shall be supported by a note setting out
the details of the proposal, relevant material fact that enable the
directors to understand the meaning, scope and implications of the
proposal and the nature of concern or interest, if any, of any
director in the proposal, which the director had earlier disclosed". lt
has been answered by the answering respondents counsel that in
the same secretarial standard in para 1.3.10 it has been stated that
"any item not included in the agenda of a board meeting may be
taken out for consideration with the permission of the chairman and
with the consent of the majority of the directors present in the
meeting, which shall include at least one independent director, if
any".

457. As to this point is concerned, including an agenda item with

short notice is not new, here the chairman himself being interested,
the board has validly elected some other director as Chairman of
the meeting to transact the business of that meeting. Merely
because of holding a meeting with short notice or inclusion of an
agenda item on the date of the meeting cannot be ascribed as a
transaction afflicted by fraud. Of course, removal of Mr. Cyrus
would have become heart-burn not only to Mr. Cyrus but to others
holding the shareholding of the petitioners, but it cannot ipso facto
become a grievance under section 241 unless the ingredients of
section 241 have been fulfilled. Basically, it cannot be called as

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grievance of the shareholders, or the company. His removal, who is

taken as employee, will not make any difference either to the
shareholders or to the company. Therefore, unless an action is
vitiated by fraud, it will not become a fraud or unfairness. This
clause of prejudice will be only in respect to either the economic
interest of the petitioners or the economic interest of the company.
Here, personal emotions or personal egos will not have any place to
attribute it as grievance under section 241.

458. In view of the same, we have not found any merit to say that
inclusion of agenda item for removal would become grievance
under section 241. Henceforth, this point is decided against the
petitioners.

459. On the contention of the petitioner that replacement of

Mr. Cyrus as Executive Chairman was in breach of the shareholders'
resolutlon dated 01.08.2012, when we have gone through this
resolution, it appears it has been resolved that the company in its
annual general meeting dated 01.08.2012 approved the
appointment and terms of remuneration of Mr. Cyrus as the
Executive Dy. Chairman of the company with substantial powers of
management for a period of five years with effect from 01.04.2012
to 31.03.2017 upon the terms and conditions set out in the
explanatory statement with authority to the board to re-designate
Mr. Cyrus as it may deem fit. Basing on this resolution, now the
petitioners counsel argued that as the shareholders approved Mr.
Cyrus as Deputy Executive Chairman for five years w.e.f.
0L.O4.20L2, Mr. Cyrus could not have been removed from the office
prior to
31.03.2017 by the board of directors of the company.
Subsequent thereto, Mr. Cyrus was later, by the board resolution
passed on 18.12.2012 designated as Executive Chairman by the
board and not by the shareholders of Tata Sons.

460. It is also to be noted that, power of re-designation was given

in the above said shareholders meeting to the Board of Directors,
power for appointment as well as removal of the Dy. Executive
Chairman has already been conferred upon the Board under

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Article119. Once anybody has been re-designated from one post to

other post, then necessarily it should be construed that the person
given another assignment is to be treated as vacated the earlier
position, the same is the thing happened in this case, therefore
these petitioners today could not say that for there being a
resolution on 18.12.2012appointing him to continue for five years
up to 31.03.2017, the board should not remove him as executive
chairman before 31.03.2017.In view of the reasons, we have not
found any merit in this point saying that Mr. Cyrus should have
been permitted to continue until 31.03.2017 for he was appointed
as Dy. Executive Chairman by the shareholders on 01.08,2012
w.e.f. 01.04.2012. In addition to this, if we see the Welspun issue,
Ola and Uber issue and other issues, it can be inferred that trust
deficit started growing in between them, which does not go well in
a company of that size. It is a decislon taken by the competent
body to end this trust defecit and to move forward, moreover, since
the petitioners themselves said that they are not on reinstatement
of Mr. Cyrus then the point left to this Bench is, as to whether the
reason upon which the removal is mala fide or not for which we
hereby held that his removal is based on the trust deficit between
Mr. Cyrus, the Board and the Majority. Hence this point is decided
against the petitioners and Mr. Cyrus.

461. On the argument of the petitioners and Mr. Cyrus counsel

saying that there was conflict of interest in the Trust nominated
directors attending the board meeting on 24.10.2016 because the
Trust nominee directors brought motion for removal of Mr. Cyrus as
Executive chairman and not by the board of directors of the
Company, for the board of directors (barring the Trust nominated
directors) were kept in dark of the removal of Mr. Cyrus as
Executive Chairman, it has been submitted by the respondent
counsel that this argument is ex-facie contrary to the mandate of
the Articles of Tata Sons, and the Trust nominee directors did not
have any personal interest in the removal of Mr. Cyrus as Executive
Chairman as such there is no conflict of interest which arose on
account of Trust nominee director participating in the board

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meeting on the resolution to remove Mr. Cyrus. Merely the

Trust/Trust nominee directors losing confidence in the functioning
of Mr. Cyrus as Executive Chairman will never amount to conflict of
interest with the interest of the company.

462. It has to be born in mind that every act that has been moved
by a director cannot be considered as their proposal is in conflict
with the interest of the company. Interest has specified meaning.
We have been all through saying, interest of the shareholders in a

company or interest of the company meaning that the interest that

makes some difference to the pecuniary interest of the company or
the shareholders. If at all we go through section 166 of Companies
Act 2013, it could be evident that directors shall act in good faith
for the benefit of its members and in the best interest of the
company. Under section 184, the directors are required to abstain
themselves from the board meetings in respect to the commercial
transaction of the company, therefore, if any of these shareholders
or directors give any requisition for removal of director or Executive
Chairman, it cannot be said that since they have interest in the
removal they shall abstain attending voting. The interest that has
been mentioned in section 166 and 184 has to be taken in the spirit
that it has been mentioned in respect to commercial transactions.
On this background, can it be said that the shareholders, who were
required for appointment could not vote at the time of removal, if
that is the case, it is nothing but mockery of corporate democracy,
therefore, we don't find any merit in this argument saying that the
Trust nominee director should have abstained themselves from on
the proposal moved by them. Accordingly, this issue has been
decided against the petitioners and M. Cyrus.

463. Asto the argument that real reason for removal of Mr. Cyrus
was because he was attempting to rectify certain irregularities and
stop mis-governance of Tata group, the respondents counsel has
submitted that this contention is bereft of any merit because as to
taking legal action against Siva group, it is Dr. Nitin Nohria, (Trusts
nominee director) who proposed at the board meeting on
15.09.2016 to initiate arbitration proceedings against Siva group,

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as to institutional frame-work is concerned, the answering

respondents counsel submit that the proposed governance
guidelines, which were said to be brought in by Mr. Cyrus, were in
fact proposed in consultation with the very same Trustees i.e. Mr.
Tata and Mr. Soonawala, as to DoCoMo issue, it is a Trustee and its
nominee director suggested to make payment to Tata DoCoMo for
the overall benefit and reputation of Tata companies, likewise, in
respect to AirAsia issue also, statement was made with impunity
that the answering respondent divested funds for financing terrorist
activities for which there is no material on record to say; as to
remuneration to the directors, it was for six non-executive directors
in the F.Y. 2015-16, when it has come to 2016-17, the strength of
non-executive directors has increased to 9, for that reason only, the
remuneration has simultaneously gone to ?9.7Scrores. But this fact
was glossed over by the petitioners herein.

464. The petitioners counsel and Mr. Cyrus counsel argued that
despite R11 performance has been lauded by the company
nomination and remuneration committee only a few weeks before
the Board Coup dated 24.1O.2016. They further submit that, in the
tenure of Mr. Cyrus, the net worth of the company by 2015 had
increased to ?42,000crores from ?26000crores in 2011, many new
business were launched, the Tata group market caplvaluation
increased to?2,95,000 crores from 2006 to 2013, in 3 years 6
months, between 2013 and October 2Ot6, increased to
?3,26,000crore, the ratio of operation cash-flow to capex was
100o/o for first time in the last 10 years, Tata Tiago car was
declared as the best compact car for the year 2016 by over drive,
the brand value has increased by USD 5 billion in spite of all these
achievements, the petitioners counsel submits, Mr. Cyrus was
unceremoniously removed from the post of the executive chairman.

465, As against this, the answering respondents counsel, stating

that though the respondents are not required to give reasons for
the removal of the executive chairman of the company, it has been
said that the reasons for losing the confidence in the stewardship of

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Mr. Cyrus are detailed as below (page 335-341 of Tata Sons Ltd.
reply to the Petitioners)
:

Respondent No. 17 did not demonstrate any results in

turning around areas where the operating companies were
facing problems viz. Tata Steel's Europe operations, Tata
Motors Indian operations and Tata Teleservices. In fact,
the market shares for commercial vehicles (which is the
mainstay of sales for Tata Motors) saw a decline from
600/o (in 2012) to around 40o/o (in 2016) under
Respondent No. 11's chairmanship. (@ Para 25, Pg. 77,
RNT Reply to CPM's Reply to the Petition). Likewise,
there was drop in market share from 13.1o/o in 2012 to
5.2o/oin 2017 in the passenger vehicle segment of Tata
Motors (@ Para 2O, Pg. 74, TSL's Reply to the
Additional Affidavit dated 37 October 2077). What is
worse, Respondent No. 11 used the public relations
services of the Tata Group and attempted to portray that
he had 'inherited'these problem hotspots.

The indebtedness of portfolio companies increased without

corresponding growth in profits (@ pS. 337 of TSL Reply
to the Petition).

Respondent No. 7 7 was in favor of w rite-offs/provisions in

group companies to push problems under the carpet
without making a conscious attempt to turn around
business operations (@ pS. 339 of TSL Reply to the
Petition)

Respondent No. 11 modified the composition of the board

of directors of several companies to ensure that he was
the only common director between many operating
companies (like IHCL) and the company in order to wrest
control over the companies and reduce the company,
ability to influence these companies in spite of being the

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promoter and the single largest shareholder (@ pg. 34O

of TSL Reply to the Petition)

Past performance may not be the only criteria for

replacement of managerial personnel as the board and
shareholders is entitled to take into account not only past
performance, but also future potential. In the present case
not only was there a historical lack of performance, there
were also a loss of confidence regarding future conduct.
Other reasons which contributed to Respondent No. 17's
replacement as the Executive Chairman have been set out
in detail in paragraphs 77 to 23 of TSL Reply to the
Petition, and fall under two broad heads: (i) Respondent
No. 11 did not demonstrate leadership which was
expected from the Chairman of the Tata Group; (ii) there
was a growing lack of trust in Respondent No. 11 by the
board of directors of the company.

466. Both sides projected the figures in fitting to the pleadings

taken by them, all these being the decisions and transactions
relating to business, it is not wise on our part to dig out something
from the business decisions and reflections of the businesses to
scale the performance one saying he has done well and other
saying he has doomed the company. We don't believe that it is
right to measure out his removal basing on achievements and
figures given by either side, it is evident that Mr. Cyrus came to the
company as an employee, the position may be executive chairman,
but that is also employment. Moreover, this will not become a
ground u/s 24t primarily for the reason that it is not in relation to
managing the affairs of the company, it is in relation to removal of
a man managing the affairs of the company on being appointed by
the directors. It has been time and again said, removal of an
employee from the company by any stretch of imagination could
not become a ground u/s 24t because removal of a person
appointed on remuneration cannot be said as conducting the affairs
of the company, it can at best be employment dispute.

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467. In view of these reasons, we have not found any merit in the
argument attributing removal of executive chairman as an act
falling within the ambit of section 241, Otherwise also there is no
merit in any of the points these petitioners and Mr. Cyrus raised,
after all company comes into existence for the benefit of the
members of the company, to get that benefit they devise their own
governance within the four corners of the Companies Act, while
doing so the majority will have right to exercise their right within
the parameters, the only safeguard that is to the minority
shareholders u/s 24t-242 is, if at all the actions of the majority or
the management causing oppression or prejudice to the interest of
the petitioners or to the company, then they can invoke this
jurisdiction. It cannot become a bugbear in the hands of the
minority shareholders to stifle the freedom of functioning and
freedom of management lying with majority. By seeing some
actions of Mr. Cyrus as executive chairman, it appears he felt that
the majority exercising their right for the benefit of the company
and its group companies perhaps perceived as the interference by
the majority. The word interference itself denotes that if anybody
gets into some others business then it can be called as interference.
Here, Mr. Tata and Mr. Soonawala have been committed to the
growth of the company and its group companies for the last several
decades, with the same spirit though their age is not on their side,
have been looking into every aspect upon which an advice is
sought, at times when they felt that situation is alarming, they used
to apprise situation to Mr. Cyrus so that he would take the company
in right direction. They have been suggesting for their own
company. The Trusts have majority shareholding in the company,
inspite of it, they have not transgressed their limit in respect to
advising Mr. Cyrus, of course they remained serious and they have
to remain serious in respect to the business happening in Tata
companies, because the majority will be more effected than
anybody else, if the decisions are important.

468. The petitioners raised hue and cry in the company petition
that the people outside of the board i.e. Mr. Tata and Soonawala

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sought unpublished price sensitive information of the listed

companies as if these two leaking price sensitive information to
have some unlawful gain or to cause some unlawful loss from / to
the group companies of the company.

469. Is there any information before this Bench that these two
leaked any of the information of the company to the people outside
of this company, is there any one case against them by SEBI saying
that they used such information against the company? Answer is
no. Such situation is possible where the people having some
marginal shareholding in the company if they happened to be in the
board, then there is a chance of leaking such information so as to
have some unlawful gain by causing sufferance to the company
whose information has been leaked out. Here the majority in the
company belongs to Tata Trusts. If at all any such thing happens,
the first loser will be Tata Trusts. Is that majority will do damage to
themselves? Normally not. To say yes to it, no information before
this bench. It is highly preposterous on the part of these petitioners
and Mr. Cyrus making such unfound and serious allegations just as
a retribution to the heart-burn they had by the removal of
Mr. Cyrus as Executive Chairman. In view of the observations we
have made, we don't find any material to say that Mr. Tata or
Trusts Nominee Directors caused the removal of Mr. Cyrus as
chairman as a retort to the purported legacy issues set out in this
company petition.

Rem val of Mr. rus as dir ector

470, Another argument under this head is removal of Mr. Cyrus as

Director of the company amounts to oppression, as to this point,
the Petitioners'Counsel submits that to set up a ground for removal
of Mr. Cyrus as Director the answering Respondents linked it to (1)
email dated 25.10.2016 alleging Mr. Cyrus leaked confidential
information to outsiders, (2) Mr. Cyrus reciprocating to the letter
sent by DCIT.

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47t. The petitioners Counsel says, as to letter dated 25.10.2016, it

has been captioned as "confidential" addressing to the Directors of
the company asking them as to on what reasons he was removed
as Executive Chairman of the Company and puttlng his side of
version to the Directors of the Company, discussing various issues
in respect to the performance and pitfalls of the company.

472. As to the letter sent to Income Tax Authorities, the

Petitioners' Counsel explains that letter has been written
responding to the notice under Section 133 (6) of the Income Tax
Act calling for certain information regarding relationship between
the Trusts and the company, the Counsel submits this information
being in relation to the Trusts, even if any disclosure happened in
respect to the said information, it could not be taken as disclosure
of information relating to the company.

473. The Petitioners Counsel further submits that since there had
been representation on the Board from the Petitioners'side since
long and the company being a company primarily comprised of two
groups, i.e. Shapoorji Group and the Tata Trusts, though no Article
has been there in Articles of Association providing proportional
representations to the petitioners herein, the Petitioner side is
entitled to continue having its representations on the Board, not
only by the convention but also on the foundation of having
proportionate representation on the board by virtue of Section 163
of the Companies Act, 2013.In view of the same, the Petitioners
Counsel submits that these two acts in anyway could not have
become grounds for removing Mr. Cyrus as Director of the
company, therefore, removal of Mr. Cyrus as Director is nothing but
causing continuation of oppression against the Petitioners and Mr.
Cyrus.

474. fo which the answer of the Respondents is, the Counsel

appearing on behalf of the company and other counsel appearing
on behalf of answering Respondents is that Mr. Cyrus was provided
this position in his professional capacity and not on the ground he
has right to seat on the board by virtue of his shareholding or

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Articles of Association. It is an admitted position that Pallonji Mistry

became director of the company in the year 1980, though Pallonji
family acquired shares in the company in the year 1965. Mr.
Pallonji Mistry entered as Director in the company and continued as
Director till 2004 and then for a period of two years (2004-2006),
thereafter Mr. Cyrus came as director in the year 2006 and
continued until he was removed.

475, The Respondents submit that the Petitioners in their rejoinder

affidavit to the reply by the company, in their additional affidavit
dated 2L.1.2017, they have admitted (Para 31) that "..... even
though there is no written agreement between the parties, by
conduct the Respondent No.1(The company) has ensured that
Shapoorji Pallonji Group is represented on its Board of Directors". Il
is not correct to say that Shapoorji family group had representation
on the Board continuously ever since they came into this company,
the Respondent Counsel submits, in any case such conduct cannot
constitute a legal foundation for Mr. Cyrus continuation on the
Board of the company de hors the Articles of the company.
Moreover, by conduct also the trustees of the company conceded
that Shapoorji family will have permanent position in the Board.

476. The respondents counsel relied upon Hanuman Prasad

Bagri and Ors. vs. Bagri Cereals Pvt Ltd. (2OOl) 4 SCC 42O to
say that the petitioner to be successful, he has to prove not only
that it is just and equitable to wind up the company, but also that
such winding up would unfairly prejudice the petitioning
shareholder, in the event the petitioner fails to make out such a
case, the petition is liable to be dismissed.

477. We agree with the principle aforementioned by further saying

that just and equitable ground for winding up which was
precondition for considering such winding up would unfairly
prejudice the petitioning shareholder is now not only applicable to
the conduct oppressive/prejud icia I to the interest of the member
complainant but also in the cases where the conduct prejudicial to
the interest of the company, in a way that the jurisdiction in respect

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to mismanagement which was earlier wide open has been narrowed

down by laying down a precondition to prove facts which would
justify the making of winding up order on the ground that it was
just and equitable that the company should be wound up, which
was not there earlier. The major change in the present enactment
is addition of prejudicial remedy in respect of the interest of the
members, another addition is restriction of granting a relief to the
cases of mismanagement by bringing an additional ground to be
proved i.e. facts justifying for winding up on just and equitable
ground.

478. The respondents counsel further relied upon S. P. Jain vs.

Kalinga Tubes (7965) 2 SCR Pg 72O, Hanuman Prasad Bagri
and Ors. vs. Bagri Cereals Pvt Ltd. (2OO1) 4 SCC 42O,
Atmaram Modi vs. ECL Agrotech Ltd., (7999) 98 Comp Cas
463 (CLB) to say that where a directorial dispute has no nexus
with the shareholders' proprietary rights, the same cannot be
entertained under oppression and mismanagement. We agree with
the ratio the respondents relied upon.

479. We agree with the argument of the Respondents Counsel

saying that no director has vested right to stay in office and is
amenable to removal under Section 169 of the Companies Act, the
only Director as per law cannot be removed by the Shareholders is,
the Directors appointed by this Tribunal under Section 242. To
understand as to whether the Petitioners are entitled to the claim of
proportional representation as envisaged under Section 163, the
text of the Section is as below:

"Section 763: Option to adopt principle of propottional

representation for appointment of directors

Notwithstanding anything contained in this Act, the articles of a

company may provide for the appointment of not less than two-
thirds of the total number of the directors of a company in
accordance with the principle of proportional representation,
whether by the single transferable vote or by a system of

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cumulative voting or otherwise and such appointments may be

made once in every three years and casual vacancies of such
directors shall be filled as provided in sub-section (4) of section
161".

