# TATA CONSULTANCY SERVICES LIMITED v. CYRUS INVESTMENTS PVT. LTD. AND ORS

- **Citation:** [2021] 12 S.C.R. 903
- **Court:** Supreme Court of India
- **Decided:** 2021-03-26
- **Case number:** Civil Appeal Nos. 440-441 of 2020
- **Bench:** S.A. Bobde, A.S. Bopanna, V. Ramasubramanian
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/tata-consultancy-services-limited-v-cyrus-investments-pvt-ltd-and-ors-35212
- **Pages:** 168

## Headnote

Companies Act, 2013 - ss. 241 and 242 - Held: The sine qua
non for invoking s.241 is that the affairs of the Company should
have been conducted or are being conducted in a manner
oppressive or prejudicial to some of the members - In a petition u/
s.241, the Tribunal cannot ask the question whether the removal of
a Director was legally valid and/or justified or not - The question
to be asked is whether such a removal tantamount to a conduct
oppressive or prejudicial to some members - Even in cases where
the Tribunal finds that the removal of a Director was not in
accordance with law or was not justified on facts, the Tribunal
cannot grant a relief u/s.242 unless the removal was oppressive or
prejudicial - There may be cases where the removal of a Director
might have been carried out perfectly in accordance with law and
yet may be part of a larger design to oppress or prejudice the interests
of some members - It is only in such cases that the Tribunal can
grant a relief u/s.242 - The validity and justification for the removal
of a person can never be the primary focus of a Tribunal u/s.242
unless the same is in furtherance of a conduct oppressive or
prejudicial to some of the members - On facts, the removal of a
person from the post of Executive Chairman cannot be termed as
oppressive or prejudicial -The original cause of action for the
complainant companies to approach NCLT was the removal of CPM
from the post of Executive Chairman - Though the complainant
companies padded up their actual grievance with various historical
facts to make a deceptive appearance, the causa proxima for the
complaint was the removal of CPM from the office of Executive
Chairman - His removal from Directorship happened subsequent
to the filing of the original complaint and that too for valid and
[2021] 12 S.C.R. 903
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justifiable reasons and hence NCLAT could not have laboured so
much on the removal of CPM, for granting relief u/ss.241 and 242.
Company Law - Held: Company Tribunal is not a labour
Court or an administrative Tribunal to focus entirely on the manner
of removal of a person from Directorship.
Company Law - Winding up order on just and equitable
grounds - Held: There must lie a justifiable lack of confidence in
the conduct and management of the company's affairs, at the
foundation of applications for winding up - The case on hand does
not fall anywhere near the just and equitable standard, for the simple
reason that it was the very same complaining minority whose
representative was not merely given a berth on the Board but was
also projected as the successor to the Office of Chairman - For
invocation of just and equitable clause, there must be a justifiable
lack of confidence on the conduct of the directors - A mere lack of
confidence between the majority shareholders and minority
shareholders would not be sufficient - On facts, Tata Sons is a
principal investment holding Company, of which the majority
shareholding is with philanthropic Trusts - The majority
shareholders are not individuals or corporate entities having deep
pockets into which the dividends find their way if the Company
does well and declares dividends - The dividends that the Trusts
get are to find their way eventually to the fulfilment of charitable
purposes - Therefore, NCLAT should have raised the most
fundamental question whether it would be equitable to wind up the
Company and thereby starve to death those charitable Trusts,
especially on the basis of un-charitable allegations of oppressive
and prejudicial conduct - Finding of NCLAT that the facts otherwise
justify the winding up of the Company under the just and equitable
clause, was completely flawed.
Companies Act, 2013 - ss. 241 and 242 - ss.241 and 242 do
not specifically confer the power of reinstatement, nor there is any
scope for holding that such a power to reinstate can be implied or
inferred from any of the powers specifically conferred - The
archi

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TATA CONSULTANCY SERVICES LIMITED
v.
CYRUS INVESTMENTS PVT. LTD. AND ORS.
