Under Section 241 to 243 of the Companies Act, at any point, if a certain set of minority shareholders feel that they have been trampled by the majority, they can always seek redress for it, says Anil Singhvi, Chairman, Ican Investment Advisors. Excerpts from an interview with ETNOW.
At this point of time there is no provision in the law that grants any rights to NCLAT to reinstate Cyrus Mistry as a chairman and neither is Cyrus Mistry saying that since he is 18% shareholder, he deserves a seat on the board. Would you agree that there is nothing in the Company’s Act now that grants the Mistry camp any power as such?One has to look at it very differently. The Supreme Court granted stay on certain parts of the NCLAT order and not on the entire order. So first and foremost, SC has not stayed the entire order. Secondly, Cyrus Mistry’s claim for two board seats is more by way of a convention than by way of right which was embedded into the article.
But having said this, under Section 241 to 243 of the Companies Act, at any point, if a certain set of minority shareholders feel that they have been trampled by the majority, they can always seek redress for it. It is not necessary that everything has to be embedded into the articles and that is why the law is made for.. What Cyrus is asking today is definitely under the same sections of the Companies Act.
It is not only a question of mismanagement, even if any act of the company is oppressive towards minority shareholders, they can seek this kind of remedial measures. So the Supreme Court today only on admission stage of this appeal, has granted certain situations.
In fact, Mistry has said that he does not want to be back as chairman of Tata Sons. Even if NCLAT has given the order that he should be reinstated, the reinstatement is essentially for him to become a director of Tata Sons. The post of chairman is not a subject matter of even shareholders. Chairman is selected by directors from among themselves. But Mistry is seeking to be on the board of Tata Sons as the Mistry family owns 18% shares. He is seeking this as a minority shareholder.
It is the interpretation of law that is at stake here — whether there is an oppressive situation because they have amended articles and have converted Tata Sons from a private limited company to a public limited company. Mistry is seeking some remedial measures on that.
You brought up Section 241 and 243 of the Companies Act. Would the burden of proof lie on the minority shareholders? Would the Mistry camp have to prove that there has been oppression, mismanagement of the minority shareholders?
Sections 241 and 243 are there for the protection of the minority. Whenever minorities feel their rights have been trampled and they have been squeezed out by the majority, they can always seek remedial measures. Corporate democracy demands most decisions have to be majoritarian but should any decision be taken by the board which tramples the minority shareholders, 241, 243 are the remedial measures given by the law.