48O, On reading Section 163 it is no doubt that it is an overriding

provision laying down that Articles of the Company may provide for
the appointment of not less than 2/3'd of the total number of
directors in accordance with the principle of proportional
representation with three years' term, but whereas in this
company, no such provision has been made in the Articles of
Association to have Directors in accordance with principle of
proportional representation. It goes without saying that application
of this proportional representation in the Board is only a discretion
given to the company, in the earlier enactment, i.e. 1956 Act, it
was limited to public companies, now it has been extended to
private companies as well. Such right could be asserted only when
such right has been incorporated in the Articles of Association, in
this company no such article is incorporated to provide any seat to
the petitioners, this cannot become a ground to set against the
removal of Mr. Cyrus as Director of the company.

481. To establish that it is a sovereign prerogative of the company

to appoint or remove a director from office and the shareholders
are not required to provide reasons for seeking removal of Director,
the company Counsel relied up Life Insurance Corporation of
India vs. Escorts Ltd (19eG) TSCC 264 Paras 95, 96, 99, 100"
which are as follows;

"95. A Company is, in some respects, an institution like as

State functioning under its 'basis Constitution' consisting of the
Companies Act and the memorandum of Association. Carrying
the analogy of constitutional law a little further, Gower describes
"the members in general meeting" and the directorate as the two
primary organs of a company and compares them with the
legislative and the executive organs of a parliamentary
democracy where legislative sovereignty rests with parliament,

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while administration is left to the Executive Government, subject

to a measure of control by Parliament through its power to force
a change of Government. Like the Government, the Directors will
be answerable to the 'Parliament' constituted by the general
meeting. But in practice (again like the Government), they will
exercise as much control over the Parliament as that exercises
over them. Although it would be constitutiona lly possible for the
company in general meeting to exercise all the powers of the
company, it clearly would not be practicable (except in the case
of one or two - man - companies) for day-to-day administration
to be undertaken by such a cumbersome piece of machinery. So
the modern practice is to confer on the Directors the right to
exercise all the company's powers except such as general law
expressly provides must be exercised in general meeting.
Gower's Principles of Modern Company Law. Of collrse, powers
which are strictly legislative are not affected by the conferment of
powers on the Directors as section 37 of the Companies Act
provides that an alteration of an article would require a special
resolution of the company in general meeting. But a perusal of
the provisions of the Companies Act itself makes it clear that in
many ways the position of the directorate vis-e-vis the company
is more powefful than that of the Government vis-a-vis the
Parliament. The strict theory of Parliamentary sovereignty would
not apply by analogy to a company since under the Companies
Act, there are many powers exercisable by the Directors with
which the members in general meeting cannot interfere. The
most they can do is to dismiss the Directorate and appoint others
in their place, or alter the articles so as to restrict the powers of
the Directors for the future. Gower himself recognizes that the
analogy of the legislature and the executive in relation to the
members in general meeting and the Directors of a Company is
an over-simplification and states "to some extent a more exact
analogy would be the division of powers between the Federal and
the State Legislature under a Federal Constitution." As already
noticed, the only effective way the members in general meeting
can exercise their control over the Directorate in a democratic

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manner is to alter the articles so as to restrict the powers of the

Directors for the future or to dismiss the Directorate and appoint
others in their place. The holders of the majority of the stock
of a corporation have the power to appoint, by election,
Directors of their choice and the power to regulate them
by a resolution for their removal. And, an injunction
cannot be granted to restrain the holding of a general
meeting to remove a director and appoint another.

96.ln Shaw & Sons (Salford) Ltd. v. Shaw1935 2 K.B. 173,

Greer, L.J. expressed :

"The only way in which the general body of the shareholders can
control-the exercise of powers vested by the articles in the
Directors is by altering the artictes or, if opportunity arises under
the articles, by refusing to re-elect the Directors on whose action
they disapproved,

99. Again in Bentley-Stevens v. Jones, 1971 (2) All E.R.

653, it was held that a shareholder had a statutory right to
move a resolution to remove a Director and that the court was
not entitled to grant an injunction restraining him from calling a
meeting to consider such a resolution. A proper remedy of the
Director was to apply for a winding-up order on the ground that
it was 'just and equitable'for the court to make such an order.
The case of Ebrahimi v. Westbourne Galleries Ltd., 1972 (2) All
E,R. 492, was explained as a case where a winding-up of order
was sought. In the case of Ebrahimi v. Westbourne Galleries
Ltd. (supra), the absolute right of the general meeting to
remove the directors was recognized and it was pointed out that
it would be open to the Director sought to be removed to ask
the Company Court for an order for winding-up on the ground
that it would be 'just and equitable' to do so. The House of
Lords said,

I must briefly justifu

"My Lords, this is an expulsion case, and
the application in such case of the just and equitabte

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c|ause........,........... The law of companies recognizes the right,

in many ways, to remove a director from the board. Section
194of the Companies Act 1948 confers this right on the
company in general meeting whatever the articles may say.
Some articles may prescribe other methods, for example, a
governing director may have the power to remove (of Re
Wondoflex Textiles Pvt. Ltd.). And quite apart from removal
powerst there are normally provisions for retirement of directors
by rotation so that their re-election can be opposed and
defeated by a majority, or even by a casting vote. In all these
days a particular director-member may find himself no longer a
director, through removal, or non-re- election: this situation he
must normally accept, unless he undertakes the burden of
providing fraud or mala fides. The just and equitable provision
nevertheless comes to his assistance if he can point to, and
prove, some special underlying obligation of his fellow
member(s) in good faith, or confidence, that so long as the
business continues he shall be entitled to management
participation, an obligation so basic that if broken, the
conclusion must be that the association must be dissolved."

100. Thus, we see that every shareholder of a company has

the right, subject to statutorily prescribed procedural and
numerical requirements, to call an extraordinary general
meeting in accordance with the p rovisions of the Companies
Act. He cannot be restrained from calling-a meeting and he is
not bound to disclose the reasons for the resolutions proposed
to be moved at the meeting. Nor are the reasons for the
resolutions subject to judicial review. It is true that underS.
173(2.) of the Companies Act, there shall be annexed to the
notice of the meeting a statement setting out all material facts
concerning each item of business to be transacted at the
meeting including, in particular, the nature of the concern or the
interest, if any, therein, of every director, the managing agent if
any, the secretaries and treasurers, if any, and the manager, if
any. This is a duty cast on the management to disclose, in an

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explanatory note, all material facts relating to the resolution

coming up before the general meeting to enable the
shareholders to form a judgment on the business before them.
It does not require the shareholders calling a meeting to
disclose the reasons for the resolutions which they propose to
move at the meeting. The Life Insurance Corporation of India,
as a shareholder of Escorts Limited, has the same right as every
shareholderto call an extraordinary general meeting of the
company for the purpose of moving a resolution to remove
some Directors and appoint others in their place. The Life
Insurance Corporation of India cannot be restrained from doing
so nor is it bound to disclose its reasons its reasons for moving
the resolutions."

4a2. By reading these paras, it is ascertainable that corporate

democracy is almost akin to the parliamentary democracy existing
in India, upholding the same, what Hon'ble Supreme Court held in
this landmark judgment is that sovereign prerogative to elect or
remove the director of the company is lying with the shareholders
and they need not give any reasons for removal of Directors from
the company, while saying so, the Hon'ble Supreme Court has also
dealt with the ratio decided in Ebrahimi v. Westbourne Galleries
Ltd. (supra) holding that the absolute right of general meeting to
remove the directors even recognized and it was pointed out that it
would be open to the Director sought to be removed to ask the
Company Court for an order for winding up on the ground that it
would be just and equitable to do so.

483. If I don't say now how the House of Lords considered just and
equitable ground, it may give an impression that whenever director
has been removed as per Companies Act, courts ought to provide
relief under Section 24t &.242 considering removal of director itself
as a ground for winding up on just and equitable ground, therefore
I have discussed the facts and finding that was arrived on the facts
of Ebrahimi.

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484, The company involved in Ebrahimi case is Westbourne

Galleries Ltd, before incorporation of this company, from about
1945, Ebra himi(Appellant) and one Asher Najar were partners in a

business, subsequent thereto, in the year 1958, a private company

was floated by these very two persons by taking over partnership
business into the newly incorporated company. In the said
company, Ebrahimi and Najar were first directors, in the said
Articles, there was a provision for removal of Director by an
ordinary resolution in the General Meeting. In this background, Mr.
Asher Najar's son, George Najar was also made as Director, for
doing so, both Ebrahimi and Najar transferred 20olo shareholding of
each to George Najar, by which he had got 20olo shareholding in the
company. This company was doing good and all the profits of the
company going to the directors as remuneration. No dividends were
ever paid. Over a period of time, in the year 1969, for there being
some misunderstanding among them, George Najar being son of
Asher Najar, both of them flexing their majority, removed Ebrahimi
as director of the company in the general meeting held as per the
Articles ofAssociation. Aggrieved of such removal, Ebrahimi
petitioned for an order under Section 210 asking that father and
son should purchase his shares in the company or sell their shares
to him as the Court should think fit, alternatively for an order under
Section 222 (f) of the Companies Act that the company is wound
up. On hearing the same, the original Court judge refused to make
an order under Section 210 but held that the father and the son
had done Ebrahimi a wrong that has been abuse of power and
breach of good faith which partners owed to each other to exclude
one of them from participation in the business in which they had
embarked on the basis that all should participate in its management
and that accordingly, it was said that Appellant has made out a
case for winding up order under Section 222(f) ot the Companies
Act, 1948.

485. Over which, when it was appealed, it was allowed holding that
in a case of quasi partnership company, the exercise by majority in
general meeting of the power under the Articles and Section 184

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to remove a
(Removal of Directors) of the Companies Act, 1948
director from office and consequently to exclude him from
participation in the management and conduct of the business did
not form a ground for holding that it was just and equitable that
the company should be wound up unless it was shown that the
power has not been exercised bonafide in the interest of the
company and that the grounds for exercising the powers such that
no reasonable man would think that the removal was in the interest
of the company.

486. On which when appeal came to House of Lords, it was

discussed at length relying the historical background and evolution
of law in respect to just and equitable concept operating on
partnership and partnership evolving into company to propound the
ratio that the companies formed out of partnerships were to be
dealt with taking partnership principles into consideration.

487. Lord Wilberforce authored this judgment saying that this

company is a private company formed in 1958 to take over a
business founded by Mr. Najar. The point highlighted by Lord
Wilberforce is that it is of cardinal importance since about 1945
the business had been carried on by Ebrahimi and Naiar as
partners equally sharing the management and the profits,
when it was incorporated as a company they appointed themselves
as first directors. As I said subsequently, Najar's Son George Najar
came into the company as the two promoters transferred 100
shares each to the son of Mr. Najar. It was also recorded that the
company made good profits all of which were distributed as
director's remuneration, no dividends have ever been paid
before or after the petition was presented. The Trial Court held that
company was to be wound up under the just and equitable
provision. Upon which, when appeal was filed, it was reversed
saying that just and equitable ground could not be invoked unless it
was shown that the power has not been exercised bonafide in the
interest of the company or that the grounds for exercising the
powers was such that no reasonable man would think that the
removal was in the interest of the company. His Lordship has

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further held as another sign post that these words "just and
equitable" appears in the Partnership Act, 1892, Section 25, as a
ground for dissolution of partnership. He said that the importance
of this is to provide a bridge between cases under Section 222 (t) ot
the Act, 1948 and the principles of equity developed in relation to
partnerships. Of course, we also have analogous provision to 397 &
398 of Companies Act in Section 44 of our Partnership Act, 1932
which is as follows:

"Section 44: At the suit of a partner, the Court may

dissolve a firm on any of the following grounds,
namely: -

(a) to (f) .......

(g) on any other ground which renders it iust and

equitable that the firm should be dissolved."

488. This theory of relating this concept of "just and equitable"

in the Partnership Act to the Companies Act in relation to quasi
partnership companies, has been well discussed in this case. It was
held that in this Westbourne Company, when the members of the
company are in substance partners or quasi partners, the winding
up may be ordered if such facts are shown as could justify the
dissolution of partnership between them. The common use of words
"just and equitable" in the company and partnership law supports
this approach. To show the consistency of applying this just and
equitable concept, the House of Lords referred cases from
Symington vs Symington's Ltd, (1905) 727, In re Yenidje
Tobacco Co Ltd, (1916) 2 CH 426, Loch vs John Blackwood
Ltd, (7924) AC 783, Thomson vs Drysdale, (1925) SC 377, In
re Lundie Brothers Ltd, (7965) 7 WLR 7O57, In re Expanded
Flex Ltd, (1966) 7 WLR 574, Baird vs. Lees, (1924) SC 83,
Elder vs. Elder & Watson, (7952) SC 49, In re Leadenhall
General Hardware Stores Ltd, (unreported February, 7971),
to say that this principle of just and equitable provision has been in
use for several decades. All these companies referred above are

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either quasi partnerships or in substance partnership in character.

For this reason only, the concept of just and equitable has been
applied to the companies of this kind tracing its origin to the same
concept present in the common law thereafter in the Partnership
Act. The reason for saying so is, it has been held that the Boards
are recognition of the fact that a limited company is more than a

mere recognition of a fact that behind it or amongst it, there are

individuals with rights, expectations and obligations inter se which
are not necessarily submerged in the company structure.

489. To apply this principle, Lord Wilberforce has made the

following observations which are as follows:

"It would be impossible, and wholly undesirable, to define the

circumstances in which these considerations may arise.
Certainly the fact that a company is a small one, or a private
company/ is not enough. There are very many of these where
the association is a purely commercial one, of which it can
safely be said that the basis of association is adequately and
exhaustively laid down in the articles. The superimposition of
equitable considerations requires something more, which
typically may include one, or probably moret of the following
elements: (i) an association formed or continued on the basis
of a personal relationship, involving mutual confidence - this
element will often be found where a pre-existing partnership
has been converted into a limited company; (ii) an agreement,
or understanding, that all, or some (for there may be
"sleeping" members), of the shareholders shall participate in
the conduct of the business; (iii) restriction upon the transfer
of the members' interest in the company - so that if
confidence ls lost, or one member is removed from
management, he cannot take out his stake and go elsewhere".

49O. By the above para, it is evident that to apply this principle,

there must be element of personal relationship or mutual
confidence as pre-existing partnership before converting such
partnership into limited company; or an agreement or

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understanding among the shareholders to participate in the conduct

of business and then restriction of transfer of shares, which are the
basic principles of partnership because if confidence with which
they come together is lost or if any member is removed from the
management, the man aggrieved would suffer like anything, for this
reason alone, these principles are applied to the companies which
have come into existence in partnership lines. It is not said in this
case, that these principles are applicable to all companies, as to
Ebrahimi supra, it has culminated into reasoning that to apply just
and equitable concept, there shall be pre-requisites as mentioned in
the para above quoted which are akin to partnership principles.
Before dealing with a case under this provision, we have to see as
to whether any expectations are in existence in favour of the
shareholders, if so, whether they have been flouted or not and such
flouting has been done to cause prejudice or oppression to the
respective members is essential before invoking section 242 to
grant relief.

491. In Ebrahimi supra what Petitioner has asked is for an order

directing the Respondents either to purchase his shares or to sell
their shares, but it appears the appellant having failed to show that
the conduct of majority is oppressive and also that it affects him in
his capacity as a shareholder, winding up has been ordered basing
on just and equitable concept. The essence of the matter is Mr.
Najar and Ebrahimi had been carrying on business as partners at
will in equal shares. The reason for passing this winding up order is,
had no company been formed, Mr. Ebrahimi could have had the
partnership wound up and though Mr. Najar and his son were
entitled by law to oust him from his directorship and depriving him
of his income, they could only do so subject to Mr. Ebrahimi's right
to obtain equitable relief in the form of winding up order under
Section 222 (f) of the Act of 1948.

492. The point that has been held in this case is that in partnership
companies, it has to be recognized that the limited company is
more than a mere legal entity, with a personality in the law of its
own; that there is a rule in the company law to recognize

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individuals with rights, expectations and obligations inter se which

are not necessarily submerged in the company's structure. It is a
qualified statement in respect to the rights of the shareholders. This
ratio is applicable to the companies where aggregation is knitted
with individuals having rights, expectations and obligations which
are not submerged in the company even after individuals being
knitted. When company is not based on partnership lines, when no
rights, expectations or obligations have not been carved out in the
Articles, the Courts are not supposed to go beyond the contractual
arrangements already the shareholders have among themselves in
the form of Articles of Association because the basic proposition
behind it is nobody can have any right more than what he has
agreed to.

493. To say that since exclusion has been considered in Ebrahimi

and other cases, it does not mean that the same is applicable to
this case because as it is said in Escorts supra, appointment or
removal of director is one of the primary right of shareholders,
therefore, it could not be diluted ascribing the principle that has
been decided in Ebrahimi.

494. Even in Ebrahimi itself, Lord Wilberforce has time and again
held that Westbourne Galleries is primarily a partnership company
therefore by looking at the individuals behind it, just and equitable
concept has been applied. By such application, it could not be said
that same could be applicable to each and every case. The equity
that is seen in Ebrahimi is whatever profits coming to the company
were going to directors in the form of remuneration, removing a
director in a situation like that, is nothing but depriving such person
from the basic objective of incorporation of company that is availing
profits of the company. For saying so, it has also been said that the
company was making profits. All these principles like quasi
partnership concept, just and equitable concept - a concept to
sequel to partnership, are to be dealt with depending on the facts of
the case, but not to set it against the concept of corporate
democracy.

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495. The principle that has been held in Ebrahimi i.e. to recognize
individuals with rights, expectations and obligations underlying the
company is applicable in the cases based on partnership
companies, family companies and small companies, the reason
behind applying just and equitable concept to these kind of
companies is,
in such companies there will be an understanding to
have equal participation in the management, accruing expectations
basing on personal relationship involving mutual confidence and
restriction upon the transfer of shares. In such situations, section
210 is applicable when confidence is lost or one member is
removed from the management putting him in a piquant situation
that neither he can continue in the management nor come out of
the company taking out his stake on valuation. To attend such kind
of piquant situation, section 210 of the English Companies Act had
come into existence enabling such person to take honorable exit
from a company. We can say section 210 of English Companies Act
is mother of this alternative remedy.

496. Therefore, in the given case, for having Mr. Cyrus on his own
sent cartels of papers to Income Tax Department, initially came
from Income Tax Authorities to Principal Officer of the company, by
the time when that letter came, Mr. Cyrus was not the Executive
Chairman of the company, had he been really apprehensive of
some action by Income Tax Authorities against him instead of
sending papers to Income Tax Authorities, he should have written
letter to company stating that what action the company took to the
letter sent by Income tax Authorities. Nothing has been done.

497. He said that he sent an email making it confidential to the

Directors of the company but it is a fact that letter has come out
into public domain, before it was reached to the Board of Directors.

498. As I already said, there is no proportional representation to

the shareholders of the company to have a seat on the board, no
special rights to the petitioners to have their man on the board, no
court order providing a seat to the petitioners on the board, in the
backdrop of it, for the Respondents have taken every precaution

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and procedural steps in compliance with the Companies Act for

removal of the Petitioner. A complaint assaillng the removal of
director cannot become a grievance to the Petitioners under Section
241 of the Companies Act, 2013. As I said earlier, grievance means
the economic interest of the shareholders because the interest of
the shareholders is counted basing on the funds invested into the
company, for that reason only, the criteria for filing company
petition has been qualified basing on the share capital the
shareholders holding, not the head count of shareholders whereby
removal of a Director being the right of shareholders, as long as no
understanding to provide a seat on Board, no member removed as
Director can raise it as a dispute under Section 241 of Companies
Act, 2013. In view of this, we have not found any merit in saying
that removal of Mr. Cyrus as Director of the company is oppressive
or prejudicial to the interest of the Petitioners. Henceforth, this
issue is decided against the Petitioners.

499. As to the argument of the Petitioners'Counsel stating that for

having Section 241 under the Companies Act, 2013 replaced
Section 397 and 398 of the Companies Act, 1956 with an
alternative "prejudice test", "oppression test" as earlier required
need not be established for seeking relief under Section 241, the
Petitioners' Sr. Counsel Mr. Aryama Sundaram, R11 Counsel
Mr. Dwarkadas, from the Respondent side, Sr. Counsel
Dr. Abhishek Singhvi, Mr. Sudipto Sarkar, Mr. S. M. Mukherjee,
explained interplay of various provisions under the old enactment
and new enactment and English Companies Law.