(Civil Appeal Nos. 440-441 of 2020)
MARCH 26, 2021
[S.A. BOBDE, CJI, A.S. BOPANNA AND
V. RAMASUBRAMANIAN, JJ.]
Companies Act, 2013 - ss. 241 and 242 - Held: The sine qua
non for invoking s.241 is that the affairs of the Company should
have been conducted or are being conducted in a manner
oppressive or prejudicial to some of the members - In a petition u/
s.241, the Tribunal cannot ask the question whether the removal of
a Director was legally valid and/or justified or not - The question
to be asked is whether such a removal tantamount to a conduct
oppressive or prejudicial to some members - Even in cases where
the Tribunal finds that the removal of a Director was not in
accordance with law or was not justified on facts, the Tribunal
cannot grant a relief u/s.242 unless the removal was oppressive or
prejudicial - There may be cases where the removal of a Director
might have been carried out perfectly in accordance with law and
yet may be part of a larger design to oppress or prejudice the interests
of some members - It is only in such cases that the Tribunal can
grant a relief u/s.242 - The validity and justification for the removal
of a person can never be the primary focus of a Tribunal u/s.242
unless the same is in furtherance of a conduct oppressive or
prejudicial to some of the members - On facts, the removal of a
person from the post of Executive Chairman cannot be termed as
oppressive or prejudicial -The original cause of action for the
complainant companies to approach NCLT was the removal of CPM
from the post of Executive Chairman - Though the complainant
companies padded up their actual grievance with various historical
facts to make a deceptive appearance, the causa proxima for the
complaint was the removal of CPM from the office of Executive
Chairman - His removal from Directorship happened subsequent
to the filing of the original complaint and that too for valid and
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justifiable reasons and hence NCLAT could not have laboured so
much on the removal of CPM, for granting relief u/ss.241 and 242.
Company Law - Held: Company Tribunal is not a labour
Court or an administrative Tribunal to focus entirely on the manner
of removal of a person from Directorship.
Company Law - Winding up order on just and equitable
grounds - Held: There must lie a justifiable lack of confidence in
the conduct and management of the company's affairs, at the
foundation of applications for winding up - The case on hand does
not fall anywhere near the just and equitable standard, for the simple
reason that it was the very same complaining minority whose
representative was not merely given a berth on the Board but was
also projected as the successor to the Office of Chairman - For
invocation of just and equitable clause, there must be a justifiable
lack of confidence on the conduct of the directors - A mere lack of
confidence between the majority shareholders and minority
shareholders would not be sufficient - On facts, Tata Sons is a
principal investment holding Company, of which the majority
shareholding is with philanthropic Trusts - The majority
shareholders are not individuals or corporate entities having deep
pockets into which the dividends find their way if the Company
does well and declares dividends - The dividends that the Trusts
get are to find their way eventually to the fulfilment of charitable
purposes - Therefore, NCLAT should have raised the most
fundamental question whether it would be equitable to wind up the
Company and thereby starve to death those charitable Trusts,
especially on the basis of un-charitable allegations of oppressive
and prejudicial conduct - Finding of NCLAT that the facts otherwise
justify the winding up of the Company under the just and equitable
clause, was completely flawed.
Companies Act, 2013 - ss. 241 and 242 - ss.241 and 242 do
not specifically confer the power of reinstatement, nor there is any
scope for holding that such a power to reinstate can be implied or
inferred from any of the powers specifically conferred - The
architecture of ss.241 and 242 does not permit the Tribunal to read
into the Sections, a power to make an order (for reinstatement) which
is barred by law vide s.14 of the Specific Relief Act, 1963 with or
without the amendment in 2018.
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Company Law - Law relating to oppression and
mismanagement - Held: Despite the law relating to oppression and
mismanagement undergoing several changes, the object that a
Tribunal should keep in mind while passing an order in an
application complaining of oppression and mismanagement, has
remained the same for decades - This object is that the Tribunal, by
its order, should bring to an end the matters complained of - The
purpose of an order both under the English Law and under the
Indian Law, irrespective of whether the regime is one of "oppressive
conduct" or "unfairly prejudicial conduct" or a mere "prejudicial
conduct", is to bring to an end the matters complained of by
providing a solution - The object cannot be to provide a remedy
worse than the disease - The object should be to put an end to the
matters complained of and not to put an end to the company itself,
forsaking the interests of other stakeholders.
Company Law - Articles of Association of a company - Held:
That Articles of Association of a company constitute a contract among
shareholders, is the bedrock of Company Law - A person who
willingly became a shareholder and thereby subscribed to the Articles
of Association and who was a willing and consenting party to the
amendments carried out to those Articles, cannot later on turn
around and challenge those Articles - The same would tantamount
to requesting the Court to rewrite a contract to which he became a
party with eyes wide open.
Companies Act, 2013 - s.241 - s.241 is not intended to
discipline a Management in respect of a possible future conduct.