5OO. The primary argument on behalf of the Petitioner side is the

word "prejudicial" introduced in Section 24lsignificantly enhanced
the scope of protection afford to the shareholders in as much as in
the advent of the Companies Act, 2013, "acts which may not
strictly qualify as oppression", secondly, introduction of the concept
of "class of members" in Part B of sub-section 1 oF Section 247 has
conferred right not only upon any member or members of the
company but also any class of members. By this signal change in
the new dispensation, the proof of harsh, burdensome and wrongful

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conduct of the wrong doer need not be proved by the aggrieved

because 2013 enactment has brought in this concept basing on
change brought in into the English Companies Act, 2006 for having
Jenkins Committee recommended that the words "oppressive" used
in Section 210 of the English Act, 1948 be replaced with the words
"unfairly prejudicial" on the ground that the definition of oppressive
conduct in Elder vs, Elder & Watson (1959) SC49has been
equated "to the conduct complained of at the lowest involve a
visible departure from the standards of fair dealing and violation of
the conditions of fair play on which every shareholder who entrusts
his money to a company entitled to rely".

5O1. The Counsel submits that by adding words "prejudicial to a

member" in Section 241, Parliament has adopted the doctrine of

"unfair prejudice" under the English Companies'Act 1980, then
English Companies Act, 1985 and thereafter, under the English
Companies Act, 2006. The Petitioner Counsel himself stated that
the doctrine of "unfair prejudice has been interpreted by English
Companies Act to mean exercise of powers by the company which
breaches promises or expectations of shareholders.

5O2. To establish that concept, the Petitioner Counsel relied upon

O'Neil vs. Philips (1999) TWLF 7092, the House of Lords held
that "such promises would arise by words or conduct, which it
would be unfair to all the members to ignore" and it was not
"necessary that such promises should be independently enforceable
as a matter of contract. " A promise may be binding as a matter of
justice and equity although for one reason or another (for example,
because in favor of a third party) it would not be enforceable in law.
Unfair prejudice has been defined as "conduct that lacks probity
and involves a visible departure from standards of fair dealing".

5O3, The respondents relied upon Scottish Co-operative

Wholesale Society vs. Meyer, (1959) AC 324, to say that the
word oppressive has been interpreted as "burdensomer harsh and
wrongful", and Needle Industries (India) Ltd vs. Needle
Industries Newey (India) Holding Ltd. (1981) 3 SCC 333 to

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say that unfair prejudice tantamount to oppression, therefore the

precedent that has been followed till date in respect to oppression
has invariably to be followed to prove as to whether the actions
impugned are oppressive against the interest of the petitioners or
not.

5O4. On perusal of the section 241 against the ratio in respect to

oppression consistently followed by Indian courts, it has to be
accepted that a new dimension has been given to section 24L to
invoke oppression and mismanagement jurisdiction if the aggrieved
proves that the acts complained of are either oppressive or
prejudicial to the interest of the petitioners. When new statute has
come into existence with a different mandate it is not that whole
ratio covered by earlier judgements is required to be followed. Now
in the present dispensation the complainant/aggrieved is at liberty
to prove that the actions complained of are either oppressive or
prejudicial to the complainant's or any other members'interest. It
has not just come like that in section 247, it has been taken out
from section 994 of English Companies Act 2006. This is a change
that has come by the recommendations made by the Jenkins
Committee in England, therefore it can't be said that prejudicial act
means burdensome, harsh and wrongful act.

5O5. As to just and equitable principle, the Petitioners' Counsel

relied upon the aforesaid text to say that just and equitable means
that when a party introduced into an association on the
expectations basing on the investment put into the company, if the
majority shareholder exercises overwhelming voting power to the
detriment of the minority shareholder, it has to be construed that
grounds for winding up on just and equitable ground are made out.
He also said that it is not necessary that such principle can only be
invoked in relation to quasi partnerships or in cases where there is
a deadlock. This point has already been dealt with referring the
elements mentioned in Ebrahimi supra indicating what would be
just and equitable, in view of the same, we don't believe that
argument of the petitioners saying the majority exercising

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overwhelming majority amounts to a ground under just and

eq u ita ble concept.

5O6. The petitioners counsel further submits in the given case, the
affirmative rights providing an overwhelming voting power to the
Tata Trust, coupled with the practice of R2 and R14 presenting
various incentives at their personal level vitiated the guarantee of
the commercial probity that should be expected such as disinterest
in recovery of dues in Siva, disinterest in closure of Nano, doing
favors to Mehli, keeping Corus with the company despite it has
been bleeding Tata Steel India since long.

5O7. The Petitioners' Counsel relied upon the judgment given by

Hon'ble High Court of Madras in "Ethiraj vs Sheetala Credit
Holdings Pvt Ltd (2O17) 2O4 Company Cases" by saying that
just and equitable concept is applicable to listed public companies
as well because the Hon'ble High Court observed that running oF
the company requires inclusiveness which is intrinsic part of
democracy process and that cannot be different where Corporate
jurisprudence or governance is involved.

5O8. Basing on this argument, the Petitioners' Counsel made out

the following points as acts caused prejudice to the Petitioners:

a. The affairs of R1 would be managed by the Board of Directors

acting independently without interference by the majority
shareholders and with probity.

In fact, for nearly 36 years, voting rights in relation to the

shares held by the Tata Trusts, was exercised by a Public
Trustee appointed by the Government under Section 153-A of
the Companies Act, 1956 i.e. from 1964 to 2000, when the
Public Trustee was abolished;

b. The Articles of
Association would not be misused by the
Trustees of the Tata Trusts to undermine the Board of the
Company by demanding pre-consultation and pre-approval on

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all matters including matters which do not have any bearing

on the interests of the Tata Trusts, before it is tabled at the
Board of R-1;

c. The Board of Directors of R-1 would act independently and

the trust nominees would apply their independent judgment
and not become spokespersons for the trustees of the Tata
Trusts;

d. That material decisions concerning R-1 would be taken after

due consultation with the representative of the SP Group. For
example, when R-1 proposed a rights issue in July, 1995, it
was undertaken after consultations with the SP Group
recognizing the fact that it was "a large shareholder of the
com pa ny. "

e. That the Board of R-1 would always have a nominee from the
SP Group - this is evident from the fact that the Petitioners
have been presented on the Board of R-1 for 35 years, i.e.
from 1980-2004 and thereafter from 2006-20L7; and

f. That Company would always continue to function as a public

company and adhere to the highest standards of corporate
governance.

5O9. On which the answering Respondent's Counsel argued that

the introduction of the word "prejudicial" in addition to the
"oppression" in Section 24t and 242 does not improve the case of
the Petitioners and prejudice qua to members does not constitute
as standalone cause of action under Section 241, therefore, the
Petitioners have failed to satisfy the test of prejudice as advocated
by them. They further said there is no understanding for it or
expectations given to the Petitioners so as to say that the
Respondents undermine the expectations and understandings
allegedly entered with the Petitioners. They further submit the
Petitioners counsel erroneously interpreted the concept of just and
eq u ity.

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51O. On hearing the arguments of either side on unfair prejudice

concept and just and equitable concept, we believe, it is important
to look into the evolution of oppression and mismanagement
concept thereafter historical changes brought in from time to time
in Indian Law as well as English Law to answer this argument.

511. This oppression and mismanagement law has in fact

originated in England and from there it has been percolated down
to British India, at the point of time when this law was evolving,
since India was ruled by England, this law also simultaneously
developed in India.

512, This concept started brewing from Foss v. Harbottle

(1e$) 67 ER r89, it is a leading English precedent in corporate
law, known as "the rule in Foss v. Harbottle", over which, the
several important exceptions that have been developed are often
described as "exceptions to the Rule in Foss v. Harbottle". Amongst
these, the 'derivative action', is one whlch allows a minority
shareholder to bring a claim on behalf of the company. This applies
in situations of 'wrongdoer control' and is, in reality, the only true
exception to the rule. The rule in Foss v Harbottle is best seen as
the starting point for minority shareholder remedies.

513. The exceptions developed to the Rule in Foss v. Harbottle, to

protect basic minority rights, regardless of the majority's vote, the
sum and substance of the judgement is as follows.

514. It is a case, where two minority shareholders, Foss and

Edward sued five directors of a company called Vlctoria Park
Company alleging that property of the company was mlsapplied by
the defendants, therefore, make them accountable to the company
and the recovery be done from them. On which, the Court
dismissed the suit holding that when a company is wronged by its
directors, it is only the company that has standing to sue on two
rules; Firstly, the proper plaintifF rule is that wrong done to the
company may be vindicated by the company alone; Secondly, the
majority rule principle states that if the alleged wrong can be

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confirmed or ratified by simple majority of members in a general

meeting, then the Court will not interfere.

L. Ultra yires and illegality: The directors of company or majority

shareholding may not use their control of the company to paper
over actions which would be ultra vires the company, or illegal.

2. Actions requiring a special majority: If some special voting

procedure would be necessary under the company's constitution or
under the Companies Act, it would defeat both if that could be
sidestepped by ordinary resolutions of a simple majority, and no
redress for aggrieved minorlties to be allowed.

3, Invasion of individual rights such as expectations and

entrenchment rights in Articles of Association, etc.

4. "Frauds on the minority": Fraud in the context of derivative

action means abuse of power whereby the directors or majority,
who are in control of the company, secure a benefit at the expense
of the company.

515. In this line, law has developed by way of common law

subsequently, it has become part of English Companies Act, 1948
as section 210 as an alternative remedy to winding up in cases of
oppression, under this head, landmark judgments like Scottish
Cooperative Society, Ebrahimi and many other judgments have
come holding that whenever oppression has been mentioned u/s
210,if the Court is of the opinion that the company affairs are
conducted in a manner oppressive to any member/members and
that to wind up the company would be unfairly prejudicial to such
member only when those 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. This has been further developed
into unfair prejudice in English Companies Act 1980, thereafter as
1985 Act, finally as English Companies Act, 2006. Along this
journey, many changes have also come in giving more clarity to
this concept from time to time.

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516. On reading section 210 of English Act, 1948, any member of

a company complained saying that the company affairs are being
conducted in a manner oppressive to some members of the
company/ then a relief could be passed instead of winding up the
company on just an equitable ground. In this section, it was not
said as to whether any legal action could be taken if the actions are
prejudicial to the company or to the public interest and it has also
not been said anywhere in this section that the actions of prejudice
aiming at the interest of the members, it has only been said that
prejudice against the member, when their position has come to
1980, in the English Companies Act 1980 oppression remedy was
morphed into unfair prejudice remedy when the interest of the
members is affected, for the first time English law was changed
from oppressive to unfairly prejudice to the interest of the
members, in this section also, it was nowhere mentioned that when
an action is prejudicial to the company, member could take action
against such company on any actual or proposed act or omission of
the company. Signal change is just and equitable ground was
removed basing on Jenkins Report. It remained unchanged in
English Companies Act, 1985. The reason for change of oppression
remedy to unfair prejudice remedy is in
Scottish Cooperative
Society case when it was laid down that for granting relief against
oppressive action, such action must be burdensome, harsh and
wrongful. Simultaneously, in Elder v. Elder and Watson Ltd.,
7952 SC 49, Lord Cooper said that the essence of the matter
seems to be that is the conduct complained of at the lowest involve
a visible departure from the standards of the fair dealing and
violation of the conditions of the fair play on which every
shareholder who entrusts his money to a company entitled to rely.
By saying different yardsticks being taken by Courts in respect to
oppression remedy, to make this remedy more protective, in
Jenkins Committee, it was recommended to cover the acts which
are oppressive or unfairly prejudicial to the interest of the
complaining member. By this recommendation, an amendment has
come into English Companies Act 1980, 1985, finally in the year
2006 settling it as action causing unfair prejudice to the interest of

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members generally or some part of its members. Side by side

another change has also come into English companies Act
demarcating shareholder action from derivative actions. In
corporate jurisprudence it
has already been well established that
the actions which cause prejudice directly to the shareholders can
be shareholder action, for example, dilution of shareholding,
denying the right of voting, but as to corporate actions which cause
prejudice to the company are called as derivative actions because
the complaining member initiate action on behalf of the company.
For which, rather two separate parts were made under English
Companies Act, 2006. Derivative actions have been set out in
sections 260-264, the remedy for shareholders' actions are set out
in sections 994-996. When it has come to English Companies Act
2006, for granting relief under either Derivative actions or
shareholders actions, it is not requisite to prove that facts would
justify the making of winding up order on the ground it was just
and equitable to windup the company before granting relief against
unfair prejudice caused to the complaining member. But to take
derivative action, the complaining member has to take permission
from the Court on placing an application and evidence disclosing
prima facie case, if the party fails to place prima facie case, the
application moved by the complaining member shall be dismissed.
When it comes to members' grievance against unfair prejudice,
such permission is not required to take action against the company.
In the case of subsidiary companies, this derivative action is said as
double derivative action, which requires lot of compliance, normally
in England, granting relief under section 260 of English Companies
Act 2006 itself is difficult, then we can imagine how difficult to get
relief in the case of double derivative actions. Here, the petitioner
impugned the actions of group companies without even making
them as parties.

5L7, For taking derivative action it shall be only against the cause
of action arising from an actual or proposed act or omission
involving negligence, default, breach of duty or breach of trust by a
director of the company. So to take derivative action, the cause of

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action should be vested in the company, the relief shall be on

behalf of the company. Such cause of action shall arise from an
actual or proposed act or omission involving negllgence, default,
breach of duty or breach of trust by a director of the company. In
this section, shadow director is also to be treated as director.

518, When it comes to section 994, it applies when a member if

excluded from the management of quasi partnership company,
when there is an understanding for provision of management in the
articles or agreement, when an excessive remuneration or dividend
has been taken and when serious mismanagement like the assets
of the company are used for the personal benefit of the majority
shareholders, when criminal conduct of the management is proved
and when removal of an auditor. It is not that this unfair prejudice
concept is not in flexible, reliefs of like nature could be included
because there is no clear cut definition for it, it all depends on the
facts of the case. Ordinarily, no relief could be passed uls 994, if
there has been no breach of the terms on which the complaining
member has agreed to and it has also established that mere
breakdown of trust among quasi partners will not be a basis for a
successful petition - the breakdown must be related to conduct
which is unfair and prejudicial.

519. A commercial misjudgment cannot become a ground to raise

a plea of unfair prejudice, In Re a Company (1987) BCLC I at
74, it has been said, members are at liberty to claim legitimate
expectations provided such understanding and expectations is in
existence between the parties but as to these aspects, Lord
Hoffman in the leading a case of O' Neill v. Philips (1999) WLR
p1O92 commented on his earlier use of the phrase "legitimate
expectations" and said it was probably a mistake and that the
phrase "legitimate expectation" should not be allowed "to lead a life
of its own". It has been said that Section 994 petition do not give
the Court a general power to assess the fairness of the conduct of
company controllers. He said that they preferred to use the phrase
"equitable considerations to describe the circumstances when court
should grant relief to the petitioners".

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52O. The first respondents counsel and second respondents

counsel relied upon Sri V.S Krishnan and Ors vs. Westforth
Hitech Hospital Ltd. and Ors., (2OOB) 3 SCC 363 to say that
Legitimate Expectation has no place in Company law and mere
proof of unfairness does not amount to oppression, therefore this
theory of legitimate expectation, according to the respondent, is not
applicable to the present case.

521. As to facts of this case, the petitioners has not raised any
ground as such under legitimate expectation except saying that
Mr. Cyrus' father continued as director from 1980 to 2004 and
Mr. Cyrus continued as director from 2006 to 2016, there is no
other ground for them to say that legitimate expectation is
available to them. Merely a person continuing as director for some
time itself will not become legitimate expectation and to call it as
oppression if a director is removed from that post. As to
continuation of director in a company as a legitimate expectation is
evolved from partnership concept, which ls not the case here
therefore the concept of legitimate expectation is not applicable to
the present case. On this ground, we have not made any further
discussion on the doctrine of legitimate expectation.

522. As to Indian Company jurisprudence, when section 397-398

has brought to Companies Act, section 210 of English Companies
Act, 1948 was rewritten adding mismanagement, initially in section
153C of Companies Act 1913 by way of amendment in the year in
1951 and then u/s 398. Now in 2013 Act, sections 397-398 have
been abridged into one section i.e. section 241 including just and
equitable ground regarding to actions prejudicial to the Interest of
the members as well as the company, whereas under 1956 Act,
"just and equitable" ground was not required to be fulfilled for
passing a relief u/s 398 dealing with mismanagement in the
co m pa ny.

523. Now under English law to seek a derivative claim, prima facie
test has to be passed, but the same is not the case in India, in
English law 'just and equitable ground' was done away from 1980

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onwards but that is still remained in our law even in 2013 Act.
Under English law, it has been made difficult to make a derivative
claim because the Court will not take cognizance of the same unless
the case filed under section 260 passes prima facie test. For
derivate action petition has to be filed against the director only on
the ground set out in the section 260 of English Companies Act,
2006.

524. In this ambivalent situation, our law has not been the same
as that of English law, we can only take out broad guidelines into
consideration to deal with cases filed u/s 241. As to oppression and
mismanagement remedy, in England it has been largely applied in
the case in partnership companies, small companies. In our
country, as against partnership companies in England, most of our
companies are family companies. The features of partnership
companies are more or less akin to family companies of our
country, therefore, whenever any issue of oppression and
mismanagement comes for hearing, Courts always considered such
issue treating it like partnership company.

525. As we all know, basic difference between partnership firm and

company ownership is, management remains same in partnership,
whereas owner and management are distinct in company. For this
reason alone, in the cases of
partnerships converted into
companies, quasi-partnership companies and partnership like
companies, when dispute arises over shareholder continuing in the
management by virtue of his position as shareholder with rights of
partner, such dispute is always treated as partnership provided
articles, which the subscribers entered into, do not disclose
intending to deviate from the earlier bond under partnership
existing among them.

526. These are elementary principles in respect to business run by

an association and an aggregate of persons. As we know every
decision in a case always turns on its facts, we have to be serious in
examining the facts and also to see whether those facts are
admitted or at least proved to be true before venturing into apply

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statute and ratio decided on facts similar to the given facts of our
case. This is how application of law happens.

527. Even in Ebrahimi also, the case was decided on the premise
that it is Partnership Company, holding Mr. Ebrahimi removal would
tantamount to deprivation of profits of the company, because the
directors receive entire profits as remuneration to the directors so
as to sustain their lives. It was also held that it normally happens in
small companies.

528. But as to big companies, management is always different

from ownership - there, these kind of legitimate expectations or
assumptions do not exist, This concept of quasi partnership
company has come into existence to meet with eventualities that
come up in small companies and partnership companies, in our
country it is family companies. The base for this premise is, when
partnership has been dissolved, it will be dissolved on just and
equitable ground along with other grounds. As we know, in
partnerships if one of the partners has some contentious issues
leadingto breakdown of trust among them, the dissolution is the
answer on just on equitable ground, but it is not the case in
companies incorporated under companies Act. In company,
members (shareholders) may come and go but the company goes
on forever. It is one of the fundamentals of company's existence.
Unlike in partnership, it is perpetual in succession; company's life is
not determined by the longevity of its members, shareholders,
promoters, directors, employees or anyone else. Despite being so,
this just and equitable clause present in Partnership Act (section
39) (in England as well as in India) has been inserted as one of the
clauses for winding up of companies to meet a situation that arise
in quasi partnership companies and family owned companies,
knowing that their structuring is somewhere in between a company
and partnership. Otherwise, there could not be any chance to have
such principle in company law, because company is perpetual in
succession with independent entity, which is not the case in
partnership.

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529. it has been clarified in Ebrahimi

As to this point is concerned,
case, how just and equltable concept is applicable to the cases u/s
210 of English Act. When we read the paras below mentioned, this
just and equitable ground is applied in small companies or private
companies, in such company, depending on the origin of that
company, it has to be seen the individuals stand behind it with
expectations and obligations inter se which are not submerged in
the independent entity i.e. the company, in the same breadth, it
has also been said that the shareholders agreed to be bound by the
Articles of Association. The important point held in Ebrahimi is, "just
and equitable" provision does not entitle one party to disregard the
obligation, he assumes by entering a company nor the Court to
dispense him from it. It is also made clear the equitable
conslderations, which subject the exercise of legal rights, shall be of
a personal character arising between one individual and another.
Therefore, some pre-existing equitable consideration of personal
character shall be present to invoke the same against the legal
rig hts.

53O. In the following para of Ebrahimi, below it has also been said
merely the fact that the company is small or private will not ipso
facto entitle the complainant to have roughshod over the company
which is purely commercial with adequately and exhaustively laid
down articles. It
has been specified that the superimposltion of
equitable consideration over legal rights will come into picture only
when the elements that have been mentioned in the following paras
of Ebrahimi. So, there is a clear line in which cases this just and
equitable ground is applicable and in which case just and equitable
ground of winding up is not applicable.

531. In section 397 of the old Act as well as 24! of the new Act,
the precondition for passing an order is, there shall be just and
equitable ground before coming to an opinion that it is unfairly
prejudicial to the member if winding up order is passed. As per the
ratio decided in Ebrahami and the same being referred in catena of
judgments of lndian Courts, the same guidance could be taken by
this Tribunal for stating that just and equitable ground would be in

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the cases where preexisting partnership has been converted into a

limited company, a stipulation for shareholders to participate in the
conduct of business and restriction on the transfer of shares.

532. In Tata Sons, first ground is not in existence because this

company has not been converted from preexisting partnership into
a limited company, second, no stipulation entitling the shareholders
to participate in the conduct of the business, third, no full
restriction upon transfer of shares, the restriction is only limited to
the extent of selling shares to the company. As to application of
third element also that could arise only when confidence is lost or a
member is removed from the management by virtue of the right
that has accrued under second element enunciated in Ebrahimi. To
apply third element taking exclusion from the management ground,
it has to be proved that his right of continuation in the management
has been curtailed. In the given case no such right of participation
in the management is ever present to the petitioners in the
company. To visualize every aspect that has been dealt with above,
the relevant paras from Ebrahimi have been placed below:

" My Lords, in my opinion these authorities represent a sound

and rational development of the law which should be
endorsed. The foundation of it all lies in the words "just and
if there is any respect in which some of the
equitable" and,
cases may be open to criticism, it is that the courts may
sometimes have been too timorous in giving them full force.
The words are a recognition of the fact that a
limited
company is more than a mere legal entity, with a personality
in law of its own; that there is room in company law for
recognition of the fact that behind it, or amongst, it, there are
individuals, with rights, expectations and obligations inter se
which are not necessarily submerged in the company
structure. That structure is defined by the Companies Act and
by the articles of association by which shareholders agree to
be bound. In most companies and in most contexts, this
definition is sufficient and exhaustive, equalty so whether the
company is large or small. The,,just and equitable,, provision

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does not, as the respondents suggest, entitle one party to

disregard the obligation he assumes by entering a company,
nor the court to dispense him from it. It does, as equity
always does, enable the court to subject the exercise of legal
rights to equitable considerations; considerations, that is, of a
personal character arising between one individual and an
another, which may make it unjust, or inequitable, to insist
on legal rights, or to exercise them in a particular way.

It would be impossible, and wholly undesirable, to define the

circumstances in which these considerations may arise.
Certainly the fact that a company is a small one, or a private
company, is not enough. There are very many of these
where the association is a purely commercial one, of which it
can safely be said that the basis of association is adequately
and exhaustively laid down in the articles. The
superimposition of equitable considerations requires
something more, which typically may include one, or probably
more, of the following elements: (i) an association formed or
continued on the basis of a personal relationship, involving
mutual confidence - this element will often be found where a
pre-existing partnership has been converted into a limited
company; (ii) an agreement, or understanding, that all, or
some (for there may be "sleeping" members), or the
shareholders shall participate in the conduct of the business;
(iii) restriction upon the transfer of the members' interest in
the company - so that if confidence is lost, or one member is
removed from management, he cannot take out his stake and
go elsewhere."

533. Since it has not been qualified in section 241 that it could be
invoked only in respect to issues relating to small companies,
partnership companies and family companies, it cannot be said that
it is applicable to the companies professionally managed.

534. This is also known fact that oppression and mismanagement

concept is an exception to the majority rule, therefore applicability

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of it has to be limited to the extent as enunciated in the statute or

else any person who has even one share also, through waiver
route, can cause havoc to the companies running business.

535. This concept is not a declaratory concept, if you see the

heading of the chapter, heading of the chapter is prevention of
oppression and mismanagement, so relief will be preventive, not
declaratory as to action impugned before court. It is to arrest
malafide happening in the company. So, to invoke this jurisdiction,
company must be a going concern, there shall be an action in
progress, and it shall be oppresslve or prejudicial to any of the
members complaining or on behalf of whom the complaint has been
made. After having complied with all these characteristics above
mentioned, the Tribunal, before granting any relief, must come to
an opinion that the proved facts would justify winding up of the
company on just and equitable ground. Therefore, we should
always remain very cautious in passing order u/s 247-242, because
it is basic principle, that whoever invested more shall have his say
over the affairs of the company that is run on his money. It is
obvious that minority sailing along with majority is bound by the
rule of majority. Otherwise, it will become curtailment of the rights
of the majority shareholders. At the most, if oppression or prejudice
or mismanagement is proved, then what right he gets is to
extricate himself from company through exit route on fair valuation
of his shares, but he will not get any right to impose his rule upon
the shareholder who have majority in the company. But to get this
relief also, the person complained of shall prove all elements
mentioned in section 241 and 242 (1) of the Companies Act, 2013.

536. In any civil case, the normal relief that is granted is

declaration of some rights in favor of a person who is entitled to
such rights. If at all the management or any other director of the
management or for that matter the majority shareholders, do
something malafide aiming the aggrieved to be put to sufferance,
that can be dealt with under the head of oppression and
mismanagement relieving him honorably, means by compensating
him with his due in the company. This itself is relief, because this

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cannot be otherwise granted, because once money goes into

company as equity, shareholder will not have any right to ask for
the refund or return of it, because he has no such right under
company law for title of it is vested with independent entity, i.e.,
company. Therefore, even if anybody is identified doing wrong, it
has to be limited to the wrong that has been done to such member,
because by virtue of such wrong, company should not be put to
sufferance. For this reason alone, whenever the grievance of the
complainant is proved, the regular and common relief that has been
passed in many of the cases is, providing exit to such person on fair
valuation, the reason is the aggrieved cannot continue in such
company, where trust levels are put to question. If you see the
closing clause to section 2a2Q) of the Act, it could be ascertainable
that the relief that is to be passed is to bring an end to the matters
complained of, not to declare what action is illegal or legal.

537. In Ethiraj & Ors. v. Sheetala Holdings(Madras) (20t7) 2O4

Company Cases 325, the reason for upholding the company law
board order providing exit on the grounds as below.

538. Natarajan was held to be a co-venturer along with

Ramaswami and on his death his son Venkatachalam, Nand Gopal
and Ethiraj, Natarajan was a "promoter director"; the court had
found that the co-venturers had arrived at an understanding that
each would have a representative on the Board; there was in reality
a "practical deadlock" and/or "gridlock" in the management and
affairs of the company; relief was justified in this case as majority
had usurped the assets of the company for its personal use,
because it itself is an act of mismanagement under Section 398 of
the Act. In this case, the Hon'ble High Court has come to a
conclusion that the complainant is a promoter of the company
indeed continuing as director of the earlier company with which
resulting company was merged i.e. First Respondent in that case,
the complainant has not been re-nominated in the company as
sought by him, therefore he has been provided exit from the
company despite holding non re-nomination of Mr. Natarajan is
u nfair.

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539. In view of the same, we hereby hold that Ethiraj ratio not
applicable to this case for the facts of it are different and no such
situation trying to cause prejudice or oppression to the petitioners.
Moreover, as we already held that just and equitable ground not
being applicable to this case, this company cannot be equated to
first respondent company or to the facts of the case. As it is said in
Ebrahimi, several parameters have to be complied with to apply
relief u/s 24I, first of all action to be there and it should flow from
the management or from majority, then it should be depriving
some right which is vested either by legitimate expectation or
obligation on other party in favor of the petitioners, then only it will
become prejudicial, finally after such act being proved as
prejudicial, it has to be proved such prejudicial action should lead to
winding up on just and equitable ground additionally it has to be
proved that such winding up would be unfairly prejudicial to the
person complained of.

540. All this has been done because the petitioner's counsel tried
to impress upon this Bench that this so called interference by Mr.
Tata and Mr. Soonawala is prejudicial to the interest of the
company as well as the petitioners, of course, these petitioners
utterly failed to prove that Mr. Tata and Mr. Soonawala acted
prejudicial either to the interest of the company or to the interest of
the petitioners.

541. A question may arise that had their actions of Mr. Cyrus
prejudicial to the interest of the majority; they would have sought
the same relief against the petitioners herein. For this, the answer
is when majority is given right to set right the business of the
company or transactions of the business including management
issues, they could set right the same as per law by bringing change
in the management to which they are entitled to. The Court also
will not grant majority shareholders a remedy under the head of
unfair prejudice where such prejudice can be avoided by the
exercise of their rights as majority shareholders. The same is done
here.

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542. If
you see the correspondence and transactions happened
under the stewardship of Mr. Cyrus, it is evident on record that Mr.
Cyrus created a situation that since he being the executive
chairman of the company, he is not accountable either to majority
shareholders or to the trusts nominee directors. As I said earlier, in
this case the majority vote has been changed to affirmative vote, if
a minority has affirmative vote and causing impediment to the
majority to go ahead with their decisions, it is conceivable that such
affirmative vote is interference to the affairs of the company. Any
executive chairman, for that matter, to all big companies will act,
as a face of the company, but that does not mean that he is whole
and sole and the majority will remain at the beck and call of him.

543. The best example to prove that Mr. Cyrus tried to convey his
way is highway is Welspun issue, where Mr. Cyrus on behalf of Tata
Power entered into acquisition of an asset costing around
?9,000crores even before Tata Sons passing a resolution as
mentioned under Article 121A of AoA, which is nothing but
bypassing the approval that was to be taken from the board of Tata
Sons before entering into any understanding with other parties, the
reason behind it is, Tata Sons is an investment company, ultimately
money has to go from Tata Sons, that means, acquisition in Tata
Power is intrinsically connected to the economic interest of Tata
Sons. As to when Mr. Tata wanted to take some space on rent
from Tata Motors Ltd., initially they said that they would give that
place at World Trade Centre, after having negotiations completed,
Tata Motors communicated to back out from the deal. Initially, Tata
Motors itself offered the space to Tata Trusts since it was vacant for
three years but subsequently changed its mind. That time Mr. Cyrus
was the chairman of Tata Motors. Could it be said that Mr. Cyrus
was not aware of Tata Motors conveying to Tata Trust to back out
from the deal? In a situation like that, will it be that Mr. Tata
writing a letter to Mr. Cyrus about this issue become interference
with the affairs of its group companies.

544. On reading e-mail correspondence and other letters, from

Mr. Cyrus to Mr. Tata and Mr. Soonawala and others and also from

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Mr. Tata and Soonawala to Mr. Cyrus, on reading either side

correspondence, it is evident that Mr. Tata as well as Soonawala
responded to the advices sought not only by Mr. Cyrus but also
from other officers of Tata Sons as well as group companies. As to
Ola and Uber, Mr. Tata tried to caution Mr. Cyrus to make sure that
at least one out of those deals not slipped out from Tata Motors. It
seems finally neither Uber did a deal nor Ola did a deal for Tata
Motors cars. In a situation like this, when majority felt that
Mr. Cyrus should not continue as executive chairman, they removed
him, in the same time when he showed anxiety in sending bundles
of papers to Income Tax authority without even putting it to the
notice principal officer, and leaking out information of the
of
company to media, conflicting with the interest of the company, he
was even removed as Director.

545. On having the petitioners relied upon Amalgamations Ltd.

v. Shankar Sundaram (2O17) (6) CTC 594 to assert that in a
petition u/s 247, members can raise a grievance/com plaint not only
regarding the company in which they are shareholders but also
regarding subsidiary companies of the former company. However,
when this matter went to Supreme Court, in Civil Appeal No. 4574-
4585/2077, it has been held that the Appellant shall be at liberty to
argue on the ground in the said petition and the prayer regarding
the alleged mismanagement of the companies in question, in case
the corporate veil is lifted, by holding further that the High Court is
not correct in saying the subsidiary companies above mentioned
should be struck from the array of the parties. Since Hon'ble High
Court of Madras reversed order of CLB for having deleted the
subsidiary companies from the array of parties, single judge of
Hon'ble High Court of Madras reversed the CLB order saying
deletion of subsidiary companies from the array of the parties is not
correct, over which, when division Bench of Hon'ble High Court of
Madras reversed the order of Hon'ble Single Judge by restoring the
order passed by CLB, on this order, when parties went to Hon'ble
Supreme Court of India, clarified that the subsidiary company
against whom the Appellant has not made any allegations in the

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petition and no relief has been sought for against need not be
added as parties, however, the subsidiary companies already
arrayed as respondents should be added as parties and the
Appellants shall be at liberty to argue on the ground in the said
petition and the prayer regarding mismanagement of the company
in question in case the corporate veil is lifted. It is not a main
petition that was decided, when the CLB deleted the names of
subsidiary companies from the array of the respondents of the
Company Petition, the petitioners proceeded before Appellate
authority, here no other company has been made as party whose
affairs have been impugned before this Bench. This is the final
hearing, not on an application, for the petitioners consciously has
not made the group companies or subsidiary companies as parties
to this Company Petition, this Bench is under no obligation to deal
with issues of the affairs of the companies which are not parties
before this Bench, which is against the fundamental of civil law,
therefore, the ratio held in Amalgamations supra is not applicable
to the present case.

546. To understand the evolution of oppression and

mismanagement remedy, the statutory provisions in India as well
as in England have been placed below:

LEGISLATIVE EVOLUTION OF STATUTORY PROVISIONS

CONCERNING OPPRESSION AND MISMANAGEMENT

IN INDIA AND ENGLAND

I, LEGISLATIVEEVOLUTION U NDER IN DIAN LAW

COMPANIES ACT, 1956 COMPANIES ACT, 2013

Chapter VI- Prevention of cnanter xVI- Preventaon of oppression and

oppression and I I

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mrsmana gement mismanagement I

Section 397- Apolication to Section 241- Aoolication to Tribunal for

lTribunall for relief in cases relief in cases of oporession, etc.:
of oooression:

(1) Any member of a company who complains

(1) Any members of a company that- I

who complain that the affairs of

the company are being conducted
in a manner prejudicial to public
(a) the affairs of the company have been or are
interest or in a manner
being conducted in a manner prejudicial to
oDDressave to nv member or
public interest or in a manner preiud icial or
members (including any one or
or
more of themselves) may apply
members or in a manner Dreiudicial to the
to the [Tribunal] for an order
interests of the companv; or
under this section, provided such
members have a right so to apply
in virtue of section 399.

(b) the material chanqe, not being a change

brought about by, or in the interests of, any
creditors, including debenture holders or any
(2) If, on any application under
class of shareholders of the company, has taken
sub-section (1), the [Tribunal] is
place in the manaqemen t or control of the
of opinion
comDanv, whether by an alteration in the
Board of Directors, or manager, or in the
ownership of the company's shares, or if it has
(a) that the company's affairs are no share capital, in its membership, or in any
being conducted in a manner other manner whatsoever, and that bv reason
prejudicial to public interest or in of such chanoe, it is likely that the affairs
a manner oDDressave to anv of the comoanv will be conducted in a
member or members ; and manner oreiudicial to its interests or its

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members or anv class of members

b)that to wind uD the

companv would unfairlv
Dreiudice such member or may apply to the Tribunal, provided such
members but that otherwise member has a right to apply under section 244,
the facts would iustify the for an order under this Chapter.
makinq of a windino up order
on the ground that it was jus'!
and eouitable that the company
(2) The Central Government, if it is of the
shou ld be wound up;
opinion that the affairs of the company are
being conducted in a manner prejudicial to
public interest, it may itself apply to the
the [Tribunal] may, with a view Tribunal for an order under this Chapter.
to bringing to an end the matters
complained of, make such order
as it thinks fit.

Section 398-Applicataon to
lTribunall for relief in cases
of mismanaqement:

(1) Any members of a company

who complain - (a) that the
affairs of the company are being
conducted in a manner prejudicial
to public interest or in a manner

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preiudicial to the interests of

the companv; or (b) that a
material chanoe (not being a
change brought about by, or in
the interests of, any creditors
includ ing debenture holders, or
any class of shareholders, of the
company) has taken olace in
the manaoement or control of I

the companv, whether b y an

alteration in its Board of directors
or manager or in the ownership
of the company's shares, or if it
has no share capital, in its
membership, or in any other
manner whatsoever, and that !y
@,itis
likely that the affairs of the
comoanv will b e conducted in
a manner oreiudicial to oublic
interest or n a manner
preiudicial to the interests of
the companv

may apply to the [Tribunal] for

an order under this section,
provided such members have a

right so to apply in virtue oF

section 399.

(2) If, on any application under

sub-section (1), the [Tribunal] is
of opinion that the affairs of the

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company are being conducted as

aforesaid or that by reason of
any material change as aforesaid
in the management or control of
the company, it is likely that the
affairs of the company will be
conducted as aforesaid, the
[Tribunal] may, with a view to
bringing to an end or preventing
the matters complained of or
apprehended, make such order
as it thinks fit.

Section 4O2- Powers of

lTribunall on application
under Sectio n 397 or 398-

Without prejudice to the

generality of the powers of the
[Tribunal] under section 397 or
398, any order under either
section may provide for -

(a) the regulation of the conduct

of the company's affairs in
future;

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. (b) the purchase of the shares or

interests of any members of the
company by other members
thereof or by the company;

(c) in the case of a purchase of

its shares by the company as
aforesa id, the consequent
reduction of its share capital;

(d) the termination, settlng aside

or modification of any
agreement, howsoever arrived
at, between the company on the
one hand, and any of the
following persons, on the other, Section 242- Powers of Tribunal:
namely : (i) the managing
director, (ii) any other director,
(iii) and (iv) [Omitted w.e.f.
(1) If, on any application made under section
13.12.20001 (v) the manager,
24L, the Tribunal is of the ooinion-
upon such terms and conditions
as may, in the opinion of the
[Tribunal] be just and equitable
in all the circumstances of the (a) that the company's affairs have been or are
case; being conducted in a manner oreiudicial or
oooressive to anv member or members or
prejudicial to public interest or in a manner
prejudicial to the interests of the company; and
(e) the termination, setting aside
or modification of any agreement
between the company and any
person not referred to in clause (b) that to wind uo the comoanv would
(d), provided that no such unfairlv Dreiudice such member or

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agreement shall be termlnated, members, but that otherwise the facts I

set aside or modified except after would iustifv the makino of a wandanq-up
due notice to the party concerned order on the ground that it was iust and
and provided further that no such eouitable that the company should be wound
agreement shall be modified up,
except after obtaining the
consent of the party concerned;

the Tribunal may, with a view to bringing to an

end the matters complained of, make such
(f) the setting aside of any order as it thinks fit.
transfer, delivery of goods,
i ourr.na, execution or other act
relating to property made or
(2) Without prejudice to the generality of the
done by or against the company
powers under sub-section (1), an order under
within three months before the
that subsection may provide for-
date of the application under
I section 397 or 398, which would,
if made or done by or against an
individual, be deemed in his (a) the regulation of conduct of affairs of the
, insolvency to be a fraudulent company in future;
preference;

(b) the purchase of shares or interests of any

(g) any other matter for which in members of the company by other members
the opinion of the [Tribunal] it is thereof or by the company;
just and equitable that provision
shou ld be made.