Companies Act, 2013 - s.242 - Articles of Association of a
company - Held: The Tribunal has the power u/s.242 to set aside
any amendment to the Articles that takes away recognised proprietary
rights of shareholders - But this is on the premise that the bringing
up of amendment itself was a conduct that was oppressive or
prejudicial - On facts, the order of NCLAT tinkering with the power
available under Article 75 of the Articles of Association was wholly
unsustainable.
In the instant matter, Tata Sons (Private) Limited
challenged a final order dated 18-12-2019 passed by the National
Company Law Appellate Tribunal (NCLAT) (i) holding as illegal,
TATA CONSULTANCY SERVICES LIMITED v. CYRUS
INVESTMENTS PVT. LTD. AND ORS.
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the proceedings of the sixth meeting of the Board of Directors of
TATA Sons Limited held on 24.10.2016 in so far as it related to
the removal of Shri Cyrus Pallonji Mistry ("CPM"); (ii) restoring
the position of CPM as the Executive Chairman of Tata Sons
Limited and consequently as a Director of the Tata Companies
for the rest of the tenure; (iii) declaring as illegal the appointment
of someone else in the place of CPM as Executive Chairman;
(iv) restraining Shri Ratan N. Tata ("RNT") and the nominees of
Tata Trust from taking any decision in advance; (v) restraining
the Company, its Board of Directors and Shareholders from
exercising the power under Article 75 of the Articles of
Association against the minority members except in exceptional
circumstances and in the interest of the Company; and (vi)
declaring as illegal, the decision of the Registrar of Companies
for changing the status of Tata Sons Limited from being a public
company into a private company.
The questions of law that arose for consideration were:
(i) Whether the formation of opinion by the Appellate
Tribunal that the company's affairs have been or are being
conducted in a manner prejudicial and oppressive to some
members and that the facts otherwise justify the winding up of
the company on just and equitable ground, is in tune with the
well settled principles and parameters, especially in the light of
the fact that the findings of NCLT on facts were not individually
and specifically overturned by the Appellate Tribunal?
(ii) Whether the reliefs granted and the directions issued
by the Appellate Tribunal, including the reinstatement of CPM
into the Board of Tata Sons and other Tata companies, are in
consonance with the pleadings made, the reliefs sought and the
powers available under Sub-section (2) of Section 242 of the
Companies Act, 2013?
(iii) Whether the Appellate Tribunal could have, in law,
muted the power of the Company under Article 75 of the Articles
of Association, to demand any member to transfer his
ordinary shares, by simply injuncting the company from exercising
such a right without setting aside the Article?
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(iv) Whether the characterisation by the Tribunal, of the
affirmative voting rights available under Article 121 to the
Directors nominated by the Trusts in terms of Article 104B, as
oppressive and prejudicial, is justified especially after the
challenge to these Articles have been given up expressly
and whether the Tribunal could have granted a direction to
RNT and the Nominee Directors virtually nullifying the effect of
these Articles ?
(v) whether the re-conversion of Tata Sons from a public
company into a private company, required the necessary approval
under section 14 of the Companies Act, 2013 or at least an action
under section 43A(4) of the Companies Act, 1956 during the
period from 2000 (when Act 53 of 2000 came into force) to 2013
(when the 2013 Act was enacted) as held by NCLAT ?
Answering all the questions of law in favour of the Tata
Group, the Court
HELD:
Question No.1
1.1. The real reason why the complainant companies thought
fit, quite tactfully, not to press for the reinstatement of CPM is
that the mere termination of Directorship cannot be projected as
something that would trigger the just and equitable clause for
winding up or to grant relief under Sections 241 and 242.
[Para 16.21][1002-A-B]
1.2. It must be remembered : (i) that a provision for
inclusion of a representative of small shareholders in the Board
of Directors, is of a recent origin under Section 151 of the
Companies Act, 2013 and it is applicable only to a listed company;
(ii) that Tata sons is not a listed Company; (iii) that the Articles of
Association of Tata sons, to which the complainant companies,
CPM and his father had subscribed, do not provide for any
representation; (iv) that despite there being no statutory or
contractual obligation, Tata Sons inducted CPM's father as a
director on the board in the year 1980 and continued him for a
period of almost 25 years; (v) that CPM himself was inducted,
again without reference to any statutory or contractual obligation,
TATA CONSULTANCY SERVICES LIMITED v. CYRUS
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as a Director on the Board in August, 2006; and (vi) that within 6
years of such induction, CPM was identified as a successor to
RNT and was appointed as Executive Deputy Chairman
and elevated to the position of Executive Chairman.