(c) in the case of a purchase of its shares by the

company as aforesaid, the consequent reduction
of its share ca pital;

r (d) restrictions on the transfer or allotment of

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the shares of the company;

(e) the termination, setting aside or

modification, of any agreement, howsoever
arrived at, between the company and the
managing director, any other director or
manager, upon such terms and conditions as
may, in the opinion of the Tribunal, be just and
equitable in the clrcumstances of the case;

(f) the termination, setting aside or modification

of any agreement between the company and
any person other than those referred to in
clause (e) :

Provided that no such agreement shall be

terminated, set aside or modified except after
due notice and after obtaining the consent of
the party concerned;

(g) the setting aside of any transfer, delivery of

goods, payment, execution or other act relating
to property made or done by or against the
company within three months before the date of
the application under this section, which would,
if made or done by or against an individual, be
deemed in his insolvency to be a fraudulent
preference;

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(h) removal of the managing director, manager

or any of the directors of the company;

(i) recovery of undue gains made by any

managing director, manager or director during
the period of his appointment as such and the
manner of utilisation of the recovery including
transfer to Investor Education and Protection
Fund or repayment to identifiable victims;

(j) the manner in which the managing director

or manager of the company may be appointed
subsequent to an order removing the existing
managing director or manager of the company
made under clause (h);

(k) appointment of such number of persons as

directors, who may be required by the Tribunal
to report to the Tribunal on such matters as the
Tribunal may d irect;

(l) imposition of costs as may be deemed fit by

the Tribunal;

(m) any other matter for which, in the opinion

of the Tribunal, it is just and equitable that

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provision shou Id be made.

(3) A certified copy of the order of the Tribunal

under sub-section (1) shall be filed by the
company with the Registrar within thirty days of
the order of the Tribunal.

(4) The Tribunal may, on the application of any

party to the proceeding, make any interim order
which it thinks fit for regulating the conduct of
the company's affairs upon such terms and
conditions as appear to it to be just and
equitable.

(5) Where an order of the Tribunal under sub-

section (1) makes any alteration in the
memorandum or articles of a company, then,
notwithstanding any other provision of this Act,
the company shall not have power, except to
the extent, if any, permitted in the order, to
make, without the leave of the Tribunal, any
alteration whatsoever which is inconsistent with
the order, either in the memorandum or in the
articles.

(6) Subject to the provisions of sub-section ( 1),

the alterations made by the order in the
memorandum or articles of a company shall, in
all respects, have the same effect as if they had

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been duly made by the company in accordance

with the provisions of this Act and the said
]

provisions shall apply accordingly to the I

]ffi;;",II.,.*'soartered I

(7) A certified copy of every order altering, or

giving leave to alter, a company's memorandum
or articles, shall within thirty days after the
making thereof, be filed by the company with
the Registrar who shall register the same.

(B) If a company contravenes the provisions of

sub-section (5), the company shall be
punishable with fine which shall not be less than
one lakh rupees but which may extend to
twenty-five lakh rupees and every ofFicer of the
company who is in default shall be punishable
with imprisonment for a term which may extend
to six months or with fine which shall not be
less than twenty-five thousand rupees but
which may extend to one lakh rupees, or with
both.

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II.LEGISLATIVE EVOLUTION UNDER ENGLISH LAW:

ENGLISH ENGLISH ENGLISH I

I
ENGLISH
COMPANIES ACT, COMPANIES ACT, COMPANIES ACT, COMPANIES
1948 1980 1985 ACT, 2006

Part IV- Part VI- Part-XVII Part 3O-

Management and Miscellaneous and Protection of
Administration Genera I members
agaanst unfair
Protection of prejudice
company's
M in orities Interests of members agaanst
employees and unfair preiudice
members Main
Provisions
Section 21O-
Altern ative Section 459- Order
remedv to Section 75- Power on application of
windinq uD ln of court to orant comoanv member: Section 994-
cases of relief aqainst Petition bv
ooDression: comDany where comDanv
members unfairlv member:
prejudiced:

( 1) Any member of (1) A member of a

a company who company may apply

complains th at the (1) Any member of a to the court by

affairs of the company may apply petition for an order (1) A member
company are being to the court by u nder this Part on of a company
conducted in a petition for an order the ground that the may apply to

manner under this section on company's affairs are the cou rt by

oDDressive to the ground that the being or have been petition for an

some Dart the affairs of the conducted in a order under this

members company are being manner which is Part on the
unfairlv oreiudicia!

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(includinq or have been to the interests of grou nd-

himself) or , in a conducted in a some part of the
case fa lling within manner which is members(includino
subsection (3) of unfairlv oreiudicial at least himself) or
(a) that the
section one to the interests of that anv actual or
company's
hundred and sixty- some part of the proposed act or
affairs are being
nine of this Act, the members(includinq omission of the
or have been
Boa rd of Trade, at least himself ) or comDanv ( inclu d in q
may make an that anv actual or an act or omission on conducted in a
manner that is
application to the Droposed actor its beha lf) is or
u nfa irlv
court by petition omission of the would be so
prejudicial to
for an order u nder comoany (includ ing prel u ic ia l.
the interests
this section. an act or omission on
of members
its be ha lf) is or
qenerallv or of
would be so
(2) The provisions of some Dart of
orei ud icia I .

(2) If on any such this Part apply to a its members

petition the court person who is not a (includinq at
is of ooinion- member of a least himself),
(2) If in the case of company but to or
any company- whom shares in the
company have been
(a) that the
transferred or
companv's affairs (b) that an
transmitted by
are beino (a) the Secretary of actua I or
operation of law, as
conducted as State has received a DroDosed act
those provisions
aforesaid; and report under section or omission of
apply to a member of
168 of the 1948 Act the comDanv
the company; and
(inspectors report) or (includinq an
references to a
exercise his powers
member or members
act or
(b) that to wind
under Part III of the
are to be construed
omrssron on
up the companv
1967 Act or section its behalf) is
would unfairlv accordingly.
36(2) to (6) of the or would be so
oreiudice that Insurance Companies Dreiu icia l.
oart of the
Act 1974 (inspection
members, but
of company's books Section 461-
otherwise the
Provisions as to

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facts would and papers); and Detitaons a nd (1A) For the

iustifv the orders under this purpose of
makino of a Part- su bsection
windinq-uo order (1)(a), a
(b) it appears to him
on the q rou nd that removal of the
that the affairs of the
it was iust and com pa ny's
company are being (1) If the court is
equitable that the aud itor from
or have been satisfied that a
company should be office -
conducted in a petition under this
wound up;
manner is unfairlv Part is well fou nded, (a) on
oreiudicial to the it may make such g rou nds
interests of some order as it thinks fit of
the court may, with part of the for giving relief in divergenc
a view to bring ing members or that respect of the eof
to an end the any actual or matters complained opin ions
matters proposed act or of. on
complained of, omission of the accountin
make such order as company ( includ ing (2)Without prejudice
I
it thinks fit, an act or omission on to the genera lity of treatment
whether for its beha lf) is or subsection ( 1), the
s or aud it
reg u lating the would be so court's order may- procedure
cond uct of the preiudicial, he may s, or
(a ) regu late the
company's affairs himself (in addition
cond uct of the
in future, or for the to or instead of (b) on
company's affairs in
pu rchase of the presenting a petition any other
the future, proper
shares of any for the winding-up of im

members of the the company u nder g rou nd s,

(b)require the
company by other section 35(1) of the
company to refrain
members of the 1967 Act) apply to Shall be treated
from doing or
company or by the the cou rt by petition as being
continuing an act
company and, in for an order under unfairly
complained of by the
the case of a th is section .
prejudicial to
petitioner or to do an
purchase by the the interests of
act which the
company, for the some part of
petitioner has
reduction the company's
(3) If the court is complained it has
accordingly of the mem bers.
satisfied that a

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company's capita l, petition u nder th is omitted to do,

or otherwise. section is well
founded it may make (c)authorise civil (2) The
such order as it proceedings to be provisions of

thinks fit for giving brought in the name this Part apply
(3) Where an order and on behalf of the to a person who
relief in respect of
under this section company by such is not a member
the matters
ma kes a ny person or persons of a company
complained of.
a lteration in or and on such terms as but to whom
add ition any the court may direct, shares in the
com pa n y's company have
memorandum or (4) Without prejudice (d)provide for the bee n
a rticles, then, to the generality of purchase of the transferred or
notwithstanding subsection (3) shares of any transmitted by
anything in any above, an order members of the operation of law
other provision of under th is section company by other as they apply to
this Act but subject may- members or by the a member of a
to the provisions of company itse lf and, com pa ny.
the order, the in the case of a

com pa ny purchase by the

(a) regulate the
concerned sha ll not company itself, the
conduct of the (3) In this
have power without reduction of the
company's affairs in section, and so
the leave of the company's ca pita I

the futu re; far as applicable

court to make any accordingly.
fu rther a lteration in for the purposes
or add ition to the (3) If an order under of this section in

memorandum or this Part req u ires the the other

(b) require the
art c CS company not to provisions of
company to refra in
inconsistent with make any, or any this Part,
from doing or
the provisions of specified, a lteration "com pa ny"
continuing an act
the order; but, in the memorandum mea ns-
complained of by the
su bject to the or a rticles, the
; petitioner or to do an
company does not (a) a company
foregoing
act which the
provisions of this then have power within the
petitioner has
su bsection, the without leave of the meaning of this
complained it has
a lterations or cou rt to make any Act, or

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add itions made by om itted to do; such alteration in (b) [omitted]

the order shall be breach of that
of the same effect req uirement.
as if duly made by
(c) authorise civil (4)Any a lteration in Section 996-
resolution of the
proceedings to be the com pa ny's Powers of the
company and the
provisions of this brought in the name memorandum or court under
Act shall apply to
and on behalf of the articles made by this Part
company by such virtue of an order
the memorandum
person or persons under this Part is of
or articles as so
and on such terms as the same efFect as if
a lte red or added to (1) If the court
the cou rt may direct; duly made by
accordingly. is satisfied that
resolution of the
a petition under
company, and the
this Part is well
provisions of this Act
(d) provide for the founded, it may
(4) An office copy apply to the
pu rchase of the make such
of any order under memorandum or
shares of any order as it
this section altering a rticles as so a ltered
members of the thinks fit for
or adding to, or accordingly.
company by other giving relief in
giving leave to
members or by the respect of the
alter or add to, a (5) An office copy of
company itself and, matte rs
com pa ny's an order under this
in the case of a complained of.
memorandum or Part altering, or
purchase by the
a rticles sha ll, giving leave to alter,
company itself, the
within fo u rtee n a company's
reduction of the
days after the memorandum or (2) Without
company's ca pita I
making thereof, be articles sha ll, within prejudice to the
accord ingly.
delivered by the 14 days from the generality of
company to the making of the order subsection ( 1),
reg istrar of or such longer period the court's
companies for as the court may
(5) Where an order order may-
reg istration; and if allow, be delivered
under this section
a company makes requ ires the by the company to
defau lt in company not to the registrar of
complying with this companies for (a) regulate the
make any, or any
su bsection, the registration; and if a conduct of the
specified, alteration
 NATIONAL COMPANY LAW TRIBUNAL, MUMBAI BENCH

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company and every in the memorandum company makes com pa ny's

officer of the or articles then, defau lt in complying affairs in the
company who is in notwithstandlng with this subsection, futu re;
default shall be anything in the the company and
liable to a defau lt Companies Act, the every officer of it
fine. company shall not who is in default is
(b) require the
have the power liable to a fine and,
without the leave of for continued
com pa ny-
the court to make contravention, to a
(5) In relation to a
any such alteration in daily default fine.
petition under this
breach of that (i) to refrain
section, section (6)Section 663
requirement. from doing or
three hundred and (winding-up rules)
continuing an
sixty-five of this applies in relation to
act complained
Act shall apply as it a petition under this
of, or
applies in relation (6) Any alteration in Part as in relation to
to a winding-up the memorandum or a winding-up petition (ii) to do an act
petition, and articles of the
that the
proceedings under company made by
petitioner has
this section shall, virtue of an order
complained it
for the purposes of under this section
has omitted to
Part V of the shall be of the same
do;
Economy effect as if duly made
(Miscellaneous by resolution of the
Provlsions) Act, company and the
1926, be deemed provisions of the (c) authorise
to be proceedings Companies Acts sha ll civil
under this Act in apply to the proceedings to
relation to the memorandum or be brought in
winding up of a rticles as so altered the name and
companies. accordingly. on behalf of the
company by
such person or
persons and on
(7) An office copy of
such terms as
any order u nder this
the court may
section altering, or

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giving leave to a lter, d i rect;

a company's
memorandum or
articles sha ll, within
(d) req u ire the
14 days from the
company not to
making of the order
make any, or
or such longer period
any specified,
as the cou rt may
a lterations in its
allow, be delivered
a rticles without
by the company to
the leave of the
the registrar of
co u rt;
companies for
registration; and if a

company makes
defau lt in complying (e) provide for
with th is su bsection, the purchase of
the company and the shares of
every officer of the any members of
company who is in the company by
default shall be liable other members
on summary or by the
conviction to a fine company itself
not exceeding one- and, in the case
fifth of the statutory of a pu rchase
maximum for every by the company
day until that copy is itself, the
delivered. reduction of the
com pa ny's
ca pita I

according ly.
(8) In relation to a
petition u nder this
section, section 365
of the 1948 Act
(general ru les for
winding up) shall

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apply as it applies in
relation to a winding-
up petition.

(9) This section shall

apply to a person
who is not a member
of a company but to
whom sha res in the
company have been
transferred or
transmitted by
operation of law as it
applies to a member
of the company, and
references to a

member or members
sha ll be construed
according ly.

(10) in subsections
(2) to (9) above
"company" means
any body corporate
which is liable to be
wound up u nder the
1948 Act.

(11) Section 210 of

the 1948 Act and
section 35(2) of the

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1967 Act (which are

superseded by th is
section) shall cease
to have effect in
relation to
proceedings on a

petition presented
before the appointed
day.

With respect to just and equitable concept, both sides relied upon
ratio decided in various cases, which we have dealt with as follows:

547. fhe Petitioner Counsel, to say that just and equitable cannot
be put in stralght jacket formula, relied upon foch vs lohn
Blackwood (1924) AC 783 by referring the para below:

"In Re Bleriot Manufacturing Aircraft Co. (1916) 32

Times L, R. 253 Neville J. made an order for winding up on
the ground that the substratum of the company was gone and
upon a further ground of proved misconduct by the directors.
His observations upon the latter point are apt in the present
case:

"But there is another ground. Here the company has

considerable capital, and it is alleged that there is misconduct
by the directors. It is truly said by Mr. Russell that the mere
fact of misconduct is no ground for winding up. IM.
'iust and eauitable' are words of the widest
sionificance and do not it the iurisdiction of the
Court to anv case. It is a question of fact, and each case
must depend on its own circumstances..... I think the moneys
of the company have been misapplied, and that the company

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is so constituted that it is deprived of its usual remedies. This

is again sufficient for a winding up."

548, He goes on to rely upon the judgement in Baird v. Lees

t924 S, C. 83 where Lord Clyde has held, "I have no intention
of attemotino a definition of the circumstances which
amount to a 'iust and eouitable' cause. But I think I may say
this. A shareholder puts his money into a company on certain
conditions. The first of them is that the business in which he invests
shall be limited to certain definite objects. The second is that it
shall be carried on by certain persons elected in a specified
way, And the third is that the business shall be conducted in
accordance with certain principles of commercial
administration defined in the statute, which provide some
guarantee of commercial probity and efficiency. A
shareholders find that these conditions or some of them are
deliberatelv and consistentlv violated and set aside bv the
n mem r and official of the
an overwhelmina votino oower, and if the result of that is
that, for the extrication of their riohts as shareholders. thev
are deorived of the ordinarv facilities which comoliance with
the Comoanies Acts would orovide them with. then there
does arise. in mv ooinion. a situation in which it mav be iust
and eouitable for the Court to wind up the companv.

549. The Petitioners'Counsel also relied upon Re. H. R. Harmer Ltd

(1959) WLR 62 quoting the para below:

" For a petition to succeed it must be shown that there has

been oppression in a real sense of members qua shareholders
and not merely a subordination of their wishes to the power of
a voting majority, As to this, however, I accept the submission
of Counsel for the Petitioners that shareholders are entitled to
have the affairs of the company conducted in a way laid down
by the company's construction. Members are entitled to expect
that their board shall perform its functions as a Board and that
the proceedings of the Directors shall be carried out in a

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normal and orthodox manner. They are entitled to the benefit

of the collective experience of the Directors, and to expect that
the directors and each of them can freely express their views
at Board Meetings and that regard shall be had to what they
say and to resolutions properly passed. If the Board brow
bitten and either ignored are overruled by one of its members,
in this case, the father who was the chairman, in reliance of his
superior voting power, the proprietary interest of the minority
shareholders cannot fail to be affected and a case of
oppression within Section 270 is in my judgement made out.

55O, He also referred Ramshankar Prasad vs, Sindhri lrion

Foundry Private Limited (AIR 1966 Cal 572) reiterating the
proposition that has been reflecte d in Harmer and Re. Albert
David Ltd 68 CWN 163 and Hind Overseas Pvt Ltd vs.
Raghunath Prasad Jhunjhunwala (1976) 3 SCC 259,
Sangram Singh Gaekwad vs. Santadevi Gaewad (2OOS) 11
SCC 374, Kamal Kumar Datta vs. Ruby General Hospital
Ltd.,,MSDC Radharamanan vs MSDC Chadrashekara Raja, for
saying that just and equitable concept is very much applicable to all
companies including public limited companies.

551. He has specifically mentioned Hind Overseas (supra) referring

the following para to say that the applicability of just and equitable
principle depends upon the facts and circumstances of each case,
the said para is as follows:

"The principle of "just and equitable" clause baffles a precise

definition. It must rest with the judicial discretion of the court
depending upon the facts and circumstances of each case.
These are necessarily equitable considerations and may, in a
given case, be superimposed on law. Whether it would be so
done in a particular case cannot be put in the straitjacket of an
inflexible formula."

552. As against this argument, Senior Counsel Dr. Abhishek

Singhvi made the following submissions:

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1. A division bench of the Calcutta High Court in the case

of Bagree Cereals & Others v. Hanuman Prasad Bagri and
Others 2OOl 7O5 Comp. Cas. 465 has held that for a
petitioner to be successful under Section 397 of the 1956 Act
he had to prove not only that it was just and equitable to wind
up the company, but also that such winding up would unfairly
prejudice the petitioning shareholder. In the event the
petitioners fail to make out such case, the petition is liable to
be dismissed. The division bench held the aforesaid to be a
prerequisite jurisdictional requirement for obtaining relief
under S. 397 of the 1956 Act. In appeal against the said
decision the Supreme Court in Hanuman Prasad Bagri &
Others v. Bagress Cereals Pvt. Ltd. & Others (2OOl) 4
SCC 42O affirmed the view taken bythe Division Bench of the
Calcutta High Court. Therefore, in so far as 1956 Act is
concerned, it was well settled that Section 397(2) which
postulated the satisfaction of the just and equitable
requirement was a mandatory precondition.

2. While enacting the 2013 Act, the legislature has

retained the said test of 'just and equitable' winding up under
Section 242(L)(b). In fact, the legislature has extended the
applicability of 'just and equitable' test to cases of
mismanagement as well, which under the 1956 Act were not
subject to this test. While doing so, the legislature was
conscious of both (a) the position under English law which
dispensed with the just and equitable test from the statute
book almost 28 years before the enactment of the 2013 Act;
and (b) the position under Indian law which made just and
equitable a mandatory requirement under Section 397 of the
1956 Act was not applicable to section 398.

3. The retention of the just and equitable requirement

under the 2013 Act indicates that the legislature wanted to
reaffirm the applicability of the just and equitable test in its full
vigour to cases of oppression and prejudice under the 2013
Act.

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4. This Hon'ble Tribunal is also cognizant of the settled law

that if a provision of a law is identical to the provision of law
that it has repealed or replaced, then the same is a strong
pointer to fact that in respect of this reincarnated provision,
the legislature intended to apply the interpretation that the
repealed provision had received before its repeal (see Sakal
Deep Sahai Srivastava v. Union of India (1974) 7 SCC
338 (para 8), Pradip J. Mehta v. Commissioner of
Income Tax, Ahmedabad (2OOB) 74 SCC 283 (Para 20,
25) and Parvathy Amma & Others v. Krishnan & Anr.
1962 KLJ 428 (para 8)).

553. We have already seen enough in English Law that this

principle of just and equitable concept initially evolved in
Partnership Act, the same has been percolated down to India first in
the Partnership Act, thereafter, through an amendment to
Companies Act, 1913, in the year 1951 as Section 153(c) of the
Companies Act 1913. Looking change that came in the
at the
English Companies Act, 1948 as Section 210.Indeed, this power of
winding up on just and equitable ground is a relic of English
Partnership Law. The same has first come as Indian Partnership
Act, under Section 46 thereafter, it has become part of Section
153(c) of Indian Companies Act, 1913. It is the fundamental
foundation of a partnership that good faith of the partners is
pledged mutually to each other that the business shall be
conducted with the actual personal interposition, subject to the
Agreement of Partnership, so that each may see that the other is
sparing it for their mutual advantage (vide Per Lord Eldon in
Peacock vs Peacock). While applying the analogy of Partnership
Law, for winding up a quasi-partnership company on the 'just and
equitable' ground, a passage was referred from Lindley in Re
Yenidje Tobacco Co Ltd (7976) 2 Ch 426, 43O (CA), Loch vs
John Blackwood Ltd (1924) AC 783 (PC) at 797; Re Lundie
Brothers Ltd (1965) 7 WLR 7O57, Ebrahimi, which is as
follows :

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" It is not necessaryt in order to induce the court to inteffere, to

show personal rudeness on the part of one partners to the
other, or even any gross misconduct as a partner. All that is
necessary is to satisfy the court that it is impossible for the
partners to place that confidence in each other which each has a
right to expect, and that such impossibility has not been caused
by the person seeking to take advantage of it".

554. The sum and substance of the English Law before and after
the Companies Act, 1948, is that when a company is a quasi-
partnership, i.e. is in the substance a partnership even though
operating in a corporate form, it should be wound up if the facts put
before the court will give grounds for dissolution of partnership in
just and equitable ground under Partnership Law.

555. When we come to Indian Law, it is evident that Section

153(c) was introduced in the year 1951 not only oppressive remedy
but also for a remedy to the wrong of mismanagement. This was
not there in the statutory remedy given under Section 210 of the
English Companies Act. It
is a unique phenomenon that has come
into existence in Indian Law on its own without any backing of
English precedent. Before Section 153(c) and 153(d) were brought
into our Companies Act, the remedy used to be given is whenever
the Petitioners'sought an order for winding up the company under
the just and equitable clause, the court would reject the prayer for
winding up a company if it was found that there was an alternative
remedy available for the redress of their grievance. The situation
before 1948 Act was that either the court had to wind up the
company or to reject the petition for winding up leaving the
petitioners to find the redress of their grievance. For this remedy
would be worse than disease, in this background, Section 210 was
introducedin the English Companies Act and after sometime
Section 153(c) and 153(d) were introduced vide (Cohen
Committee).

556. If we read Section 210 of the Companies Act, 1945, we can

visualize a member can complain if the affairs of the company are

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being conducted in a manner oppressive to some part of the

member (including himself), whereas under Section 153(c), it was
said for the first time that a member can complain when the affairs
of the company are being conducted not only in respect to
oppressive action against some part of the members (including
himself) but also in a manner prejudicial to the interest of the
company (mismanagement). This provision as to mismanagement
was purely an innovation of Indian legislation by virtue of a
recommendation made by two Indian Lawyers, i.e. M/s. T.
Dwarkadas & Thiruvenkatacharya and Shri N. K. Mujumdar, an
officer in the old Ministry of Commerce. What is most important
note here before we leave the Companies (Amendment) Act, 1951
is that this provision on mismanagement in Section 153(c) was
inextricably linked to winding up on the "just and equitable" ground
just as the provision regarding oppression was linked both in
Section 210 of the English Act and in Section 153(c). Under Section
153(c), to invoke jurisdiction under the head of "mismanagement",
the complainant was invariably to prove that the facts would justify
the making of a winding up order on the ground that it is "just and
equitable" that the company should be wound up. From 1951 when
it came to 1956 Companies Act, thls 153(c) was bifurcated into two
Sections, i.e. Section 397, as to mismanagement is concerned
Section 398 (1)(a). In regard to mismanagement, it has been
delinked from proving or showing the facts that would justify
making of a winding up order on the ground that is just and
equitable that the company should be wound up.

557, For the sake of historical importance, Section 153(c) of

Companies Act, 1913 and Section 397-398 of Companies Act, 1956
are placed herein.

COMPANIES ACT, 1913 COMPANIES ACT, 1956

The Indian Companies Chapter VI- Prevention of

oppression and
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(Amendment) Act, 1951. mismanagement

Alternative remedy to winding Section 397- Application to

up in cases of mismanagement ITribunal] for relief in cases of
or oppression: ooDressron:

153C. Power of court to act when (1) Any members of a company

company acts in a prejudicial who complain that the affairs of
manner or oppresses any part of its the company are being conducted
members. - in a manner prejudicial to public
interest or in a manner
oDpressive to anv member or
members (including any one or
(1) Without prejudice to an other
more of themselves) may apply to
action that may be taken, whether
the [Tribunal] for an order under
in pursuance of this Act or any
this section, provided such
other law for the time being in
members have a right so to apply
force, any member of a company
in virtue of section 399.
who complains that the affairs of
the company are being conducted-

(a) In a manner prejudicial (2) If, on any application under

to the interests of the sub-section (1), the [Tribunal] is
company, of of opinion

(b) In a manner oppressive

to some part of the members
(including himself) (a) that the company's affairs are
being conducted in a manner
may make an application to the prejudicial to public interest or in
court for an order under this a manner oDDresstv e to anv
Section. member or members ; and
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(2) An application under sub-section (b) that to wind up the

(1) may also be made by the comoanv would unfairlv
Central Government if it is satisfied oreiudice such member or
that the affairs of the company are members, but that otherwise
being conducted as aforesaid. the facts would iustafv the
makinq of a windinq uD order
on the ground that it was j!!g!
and eouitable that the company
(3) XX XX XX
shou ld be wound up;

(4) If on any such application the

the fTribunal] may, with a view to
court is of opinion-
bringing to an end the matters
complained of, make such order
as it thinks fit.

(a) That the company's

affairs are being conducted as
aforesaid, and

(b) That to wind up the

company would u nfairly and
martially prejudice the
interests of the company or
any parts of its members, but
otherwise the facts wou ld
justify the making of a

winding up order on the

ground that it is just and
equitable that the company
Section 3g8-Application to
should be wound up,
lTribunal] for relief in cases of
mismanaqement:
the court may, with a view to
bringing to an end the matters

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complained of, make such order in

relation thereto as it thinks fit."
( 1) Any members of a company
who complain - (a) that the affairs
of the company are being
conducted in a manner prejudicial
to public interest or in a...!!@
preiudicial to the interests of
the companv; or (b) that a
materia I (not being a
cha noe
change brought about by, or in
the interests of, any creditors
including debenture holders, or
any class of shareholders, of the
company) has taken place in
the manaqement or control of
the company, whether by an
alteration in its Board of directors
or manager or in the ownership of
the company's shares, or if it has
no share capital, in its
membership, or in any other
manner whatsoever, and that by
reason of such chanqe, it is
likely that the_affaIs__sf_1re
comoanv will be conducted in
a manner oreiudicial to oublic
interest or in a manner
oreiudicial to the interests of
the companv ;

may apply to the [Tribunal] for an I

order under this section, provided j

lsuch members have a right so to

l-l I

33s
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apply in virtue of section 399.

(2) If, on any application under

sub-section (1), the [Tribunal] is
of opinion that the affairs of the
company are being conducted as
aforesaid or that by reason of any
material change as aforesaid in
the management or control of the
company, it is likely that the
affairs of the company will be
conducted as aforesaid, the
[Tribunal] may, with a view to
bringing to an end or preventing
the matters complained of or
apprehended, make such order as
it thinks fit.

Section 4O2- Powers of

ITribunal'l on aoolication
under Section 397 or 398-

Without prejud ice to the

generality of the powers of the
[Tribunal] under section 397 or
398, any order under either
section may provide for -
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(a) the regulation of the conduct

of the company's affairs in future;

(b) the purchase of the shares or

interests of any members of the
company by other members
thereof or by the company;

(c) in the case of a purchase of its

sharesby the company as
aforesaid, the consequent
reduction of its share capital;

(d) the termination, setting aside

or modification of any agreement,
howsoever arrived at, between
the company on the one hand,
and any of the following persons.
on the other, namely: (i) the
managing director, (ii) any other
director, (iii) and (iv) [Omitted
w.e.f. 13.12.20001 (v) the
managerf upon such terms and
conditions as may, in the opinion
of the [Tribunal] be just and
equitable in all the circumstances
of the case;

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(e) the termination, setting aside

or modification of any agreement
between the company and any
person not referred to in clause
(d), provided that no such
agreement shall be te rm in ated,
set aside or modified except after
due notice to the party concerned
and provided further that no such
agreement shall be modified
except after obtaining the consent
of the party concerned;

(0 the setting aside of any

transfer, delivery of goods,
payment, execution or other act
relating to property made or done
by or against the company within
three months before the date of
the application under section 397
or 398, which would, if made or
done by or against an individual,
be deemed in his insolvency to be
a fraudu lent preference;

(g) any other matter for which in

the opinion of the [Tribunal] it is
just and equitable that Provision
should be made.

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558. All this was very much present in various judgements Indian
Courts dealt with such as Rajamundry Electric Supply
Corporation Ltd vs. A Nageshwar Rao AIR 7956 SC 2lZ, Seth
Mohanlal vs. Sayaji Jublee Cotton & .Iute Mills (fi6{) 3a
Com Cas 777, Navnitlal M. Shah and Orq, vs. Atul Drug House
Ltd and Ors. to know how this change has come in law and its
implications. Out of all these cases, Seth Mohanlal supra elucidated
with erudition over oppression and mismanagement law by Hon'ble
Justice P. N. Bagawati when he was with Gujarat High Court to
understand the interplay of these Sections, it is very much to know
what has been said in that judgement, thereby we place some of
the paras of that judgment which are as follows:

"28. Sections 397 and 398 are part of a fascicles of sections

commencing from section 397 and ending with section 407 and
this fascicles of sections occurs in section A dealing with
powers of court under Chapter VI headed "Prevention of
oppression and mismanagement". Under section 397 any
members of a company who complain that the affairs of the
company are being conducted in a manner oppressive to any
member or members including any one or more of themselves,
may petition the court which, if satisfied that the company's
affairs are being conducted in a manner oppressive to any
member or members and that the facts justify the making of a
winding-up order on the ground that it is just and equitable to
do so but that this would unfairly prejudice such member or
members, may make such order as it thinks fir with a view to
bringing to an end the matters complained of. This section
corresponds to section 210 of the English Companies Act,
7948. Section 398 considerably enlarges the scope of the
remedy by providing that any members of a company who
complain that the affairs of the company are being conducted
in a manner prejudicial t the interests of the company or that a
material change has taken place in the management or control
of the company and that by reason of such change, it is likely
that the affairs of the company will be conducted in a manner

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prejudicial to the interests of the company, may apply to the

court and the court may, if it is of the opinion that the affairs
of the company are being conducted aforesaid or that by
reason of any material change as aforesaid in the management
or control of the company, it is likely that the affairs of the
company will be conducted as aforesaid make such order as it
thinks fir with a view to bringing to an end or preventing the
matters complained of or apprehended. It is obvious that this
remedy provided by section 398 is of a much wider nature than
the remedy under section 397, since unlike the remedy
under section 397, it is not limited by the requirement that the
facts must be such as justify the making of the winding up
order against the company on the ground that it is just and
equitable to do so. The question of construction which arises
for determination on these provisions is as to what is the
extent of the power of the court under sections 397 or 398.
Does the power of the court extend to the making of an order,
setting aside or interfering with past and concluded
transactions between a company and a third party which are
no longer continuing wrongs or is the power of the court
confined to the making of an order preventing future
oppression or mismanagement? Mr. S.B. Vakil, learned
advocate appearing on behalf of the petitioners, pleaded for
the former construction on the ground that such construction
would enlarge the power of the court rather than limit it and in
support of this plea he relied on the well-known rule of
interpretation that in the case of provisions of a remedial
nature, which sections 397 and 398 undoubtedly were, the
construction to be made should be such as will suppress the
mischief and advance the remedy and add force and life to the
cure and remedy according to the true intent of the makers of
the Act, pro bono publico. Now Mr. S.B. Vakil is certainly right
in his submission that sections 397 and 398 being designed to
suppress an acknowledge mischief, they should receive liberal
interpretation and the court should give such construction as
will advance the remedy, but even applying this principle of

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interpretation, it is not possible to accept the construction

contended for on behalf of the petitioners. The reasons are as
follows:

29. Prior to the enactment of the Companies Act, 1956, the

statute relating to companies was the Indian Companies Act,
1973. There was in the Indian Companies Act, 1913, section
153C which corresponded to sections 397 and 398 of the
Companies Act, 1956. This section was introduced in
the Indian Companies Act, 1913, by Act LII of 1951 following
the enactment of section 210 in the English Companies Act,
1948. The genesis of the provisions contained in section
397 and 398 of the Companies Act, 1956, is therefore, to be
found in section 210 of the English Companies Act, 1948. Now
the position which obtained prior to the enactment of section
210 of the English Companies Act, 1948, was that even if the
affairs of acompany were being conducted in a manner
oppressive to some part of the shareholders or in a manner
prejudicial to the interests of the company, the aggrieved
shareholders had no effective remedy to put an end to such
conduct, for unless the case fell within any of the three
recognized exceptions to the rule in Foss v. Harbottle (1)
(1843) 2 Hare 467., the court had not jurisdiction to interfere
with the internal management of the company and even in a
case falling within any of the three recognized exceptions to
the rule in Foss v. Harbottle (1) (1843) 2 Hare 461., all that
the aggrieved shareholders could do was to challenge an act
already done by the controlling shareholders as part of such
conduct and they could not take any effective steps to prevent
the continuance of such conduct. The only remedy which the
aggrieved shareholders had was just and equitable to do so.
That remedy was however totally inadequate for it meant
kitling the company for the purpose of putting an end to the
oppression and mismanagement' But killing the company
would be a singularty clumsy method of ending oppression and
mismanagement and such a course might well turn out to be

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against the interests of the minority shareholders. The

liquidation of the company may result in the sale of its asset at
break-up value which may be small and the minority who,
urged by the oppression of the majority, petitions for a winding
up order may in effect play its opponent's game, for the only
available purchaser of the assets of the company may be the
very majority whose oppression has driven the minority to
seek redress. Hence, the Cohen Committee recommended an
alternative and less drastic expedient for bringing to an end
oppressive conduct on the part of those in control of the
company and this expedient is now embodied in section 210 of
the English Companies Act, 1948. Following the enactment of
this section the legislature introduced section 153C in
the Indian Companies Act, 1913, providing an alternative
remedy for putting an end to oppression or mismanagement
on the part of the controlling shareholders. The remedy given
by section 153C was a more effective and less drastic remedy
then the remedy of winding up for if there was oppression or
mismanagement, the aggrieved shareholders could, instead of
applying for winding up the company in order to put an end to
such oppression or mismanagement, apply for relief under the
section and the court could make such order as it thought
necessary with a view to putting an end to such oppression or
mismanagement and preventing its recurrence. When the
Companies Act, 1956, was enacted, what was originally section
153C wassplit up into sections 397 and 398 and the scope of
the remedy was expanded by removing in cases covered
by section 398 requirement that the aggrieved
the
shareholders must make out a case for winding up under the
just and equitable clause before they can apply for relief under
that section. The object and purpose of the remedy, however,
remained the same, namely, to curse the mischief of
oppression or mismanagement on the part of controlling
shareholders by bringing to an end such oppression or
mismanagement so that it does not continue in future. The
remedy was intended to put an end to a continuing state of

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affairs and not to afford compensation to the aggrieved

shareholders in respect of acts already done which were no
longer continuing wrongs. It is in the light of this background
that the principle of interpretation relied on by Mr. S.B. Vakil
must be applied and applying that principle of interpretation
the widest power may be inferred for the court to interfere in
the internal management of a company with a view of putting
an end to oppression or mismanagement on the part of
controlling shareholders so as to advance the remedy and
suppress the mischief. But no power, I am afraid, can be
inferred by the application of that principle of interpretation to
set aside or interfere with past and concluded transactions
between a company and third parties which are no longer
continuing wrongs, unless the sections by use of clear and
unambiguous language confer such power on the court.

30. Going to sections 397 and 398, I find that the language of
these sections also far from conferring any power on the court
to set aside or interfere with past and concluded transactions
between a company and third parties which are no longer
continuing wrongs, confines the power of the court to making
an order for the purpose of putting an end to oppression or
mismanagement on the part of controlling shareholders. It is
undoubtedly true that the power of the court under sections
397 and 399is very wide-- it is conferred in terms of the widest
amplitude--and the court and make such order as it thinks fit,
but this power is conditioned by the purpose for which it can
be exercised, namely, "with a view to bringing to an end the
matters complained of" in a case under section 397 and "with a
view to bringing to an end or preventing the matters
complained of or apprehended" in a case under section 398.
These words indicate the confines within which the power of
the court under sections 397 and 398must operate. Now what
are these confines? The answer is clear from the language
of sections 397 and 398. The remedy under section 397 can be
invoked only when the affairs of the company are being

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conducted in a manner oppressive to a shareholders or

shareholders and similarly the remedy under section 398 can
be invoked only when the affairs of the company are being
conducted in a manner prejudicial to the interests on the
company. Of course when I say this I am referred only to the
first part of section 398 and leaving out of consideration the
second part to which I shall refer a little later. Sections
397 and 398 thus clearly postulate that there must be at the
date of the application a continuing course of conduct of the
affairs of the company which is oppressive to any shareholder
or shareholders or prejudicial to the interests of the company
and it is this course of oppressive or prejudicial conduct which
would form the subject-matter of the complained in the
application. Now the purpose for which an order can be made
under sections 397 and 398 being to bring to an end the
matters complained of and the matters complained of in an
application under these sections being a course of conduct on
the part of controlling shareholders in the management of the
affairs of the company which is oppressive to any shareholder
or shareholders or prejudicial to the interests of the company,
it is clear that an order can be made under these sections only
for the purpose of bringing to an end such course of oppressive
or prejudicial conduct, that is, for the purpose of putting an
end to oppression or mismanagement on the part of controlling
shareholders so that there may not be in future such
oppression or mismanagement. The language of sections
397 and 398 leaves no doubt as to the true intendment of the
legislature and it is transparent that the remedy provided by
these sections is of a preventive nature so as to bring to an
end oppression or mismanagement on the part of controlling
shareholders and not to allow its continuance to the detriment
of the aggrieved shareholders or the company. The remedy is
not intended to enable the aggrieved shareholders to set at
naught what has already been done by controlling shareholders
in the management of the affairs of the company. If such were
the intention of the legislature, which as I will presently show it

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could never have been, the language of sections

397 and 398 would have been different and the legislature
would not have confined the power of the court by limiting the
purpose for which it can be exercised under the sections. That
the remedy provided by sections 397 and 398 is essentially
preventive in character is also borne out by the second part
of section 398 which applies when a material change has taken
place in the management or control of a company and by
reason of such change it is likely that the affairs of the
company would be conducted in a manner prejudicial to the
interests of the company and empowers the court in such a
case to make an order with a view to preventing the matter
apprehended, namely, the prejudicial conduct of the affairs of
the company, so that such prejudicial conduct may not at all
result from such change and may be totally prevented.
Whereas the first part of section 3ggapplies to a case where
the affairs of the company are being conducted in a manner
prejudicial to the interests of the company and it is required to
put an end to such existing course of prejudicial conduct, the
second part of the second applies where there is not existing
course of prejudicial conduct but prejudicial conduct is
apprehended by reason of a material change in the
management or control of the company and what is, therefore,
required is the presentation of occurrence of such prejudicial
conduct. These then are the confines within which the remedy
provided by sections 397 and 398 operates. But it must be
remembered that within these confines the remedy is a very
potent and effective remedy, since the power it confers on the
court is extremely wide and the court can pass such order as it
thinks necessary for the purpose of putting an end to
oppression or mismanagement on the part of controlling
shareholders. The nature of the order would depend on the
state of affairs prevailing in the company and the nature of the
restrictions required to put an end to such state of affairs. The
necessity of interference under these section may arise in an
infinite variety of circumstances and the legislature has,

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therefore, left the discretion of the court unfettered in the

matter of making an appropriate order. Such power can,
however, be exercised by the court only for the purpose of
bringing to an end oppressive or prejudicial conduct in the
management of the affairs of the company.