[Para 16.22][1002-B-E]
1.3. It is an irony that the very same person who represents
shareholders owning just 18.37% of the total paid up share capital
and yet identified as the successor to the empire, has chosen to
accuse the very same Board, of conduct, oppressive and unfairly
prejudicial to the interests of the minorities. [Para 16.23]
[1002-E-F]
1.4. The fact that the removal of CPM was only from the
Executive Chairmanship and not the Directorship of the company
as on the date of filing of the petition and the fact that in law, even
the removal from Directorship can never be held to be an
oppressive or prejudicial conduct, was sufficient to throw the
petition under section 241 out, especially since NCLAT chose
not to interfere with the findings of fact on certain business
decisions. [Para 16.24][1002-G-H; 1003-A]
1.5. The subsequent conduct on the part of CPM in leaking
his mail dated 25-10-2016 to the Press and sending replies to
the Income Tax Authorities enclosing 4 box files, even while
continuing as a Director, justified his removal even from the
Directorship of Tata Sons and other group companies. A person
who tries to set his own house on fire for not getting what he
perceives as legitimately due to him, does not deserve to
continue as part of any decision making body (not just the Board
of a company). [Para 16.25][1003-B-C]
1.6. In a petition under Section 241 of the Companies Act,
2013, the Tribunal cannot ask the question whether the removal
of a Director was legally valid and/or justified or not. The question
to be asked is whether such a removal tantamount to a conduct
oppressive or prejudicial to some members. Even in cases where
the Tribunal finds that the removal of a Director was not in
accordance with law or was not justified on facts, the Tribunal
cannot grant a relief under Section 242 unless the removal was
oppressive or prejudicial. [Para 16.28][1003-H; 1004-A-B]
1.7. There may be cases where the removal of a Director
might have been carried out perfectly in accordance with law and
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yet may be part of a larger design to oppress or prejudice the
interests of some members. It is only in such cases that the
Tribunal can grant a relief under Section 242. The Company
Tribunal is not a labour Court or an administrative Tribunal to
focus entirely on the manner of removal of a person from
Directorship. [Para 16.29][1004-B-C]
1.8. The validity of and justification for the removal of a
person can never be the primary focus of a Tribunal under Section
242 unless the same is in furtherance of a conduct oppressive or
prejudicial to some of the members. In fact the post of Executive
Chairman is not statutorily recognised or regulated, though the
post of a Director is. CPM was removed only from the post of (or
designation as) Executive Chairman and not from the post of
Director till the Company Petition was filed. But CPM himself
invited trouble, by declaring an all out war, which led to his
removal from Directorship. [Para 16.31][1004-E-F]
1.9. It is true that as per the evidence available on record
he was requested before the Board meeting, to step down from
the post of Executive Chairman. That does not tantamount to
the act being pre-meditated. The induction of new members on
8.8.2016 into the Board and the Board securing a legal opinion
prior to the Board meeting, cannot make the act a pre-meditated
one. There is a thin line of demarcation between a well-conceived
plan and a pre-meditated one and the line can many times be
blurred. [Para 16.32][1004-G-H]
1.10. In any event the removal of a person from the post of
Executive Chairman cannot be termed as oppressive or
prejudicial. The original cause of action for the complainant
companies to approach NCLT was the removal of CPM from the
post of Executive Chairman. Though the complainant companies
padded up their actual grievance with various historical facts to
make a deceptive appearance, the causa proxima for the complaint
was the removal of CPM from the office of Executive Chairman.
His removal from Directorship happened subsequent to the filing
of the original complaint and that too for valid and justifiable
reasons and hence NCLAT could not have laboured so much on
the removal of CPM, for granting relief under Sections 241 and
242. [Para 16.42][1008-B-C]
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1.11. NCLAT has recorded a finding, though not based upon
any factual foundation, that the facts otherwise justify the making
of a winding up order on just and equitable ground. But as held
by the Privy Council in Loch v. John Blackwood ,"there must lie a
justifiable lack of confidence in the conduct and management of
the company's affairs, at the foundation of applications for winding
up." More importantly, "the lack of confidence must spring not
from dissatisfaction at being out-voted on the business affairs or on
what is called the domestic policy of the company". But, "wherever
the lack of confidence is rested on a lack of probity in the conduct
of the company's affairs, then the former is justified by the latter."