31. This, in my opinion, is the true import of sections

397 and 398 and it is amply supported by the heading under
which the sections occur. It is now well settled that heading of
this kind can be referred to for the purpose of construction of
the sections ranged under the headings. In Inglis v. Robertson
(1) tl9g9l A.C. 616., Lord Herschell, called upon to construe
section 3 of the Factors Act, 7889, relied upon the fact that the
section appeared in a group of sections headed "Dispositions
by Mercantile Agents" and after referring to the headings of
different parts of the Act, observed: "These headings are not,
in my opinionl mere marginal notes, but the sections in the
group to which they belong must be read in connection with
them and interpreted by the light of them." Lord Collins also
said much to the same effect in Toronto Corporation v. Toronto
Railway (1) [1907] A.C. 315, 324., when he observed: "This
clause is the last of the fasciculus, of which the heading is
'Track, & C., and Railways' and, as was held in Hammersmith
Ry. Co. v. Brand (2) (1869) L.R.4 H.1.777., such a heading is
to be regarded as giving the key to the interpretation of the
clauses ranged under it, unless the wording is inconsistent with
such interpretation. " These observations of Lord Herschell and
Lord Collins were relied upon by the Court of Appeal in a recent
decision in Qualter Hall & Company v. Board of Trade(3)
[1961] 3 W.L.R. 825 ; [1962] 32 Comp. Cas. 591. It is,
therefore, clear that the heading under which a section occurs
can be referred to as throwing light on the interpretation of the
section unless the language of the section is plainly contrary to
such interpretation. The fasciculus of sections
in a chapter headed
comprising sections 397 and 398 occurs
"Prevention of oppression and mismanagement", the sub-

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heading being "Powers of Court". The heading read with the

sub- heading clearly shows that sections 397 and 398 deal with
powers of courts for
prevention of oppression and
mismanagement in the affairs of the company and that the
remedy given by these sections is, therefore, of a preventive
nature intended to prevent occurrence or continuance of
oppression or mismanagement in the affairs of the company
and is not intended to set at naught what has already been
done by controlling shareholders in the course of such
oppression or mismanagement which is past and concluded
and no longer a continuing wrong.

32. Apart from the plain dictate of the language of sections

397 and 398 there are other considerations which weigh with
me in taking the view that a past and concluded transaction
between a company and a third party cannot be set aside on
an application under section 397 or 398. Let us see what are
the consequences to which the other construction must
logically and inevitably lead and then consider whether the
legislature could have possibly intended such consequences.
The effect of accepting that construction would be that if a
transaction has been entered into between a company and a
third party as part of a continuous and continuing course of
oppressive or prejudicial conduct, any shareholders who are
aggrieved by such conduct would be entitled to ask the court
to set aside such transaction. Now such transaction may not
come within any of the three recognized exceptions to the rule
in v. Harbottle (4) (1843) 2 Hare 461. and yet the
Foss
aggrieved shareholders would be entitled to challenge such
transaction by taking proceedings in their own right
under sections 397 and 398. The result would be that on this
construction the exceptions to the rule in Foss v. Harbottle (1)
(1843) 2 Hare 461., would be enlarged beyond the three well
recognized exceptions and whenever any transaction is entered
into by a company with a third party which is part of
oppressive or prejudicial conduct on the part of those in

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management of the affairs of the company, it would be liable

to be challenged at the instance of the aggrieved shareholders.
Now could the legislature have intended to being about such a
result which would have the effect of almost abrogating the
rule in Foss v. Harbottle (1) (1843) 2 Hare 461. in so far as
transactions with third parties are concerned? Could the
legislature have intended to strike a death-blow to the rule in
Foss v. Harbottle (1) (1843) 2 Hare 461. which has held the
field now for well-night over a hundred years and that too in
this indirect manner? I should be certainly slow to accept a
construction which would have the effect of producing this
consequence.

33. Not only would this consequence ensure but also the basic
and fundamental principle on which the three well recognized
exceptions to the rule in Foss v. Harbottle (1)(1843) 2 Hare
461. have been evolved would be completely set at naught. In
all cases falling within the three well-recognized exceptions to
the rule in Foss. v. Harbottle (1) (1843) 2 Hare 461. the
aggrieved shareholders can sue a third party but that is
permitted to be done merely as a matter of procedure ; the
cause of action on which they sue is a cause of action properly
belonging to the company, but since the persons in control of
the management of the affairs of the company are themselves
the alleged wrong-doers and will not, therefore, permit an
action to be brought in the name of the company, the
aggrieved shareholders are permitted to enforce the cause of
action belonging to the company. But if the construction
contended for by Mr. S.B. Vakil were accepted, the result
would be that though a company may have no cause of action
to sue a third party to set aside a transaction entered into by
the comp1any with such third party, the aggrieved
shareholders would be entitled to move the court and at the
instance of the aggrieved shareholders the court would be
entitled to set aside such transaction, provided only that such
transaction was part of oppressive or prejudicial conduct on

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the part of those in control of the management of the affairs of

the company. The aggrieved shareholders would in that event
have a cause of action of their own and in taking proceedings
under section 397 or 398, they would be enforcing their own
cause of action and not a cause of action belonging to the
company. One might well ask the question: Did the legislature
intend to confer such a new cause of action on individual
shareholders against third parties so as to entitle them to set
aside transactions which the company could not? I think not. If
such were the intention of the legislature, I should have
expected appropriate language and not language indicative
only of preventive relief .

34. Another question also arise on the construction advocated

by Mr. S.B. Vakil and it is difficult to find an answer to that
question. If sections 397 and 398 are intended to confer a new
cause of action on individual shareholders to set aside
transactions entered into by the company with third parties, on
what ground are those transactions liable to be impeached? No
clue to the answer to this question is furnished by the sections
save and except that the transactions would be liable to be set
aside if they are part of a continuous and continuing course of
oppressive or prejudicial conduct on the part of controlling
shareholders. But this would mean that individual shareholders
would have a right to ask the court to set aside any transaction
entered into by the company with a third party on the mere
ground that such transaction, though otherwise perfectly legal
and valid and hence, incapable of being avoided by the
company, was oppressive to the complaining shareholders or
prejudicial to the interests of the company. Such a view would
make it impossible for any outsiders to deal with the company
and far from advancing the interests of the company would be
clearly detrimental to the interests of the company, for it would
scare away persons dealing with the company. How would an
outsider dealing with the company know or even have the
means of knowing whether the affairs of the company are

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being conducted in a manner oppressive to some part of the

shareholders or prejudicial to the interests of the company?
The result would be that having entered into a transaction
perfectly lawful and valid with a company, an outsider may
suddenly discover one fine morning that his transaction is bad,
because it was oppressive to some part of the shareholders or
prejudicial to the interests of the company. Peffected titles to
property would on this construction be rendered uncertain.
Could the legislature have intended to bring about such a
result? The answer to my mind is plainly no.

35. Mr. S.B. Vakil sought to support the construction suggested

by him by relying on section 402which particularizes, without
prejudice to the generality of the powers under section 397 or
398, what orders may be made by the court under either of
the two sections. Mr. S.B. Vakil pointed out that section
402 enumerated by way of illustration the different kinds of
orders which may be made by the court under section 397 or
398 and contended that clauses (e) (f) of section 402 clearly
showed that a transaction entered into bay company with a
third party could be set aside or interfered with by the court
under section 397 or 398. The particular orders specified
in section 402 as orders which may be made by the court
under section 397 or 398 were, argued Mr. S.B. Vakil,
illustrative of the kinds of orders which could be made by the
court and since clauses (e) and (f) of section 402 provided for
making of orders setting aside or interfering with transactions
between a company and third pafties in certain specified cases,
it was obvious that the power of the court under section 397 or
398 extended to making of an order setting aside or interfering
with transaction between a company and a third party
provided that the other conditions of the section were satisfied.
This contention, though at first blush attractive, is, in my
opinion, fallacious and for several reasons."

559, Now the interesting part under new regime that Companies
Act, 2013, the Section for oppression and the section for

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mismanagement have been abridged into one section making just

and equitable ground applicable to both scenarios, i.e. for
oppression as well as mismanagement. The scope that was open for
more than 60 years, i.e. from 1956 to 2013 for making out cases
under the caption of mismanagement without proving a ground for
winding up under just and equitable principle. It is not that
something new has come in in the regime of 2013 Act, indeed the
position that was in existence from 1951 to 1956 has been restored
under 2013 Act. Now it is not opened to any member to raise
mismanagement ground saying that since mismanagement has
been proved relief is to be granted. Now twin conditions have to be
proved for mismanagement, i.e. mismanagement as well as ground
for winding up under just and equitable ground.

56O. Right of minority shareholders as against majority rule is

paradoxical to each other; it is an anathema to each other, but
beauty of dispensation of justice lies in employment of law and
seamless application of contrast concepts to the conspectus of
given facts to meet the ends of justice. .Justifying these two given
concepts is somewhat uphill task because governance by majority
is a rule; protecting minority from majority is an exception, in fact
minority protection is an occasional departure devised when
majority rule has become a ruse to aim at decimation of minority.
Rightly so, because there is no place to majority, for that matter to
anybody, to selectively use their authority to solely decimate the
minority and erosion of their economic interest and their
expectations with which they remain in the company. This
exception is to be examined on the fulcrum of fairness doctrine.
This fairness doctrine has to be applied only when majority rule is
deployed solely to cause prejudice to the minority shareholders.
However, the primordial thing to be looked into is, the doctrine of
majority rule should not be truncated by getting carried away by
the exception of protection to minority despite the given facts are
short of unfairness or prejudice against the minority shareholders.
What is unfair or prejudice all turns on the facts of the case. What
is oppression or unfairness or prejudice, how much is oppression or

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unfairness or prejudice depends on the injury caused to wronged

party by the wronging party as envisaged under section 241 of the
Act, not otherwise.

561. The problem is Mr. Cyrus was taken as Executive Chairman to

preside over the Board of Directors, he could not become a
sovereign authority over this company because the superior body in
any company is at first level the shareholders, thereafter, Board of
Directors elected by those shareholders. As long as those Board of
Directors are not removed and as long as they work within the
powers endowed upon them to manage the affairs of the company,
there can't be any sovereign concept in corporate structure, it is a

collective responsibility of the Board of Directors and their actions

are accountable to shareholders of the company. Even though
Executive Chairman was appointed by Board of Directors, one point
to be remembered is, it is not a position elected by the
shareholders. Though Executive Chairman takes a lead in taking
decisions but every such decision in respect to policy issues or an
issue that requires Board of Directors approval, it has to go through
the Board of Directors only. Executive Chairman post is not an
elected post; therefore, every action of the Executive Chairman is
amenable to the Board of Directors. So is the case in Tata Sons
also. It is like an Agreement of employment for five years.

562. On reading the plaint and the reply of Mr. Cyrus, it is

ascertainable that Mr. Cyrus, according to him joined as Executive
Chairman under the assumption that he was given free hand to run
the affairs of the company. To agree with this argument, there
should be an understanding or an Agreement to show that
Mr. Cyrus joined as Executive Chairman with a liberty to handle the
affairs of the company as per his wish, but no such indication or
something in writing reflecting that Mr, Cyrus was given free hand
to run the affairs of the company as he wishes.

563. The very idea Mr. Cyrus assumed in his mind that he was
given free hand to run the affairs of the company is incongruous to
the corporate governance and corporate democracy. Until before

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one-man company has come into under Companies Act, 2013,

there should not be less than two persons in the Board of Directors
and they should come to an agreement to take a decision in respect
to any of the affairs of the company. Such being the ethos of the
company structure, Mr. Cyrus could not even by imagination expect
free hand in running the affairs of the company.

564. For Mr. Cyrus started his journey as an Executive Chairman

under the impression that he was given free hand or would be
given free hand to run the affairs of the company, perhaps caused
all these problems because he was obsessed with an idea that he
alone would lead the company and others to remain assisting him
in running the company. Adminlstration of the affairs of the
company is the collective responsibility of all the directors except
some actions day in and day out dealt with by the Executive
Chairman. Perhaps since he saw Mr. Tata working as Executive
Chairman, he might have gone into the mind that he would exercise
the powers as Mr. Tata exercised forgetting the fact that Mr. Tata at
that point of time had two hats, one, as the Chairman of Tata
Trusts holding majority shareholding of Tata Sons, two, as the
Executive Chairman of the company, but that is not the case with
Mr. Cyrus. By the time when Mr. Cyrus came, he came as an
employee to the company not with another hat that Mr. Tata had
while he was working as Executive Chairman.

565. Though the position of Executive Chairman, by virtue of its

position looking as if he is head of the company, he is in fact
accountable to the Board of Directors, who are elected by the
majority shareholders. Any company that comes with an objective
to run a business for profits, every company will have its own ideals
and way of approach. This normally comes from promoters of the
company, the people whoever coming to the company, they come
into the company with implicit understanding that they have to pit
into the ideals and approach of that company. To take those ideals,
values and objectives to its zenith, the Board of Directors keep
working in that line. Every business house will have its own line of
working culture, as no two men are same, the businesses also

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though working on the objective of earning profit, every business

entity will have its own way of working. This world is a large
community keep working together at times with known persons at
times with strangers, over a period of time, every business will
have its own clout around it, its own peripheral businesses, nobody
can bring any person from some other planet to prove that the deal
is at arm's length. The only test to prove that every deal is at arm's
length is as to whether standard due diligence that is required to be
taken is taken or not. While doing business transactions, a company
cannot keep changing its customers or traders or manufacturers on
the footing that they had a deal with them in the past. When people
working together for a long time, trust level will also keep
increasing, of course there would be one-two issues where things
happen otherwise also. With this, we hold that this free hand rule
concept is an antithesis to collective responsibility and collective
decision making.

566. Section 241-242 is a jurisdiction where ordinary jurisdiction

could not reach, for that reason only it is called extra ordinary, it is
a jurisdiction not about declaration of what is legal and what is
illegal, it is a jurisdiction to test the fairness of actions. Under this
jurisdiction, Advocates committed to put forward the cause of their
clients may take sides to justify the case of their clients, but
whereas Court cannot take sides, more specially in this jurisdiction,
what action is done in relation to the affairs of the company is
important, not who has done what. If such action is proved in
relation to the affairs of the company then it has to be seen
whether it has been done in the course of conducting the affairs of
the company or not, if that is so, then to prove that such action is
oppressive/prejudicial to the interest of the shareholders and then
to the interest of the company. Paramount concern to the Court is
the interest of the company, in the event if any act is prejudicial to
the interest of the company, or to any of the members, it has to be
seen how to bring to an end by passing a preventive relief. This
entire jurisdiction revolves around justness and fairness in
conducting the affairs of the company which amounts to cause

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prejudice either to the Petitioners or to the company, after having

proved all these, it is also imperative on the party to see as to
whether such actions causing prejudice either to the company or to
the Petitioners, then to indicate grounds for winding up on the
ground of just and equity. Finally, before granting relief in this case
another requisite to be accomplished that such winding up of a
company on just and equitable ground would unfairly prejudice
such member/members. If this whole process is through, then only
a relief could be passed under oppression and mismanagement.
Though jurisdiction is on equity, it has to be proved as envisaged in
these two Sections, there cannot be any compromise in
ascertaining as to whether grievance is potential enough to grant
relief under Section 242 (2) of the Act, 2013. The reason behind
such strict proof is, the grievance falling under this Section cannot
be taken as grievance to any Civil Court because to get a relief
under Civil Court it has to be proved that action is not in
compliance with law. It does not mean that this Section does not
permit to seek relief over an action which is unlawful. It is only said
to give emphasis that whether action is legal or illegal, if such
action is coupled with unfairness, then certainly it will fall under this
jurisdiction provided such action meets all the requisites mentioned
under Section 24t and Section 242(l) of the Act, 2013. If action is

illegal, remedy is available under Civil Court jurisdiction, if action is

legal, but not fair, since relief being asked basing on the test of
fairness, especially when action is legal, Court shall be more careful
in granting such relief because over a period of time, it has been
umpteen times said what could be fair and unfair in respect to this
subject matter. In a layman language it could be said, as I already
mentioned once or twice in this order itself, that when any two
persons enter into an agreement to do something, they enter into
such agreement, oral or written, with explicit terms or with
expectations with which they started working together. These
terms, conditions and expectations normally known to each other
right from the beginning, if they are not known to each other, one
person cannot later surprise other with his assumed expectations.
Fairness is as simple as this. The action which is'not fair'or'unfair'

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should be prejudicial to the interest of a member. Normally the

actions which are prejudicial to the company are siphoning, acting
in conflict with the interest of the company, etc. Of course, if you
go to the fundamentals of prejudice to the company are also based
I say is mere unfairness of the action is not
on unfairness. What all
enough it must be prejudicial either to the Petitioners or to the
company. It
may be said that prejudicial action will not amount to
have caused harm to the aggrieved, but such action is potential
enough to to a member or company. For that
cause prejudice
reason only, the heading of this Chapter is also mentioned as
"Prevention of Oppression and Mismanagement", so that if at all
any action is prejudicial, potential enough to cause harm to the
member or the company as envisaged in the Sections, preventive
relief could be granted, normal relief that is granted in most of the
oppression and mismanagement cases, if oppressio n/prej ud ice is to
the members, especially to the minority, the Courts so far provided
is exit remedy on fair valuation of the shares of the aggrieved
member.

567. It is an argument from the Petitioner side that the Petitioner

need not proceed against subsidiaries or group companies, whereas
the Respondent side says when actions of the subsidiaries are
impugned they have to be necessarily made as parties to the
proceeding. If this point is pragmatically approached, it can be said
if the actions in a wholly owned subsidiary are impugned as acts
prejudiclal to one of the shareholders of the holding company and if
the management of the holding company and subsidiary is one and
the same, then there could be a possibility that the persons in
action being one and the same, there can be a possibility to
examine as to whether such action is prejudicial to the member of
the holding company, except this situation, to my understanding it
is not possible construe something that has happened in a
to
subsidiary which is managed by a different Board as an action
prejudicial to the member of the holding company, it has to be
examined independently either along with the holding company as
Respondent in the same proceeding or different proceeding' The

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disadvantage in our system in contrast to UK system is, as far as

my knowledge goes by seeing various decisions of UK Courts, there
trial takes place to prove the actions impugned, therefore, there is
a chance to examine every issue threadbare but here, since we are
going by the sworn Affidavits placed by the parties, we mostly rely
upon admitted facts, if the facts are not admitted, a letter or
something written by third party is taken into consideration to
decide an issue, there is every possibility to deviate from the truth
because facts available are assumed facts, not admitted facts. Third
party statements cannot be taken as material having evidentiary
value for two reasons, (i) his interest is not involved in a dispute
between two persons, (ii) he is not before Court of Law to ascertain
as to such statement is true and correct, if so, such statement has
any relevance over the issue impugned before the Court of Law.
Before arriving to a conclusion as to whether impleadment of
subsidiaries is essential or not, I must say most of the companies
are not at all subsidiaries of Tata Sons they are only associate
companies or having shareholding by Tata Sons. If at all we go by
this argument, since Mr. Cyrus continued as a Non-Executive
Chairman of most of the group companies, he is more answerable
than anybody else to the issues of the group companies. However,
the Petitioners having raised the group companies issues without
making them as Respondents, adjudication on such business
decisions without making the bodies taken such business decisions
is nothing but deciding issues without hearing the party who
actually conducted the affairs of such group companies. The
Petitioner proceeded with this case for more than one year, argued
on maintaina bility, argued on waiver, argued on main petition but
has not filed any application for impleadment of those group
companies as parties to this proceeding. In view of these reasons,
non-joinder of such parties is fatal to this case. It is, as per Section
24! also, necessary to implead the company whose affairs have
been impugned in the proceeding. It is one fatality out of many
fatalities writ large in this case.

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568. If you examine this case, the Petitioners mostly relied upon
statements of third persons rather than the facts admitted against
each other. The risk lying in entertaining such cases is that there is
a chance of arriving to a conclusion without ascertaining truth in
those facts, therefore, in view of the above reasoning, on the
believable facts available, we have not found any truth in the
allegations made against Mr. Tata, Mr. Soonawala and the other
Respondents.

569. In this case, the Petitioners main argument ls that Mr. Tata
has close relationship with Siva, Mehli, Bhattacharya and many, by
seeing such deals with them, could it be said that the transactions
with them are not at arm's length only because they know each
other. To my mind, it is not so. The test to see whether such
transactions are arm's length or not is by measure out as to
whether any fraud is involved, as to whether any dealing is there,
as to whether unlawful gain is there, as to whether standard
practices that are to be followed are not followed, without seeing all
those things, we cannot jump from seeing closeness between two
persons to a conclusion that the deal in between them is not at
arm's length, not for the benefit of the company. It is very easy to
say to anybody, had it not been like this, it would have been like
that. What business is right, what business is not right, is a
business judgement. A decision to one person looks like a decision
taken at hindsight, the same decision looks to somebody else as a
decision taken at foresight, it all depends upon the perception of a
person. Perception differs from person to person. Moreover, money
belongs to the shareholders, they are the best judges what is right
to them, as to minority, the only rlght left to minority is either to
sail with them or to part with them provided there is an action
prejudicial to the interest of them as enunciated under section 241
&242, not otherwise, not otherwise because company is an entity,
whatever goes to the kitty of it, no shareholder will have any
exclusive right over the asset of the company, except aggregate
rights, which are called shareholders rights. Courts are mindful of
the fact that the business judgments are very complex dependent

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on various external factors, therefore, unless and until all elements

that are mentioned under 247-242 are complied with, no relief will
be passed. It is not like Civil Court that once it is in violation an
order is invariably to be passed, knowing well business will have so
many complexities, the discretion is still left to the Court to pass a
relief only on satisfaction of it. Every equity relief is a discretionary
relief; it has to be in alignment with justice to be done in the facts
of that case.

570. What situations were in existence at the time Mr. Tata

entered into Corus were known to him likewise what happened in
Nano everybody knows. It is not that all business judgements
would click and pump in money into the company, some fail, some
succeed. Sometime before when maintainability issue was decided
it was already said no magic wand is present in the hands of
Mr. Tata. They are all past and concluded acts. Right, they may be
continuing still now, but Mr. Cyrus did all along about the same
issues which he yelled out as legacy issues. Is there any one
instance where Mr. Tata said no to the proposal raised by Mr.
Cyrus. Not even one, if at all he said no to something Mr. Cyrus
proposed, then there would be an occasion to see who has to take
a call whether a majority has to take a call through its vote or the
Executive Chairman merely appointed by the Board of Directors.
The crucial aspect that should be remembered is in corporate
democracy, decision making always remain with Board of Directors
as long as they enjoy the pleasure of the shareholders. Likewise,
even Executive Chairman will also continue as long as he enjoys the
pleasure of the Board of Directors.

571. The Shadow Director concept is recognized by the Companies

Act, 2006 of United Kingdom, though the same has not been
incorporated in the Companies Act 1956 or Companies Act, 2013 it
has been included in the definition of "officer who is in default" to
extend punishment to any person in accordance with whose advice,
directions or instructions the Board of Directors of the company is
accustomed to act, other than a person who gives advice to the
Board in a professional capacity. It is included solely to identify the

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person who defaulted in doing something that is ought to be done

under Companies Act. In section 2 (60), the person directing the
Board of Directors to do something that is punishable under the
Companies Act is also defined as "officer in default". I am afraid
that action of such person shown as officer in default under section
2 (60) of the Companies Act, 2013 causing default through the
Board of Directors cannot be treated as an action falling under
Section 241 and 242 of the Companies Act, 2013.

572. The Petitioners all along referred Mr. Tata as well as Mr.
Soonawala as Shadow Directors causing Nominee Directors to
influence the Board in getting their wish done.

573. The Petitioners' Counsel relied upon an English Case in

between Secretary of State for Trade and Industry vs Deverell
and Anr.(2 WLR 9o7)-Court of Appeal Judgement dated 7999
Nov. 9, 10, 11; Dec 27, to say that it is not necessary that the
shadow directors influence was exercised to the whole of its
corporate activities; that the Court has to ascertain objectively in
the light of all evidence whether any particular communication from
an alleged shadow director, whether by words or conduct was to be
classified as adirection or instruction; that, while it would be
sufficient to show that in the case of directions or instructions from
the alleged shadow director the properly appointed directors or
some of them task themselves in a sub-servient role or surrender
their respective discretions, it was not necessary to do so; that the
judge, in looking for the additional ingredient of the sub-servient
role or the surrender of discretion by the Board, had imposed a
qualification beyond that justified by the statutory language; and
that on the facts found by the judge, D and H were both shadow
directors of the company and were fit to be a director of the
company and disqualification orders were made against them.

574. On reading the above judgement, we have observed that it is

not a case filed under Section 459 of the Companies Act, 1985, nor
under Insolvency Act, it is only a case decided under Section 6 of
the Company Directors Disqualification Act, 1986 for the deliberate

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deception of and concealment from ABTA of this involvement in the

management of the company; the deception of Civil Aviation
Authority, and trading whilst insolvent. Since the persons referred
in that case being involved in doing something unlawful, they were
punished under the Act mentioned thereof. Even as I mentioned
above, though not named as Shadow Director, the people doing
such things are being covered under the caption of "officer who is in
default" in Companies Act, 1956 as well as Companies Act, 2013.
Identifying somebody as a shadow director and punishing him
under some other enactment, cannot be equated to dispensation of
justice on altogether different parameters. The meaning of shadow
director itself indicates that he is a
person indirectly does
something which causes another to act which is unlawful or not
permissible under law. Therefore, the concept of shadow Director
cannot be equated to the advices and suggestions given by Mr.
Tata and Mr. Soonawala, moreover the word shadow itself indicates
as something done lurking behind, normally this term is used only
when foul play has taken place by the advice of somebody. If
shadow director concept is taken into consideration the person to
whom such advice is given should have done something causing
harm to somebody else. Moreover, when section is clear that
actions of the management in relation to the affairs of the company
alone will become a causative factor to invoke section 241,
something else cannot be lifted from some other section of law to
read into the section to be applied in a given case. In the definition
of officer in default it is not that shadow director will be punished
and real directors will not be punished, both of them will be
punished for committing some unlawful act. It is a concept that has
come into existence not to leave the real culprit scot free. When
any culpable act has been done, to keep the society in order, the
person abetting somebody to act will also be imputed with charges.
It is known that Companies Act is inclusive of civil law and criminal
law as regard to the violations of Companies Act therefore by
looking at a provision taking action basing of the culpability of a
person cannot be dragged into the concept of oppression and
mismanagement, therefore the petitioners and Mr. Cyrus dragging

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Mr. Tata and Mr. Soonawala advices and suggestions as shadow

director action deserves no merit to be treated as actions falling
under section 24L and 242 of the Companies Act, 2013. In view of
the same the ratio above decided is not applicable to the present
case.

575. Regarding leakage of information by Mr. Cyrus to the outside

people, the answering respondents submit that soon after Mr. Cyrus
was replaced as Executive Chairman of the company, he made
unsubstantiated allegations casting aspersions not only on Tata
Sons but also other Tata Group companies revealing confidential
information of the Tata Sons and its group companies such as
writing a mail on 25.10.2016 making personal allegations against
directors discussing every issue in respect to Tata Sons and its
group companies addressing to Tata Sons directors, but this
information has not remained restricted to the directors, though it
has been labelled as confidential, this has simultaneously come in
the media. For instance, the answering respondents counsel
submits, the petitioners did not redact the references to the
proposed transactions involving Tata AIA Life Insurance Co. Ltd.
and PNB Metlife Insurance Co. India Ltd., which led to protest by
PNB Metlife Insurance Co. India Ltd. regarding the manner in which
confidential details of an impending business transactions were
made public and has exposed Tata Sons to potential legal actions
on account of breach of the non-disclosure agreement with PNB
Metlife. Besides this, the counsel says Mr. Cyrus on his own,
provided information to Income Tax Department after he was
removed as Executive Chairman, even after the assessment for the
relevant year has been closed on 3L.L2.2Ot6. When this was put to
Mr. Mistry why such information was sent to Income Tax Authority,
his advocate on 05.01.2017, instead of answering what triggered
Mr. Cyrus to send information to Income Tax Authority, wrote that
the answering respondent could not escape the legal consequences
of violating tax compliances which clearly demonstrates the hostility
Mr. Cyrus bears towards the directors of Tata Sons. Mr. Cyrus did
not stop at there, he further directly submitted to DCIT along with

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four box files containing several documents though he was not

authorized to submit such information to DCIT, it so happened that
Tata Sons was compelled to inform DCIT vide its letter dated
26.12.20t6 informing that Mr. Cyrus's letter and information is
motivated and distortion of the facts relating to the management of
Tata Sons and the true nature of the relationships between Tata
Sons and its stakeholders. When this onslaught was continuing, on
having Mr. Cyrus revealed information in relation to PNB Metlife
india Insurance Co. Ltd., Metlife wrote a letter to Tata AIA Life
Insurance Co. Ltd. on 27.t2.2016 informing that they were
disappointed to see the confidential consideration of a possible
transaction publicized as part of the ongoing events of Tata
company, and PNB Metlife shareholders were concerned about the
potential impact on their business.

576. There is no befitting reply to any of these allegations except

saying that they gave information to DCIT so that Mr. Cyrus would
not be penalized for non-compliance of filings with Income Tax
authorities for he was continuing as one of the directors of the
company. As to leakage of his confidential letter dated 25.10.2015
sent by email, the reply is so irrational that he could not explain
away leaking email correspondence to outsiders except the person
who has been using such email id.

577. On reading the assertions and denials in respect to leakage, it

is evident that the information that was not known to any outsiders
in respect to Tata Sons and its group companies, because of this rift
in between Cyrus and the board of Tata Sons, the business
transactions of Tata Sons became public for the letter captioned as
confidential simultaneously came to media and the same not been
denied either by the petitioners or by Mr. Cyrus, the fact of this
information coming out after Mr. Cyrus was removed on
24.70.2076 is undeniable. The only fact that Mr. Cyrus counsel
denied is that Mr. Cyrus did not reveal that information. When that
confidential information was admittedly come from Mr. Cyrus's mail
id, the burden lies upon Mr. Cyrus to prove that it was not leaked
from his side, but no such efforts has been made by either by the

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petitioners or by Mr. Cyrus to prove that this information was not

leaked by him. According to law, a fact admitted as done results
into another action, such other action presumed to be remained in
the special knowledge of the person done first act, it could be
inferred as done by him only as envisaged under section 106 of
Indian Evidence Act unless it has been disproved that fact of
leaking information is proved as done by somebody else. In view of
the same, for Mr. Cyrus has not made any effo rt to show that
somebody else leaked that email, it is to be construed that it is
done by Mr. Cyrus only. Here in this case, since the letter dated
25,10.2016 came from Mr. Cyrus through email and the same not
been disproved that it has not been leaked from his end, it has to
be held that it was leaked by him only. With such presumption, we
hereby hold that the information letter dated 25.10.2016 about
hotel issue, Tata Capital issue, DoCoMo issue, Airlines issue, is
leaked by Mr. Cyrus to the media, in the same line, we further hold
that Mr. Cyrus sent Tata Sons information to DCIT, though he was
not continuing as Executive Chairman at the time when he sent
such information to the DCIT without even putting it to the
responsible officers of the Tata Sons. In view of these two reasons,
we hereby hold that Mr. Cyrus perhaps by virtue of being removed
as Executive Chairman, leaked the information above, forgetting
that he was giving out Tata Sons information, whose affairs today
Mr, Cyrus impugned before this Bench, to the outsiders, which does
not go well to the company. Whatever be the differences, as long
as Mr. Cyrus continuing as one of the directors along with others as
on the date the aforesaid episode happened, he should not have
divu lged the information at least for the sake of fiduciary
obligations cast upon him.

578. All these things, according to the answering respondents led

the board to initiate proceedings for removal of him as director of
the company on 06.02.2OL7.

579. The Petitioners counsel has made a long argument to impress

upon this Bench that the correspondence, letters or advices that
have come from Mr. Tata and Mr. Soonawala as interFerence to the

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affairs of Tata Sons, it has been answered at various places in this

order that the letters that have come from Mr. Tata and Soonawala
are their inputs to the company, that too most of the times Mr. Tata
and Soonawala gave suggestion on being solicited, it was already
held that it
was not an interference, moreover, such advices or
suggestions either on being solicited or not being solicited, first - it
would not fall within the ambit of conducting the affairs of the
company, two - it was Mr. Cyrus who administered the company
until before the removal, therefore no act in respect to the
company which was not translated into the action could not be
called the conduct in relation to the affairs of the company. Besides
this, when Mr. Cyrus himself was privy to every action in relation to
the company, neither Mr. Cyrus nor the petitioners could say that
Mr. Tata and Mr. Soonawala giving some suggestions would amount
to interference in relation to the affairs of the
company. as I
already said the meaning of interference, when anybody gets into
the affairs of somebody else then it would be called as interference.
May be Mr. Cyrus was under the impression that the affairs of Tata
Sons are not related to Mr. Tata and Mr. Soonawala, when
somebody goes into such assumption, then only it appears to them
as interference. As we all know, Mr. Tata is the Chairman of
majority shareholders of the company, Mr. Soonawala is one of the
Trustees of the Trust, for their interest being more than anybody
else, as long as their suggestions are not fraught with malafides, it
has to be treated as the advice and suggestions for the benefit of
the company not as an interference. This company has run for more
than 100 years; it was headed by Mr. Tata for more than 12 years.
Tatas dedicated not only their fortunes but their lives as well for the
good of the society by giving everything to the Trusts, Mr. Cyrus
and the petitioners should have been more careful in making
allegations against the Trusts and the people working for it.
Whenever any 241-242 proceedings are initiated, it should not be
to dig out mountain to get a mole as to whether any actions are
there falling under section 247 or 242, it must be manifest enough
to any bystander to feel that something harm has been done to the
economic interest of the aggrieved member, it must be

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unconscionable conduct, not by holding out some suggestions as

interferences.

580. There has been another argument beyond interference

argument i.e. tone and tenor argument emphasizing the language
used in the correspondence of Mr. Tata and Mr. Soonawala, not the
content of the letters, I wonder from where to where this case is
going, initially in the Company Petition they tried to highlight
purported legacy issues and removal of Mr. Cyrus as Executive
Chairman as grievances falling under section 241, but when it has
come to argument it has been expanded to removal of Director and
conversion, as to these two issues, it is conceivable that it is
possible to raise those points as issues before this Bench but
whereas these petitioners went even beyond that making advlces
and suggestions of Mr. Tata and Mr. Soonawala as interference
falling u/s 241-242. The petitioners have also come out with
another new argument i.e. existence of articles itself is per se
oppressive and prejudicial to the petitioners, finally it has been
pepped up to tone and tenor argument to emphasize that language
used by Mr. Tata in his letters to Mr. Cyrus as actions falling under
section 24L-242 of the Companies Act, 2013, in spite of the best
efforts the counsel made arguing no case as big case, we are
unable to make out anything from their arguments to believe that
the actions impugned are covered within the ambit of section
241/242 of the Companies Act, 2013.

581. In view of the same, we have summarized the findings of us

as follows:

a) Removal of Mr. Cyrus Mistry as Executive Chairman on

24.tO.2076 is because the Board of Directors and Majority
of Shareholders, 1.e., Tata Trusts lost confidence in
Mr. Cyrus as Chairman, not because by contemplating
that Mr. Cyrus would cause discomfort to Mr. Tata,
Mr. Soonawala and other answering Respondents over
purported legacy issues. Board of Directors are competent
to remove Executive Chairman; no selection committee

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recommendation is required before removing him as

Executive Chairman.

b) Removal of Mr. Cyrus Mistry from the position of Director

is because he admittedly sent the company information to
Income Tax Authorities; leaked the company information
to Media and openly come out agalnst the Board and the
Trusts, which hardly augurs well for smooth functloning of
the company, and we have not found any merit to believe
that his removal as director falls within the ambit of
section 241 of Companies Act 2013.

c) We have not found any merit to hold that proportional

representation on Board proportionate to the shareholding
of the petitioners is possible so long as Articles do not
have such mandate as envisaged under section 163 of
Companles Act, 2013.

d) We have not found any merit in purported legacy issues,

such as Siva issue, TTSL issue, Nano car issue, Corus
lssue, Mr. Mehli issue and Air Asia issue to state that those
issues fall within the ambit of section 247 and 242 of
Companies Act 2013.

e) We also have not found any merit to say that the

company filing application under section 14 of Companies
Act 2013 asking this Tribunal to make it from Public to
Private falls for consideration under the jurisdiction of
section 247 &.242 of Companies Act 2013.

f) We have also found no merit in saying that Mr. Tata & Mr.
Soonawala giving advices and suggestions amounted to
interference in administering the affairs of the company,
so that to consider their conduct as prejudicial to the
interest of the company under section 241 of Companies
Act 2013.

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g) We have found no merit in the argument that Mr. Tata

and Mr. Soonawala acted as shadow directors
superimposing their wish upon the company so that action
to be taken under section 241 & 242 of Companies Act
2013.

h) We have not found any merit in the argument that Articles

75, 1048, 118, 121 of the Articles of Association per se
oppressive aga inst the petitioners.

i) We have not found any merit in the argument that

Majority Rule has taken back seat by introduction of
corporate governance in Companies Act, 2013, it is like
corporate democracy is genesis, and corporate
governance is species. They are never in conflict with each
other; the management is rather more accountable to the
shareholders under the present regime. Corporate
governance is collective responsibility, not based on
assumed free-hand rule which is alien to the concept of
collective responsibility endowed upon the Board.
j) We have observed that prejudice remedy has been
included in 2013 Act in addition to oppressive remedy
already there and also included application of "just and
equitable" ground as precondition to pass any relief in
mismanagement issues, which was not the case under old
Act.

582, For the reasons afore said, we hereby dismiss this company
petition by closing applications if any remain pending. No costs.

5J r- )ct''
V. NALLASENAPATHY B.S.V. PRAKASH KUMAR
MEMBER (TECHNTCAL) MEMBER (JUDICIAL)

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