[Para 16.43][1008-D-F]
1.12. The case on hand will not fall anywhere near the just
and equitable standard, for the simple reason that it was the very
same complaining minority whose representative was not merely
given a berth on the Board but was also projected as the successor
to the Office of Chairman. [Para 16.45][1009-C-D]
1.13. For invoking the just and equitable standard, the
underlying principle is that the Court should be satisfied either
that the partners cannot carry on together or that one of them
cannot certainly carry on with the other. [Para 16.50][1011-C]
1.14. In the case in hand there was never and there could
never have been a relationship in the nature of quasi partnership
between the Tata Group and S.P. Group. S.P. Group boarded the
train half-way through the journey of Tata Sons. Functional dead
lock is not even pleaded nor proved. [Para 16.51][1011-C-D]
1.15. For the invocation of just and equitable clause, there
must be a justifiable lack of confidence on the conduct of the
directors. A mere lack of confidence between the majority
shareholders and minority shareholders would not be sufficient.
[Para 16.52][1011-E]
1.16. Tata Sons is a principal investment holding Company,
of which the majority shareholding is with philanthropic Trusts.
The majority shareholders are not individuals or corporate entities
having deep pockets into which the dividends find their way if
the Company does well and declares dividends. The dividends
that the Trusts get are to find their way eventually to the fulfilment
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of charitable purposes. Therefore, NCLAT should have raised
the most fundamental question whether it would be equitable to
wind up the Company and thereby starve to death those charitable
Trusts, especially on the basis of un-charitable allegations of
oppressive and prejudicial conduct. Therefore, the finding of
NCLAT that the facts otherwise justify the winding up of the
Company under the just and equitable clause, is completely
flawed. [Para 16.54][1012-A-C]
Question No.2
2.1. Sections 241 and 242 of the Companies Act, 2013 do
not specifically confer the power of reinstatement, nor there is
any scope for holding that such a power to reinstate can be implied
or inferred from any of the powers specifically conferred.
[Para 17.17][1024-C]
2.2. The following words at the end of sub-section (1) of
242 "the Tribunal may, with a view to bringing to an end the
matters complained of, make such order as it thinks fit" cannot
be interpreted as conferring on the Tribunal any implied power
of directing reinstatement of a director or other officer of the
company who has been removed from such office. These words
can only be interpreted to mean as conferring the power to make
such order as the Tribunal thinks fit, where the power to make
such an order is not specifically conferred but is found necessary
to remove any doubts and give effect to an order for which the
power is specifically conferred. For instance, sub-section (2) of
Section 242 confers the power to make an order directing several
actions. The words by which sub-section (1) of Section 242 ends,
supra can be held to mean the power to make such orders to
bring an end, matters for which directions are given under subsection (2) of Section 242. [Para 17.18][1024-C-F]
2.3. The architecture of Sections 241 and 242 does not
permit the Tribunal to read into the Sections, a power to make an
order (for reinstatement) which is barred by law vide Section 14
of the Specific Relief Act, 1963 with or without the amendment in
2018. [Para 17.19][1024-F-G]
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2.4. Despite the law relating to oppression and
mismanagement undergoing several changes, the object that a
Tribunal should keep in mind while passing an order in an
application complaining of oppression and mismanagement, has
remained the same for decades. This object is that the Tribunal,
by its order, should bring to an end the matters complained of.
[Para 17.33][1029-B-C]
2.5. The purpose of an order both under the English Law
and under the Indian Law, irrespective of whether the regime is
one of "oppressive conduct" or "unfairly prejudicial conduct" or a
mere "prejudicial conduct", is to bring to an end the matters
complained of by providing a solution. The object cannot be to
provide a remedy worse than the disease. The object should be
to put an end to the matters complained of and not to put an end
to the company itself, forsaking the interests of other
stakeholders. [Para 17.34][1029-D]
2.6. The NCLAT could not have granted the reliefs of (i)
reinstatement of CPM (ii) restriction on the right to invoke Article
75 (iii) restraining RNT and the Nominee Directors from taking
decisions in advance and (iv) setting aside the conversion of Tata
Sons into a private company. [Para 17.35][1029-F-G]
Question No.3
3.1. The sine qua non for invoking Section 241 is that the
affairs of the Company should have been conducted or are being
conducted in a manner oppressive or prejudicial to some of the
members. No single instance even of invocation of Article 75,
leave alone misuse, is averred in the main company petition or in
the application for amendment. Therefore, NCLAT could not have
and should not have made Article 75 completely ineffective by
passing an order of restraint. [Para 18.3][1030-E-F]
3.2. As a matter of fact, NCLAT has agreed, on first
principles, that it has no jurisdiction to declare any of the Articles
of Association illegal. After having set a benchmark correctly,
NCLAT neutralised Article 75 merely on the basis of likelihood
of misuse. Section 241(1)(a) provides for a remedy, only in respect
of past and present conduct or past and present continuous
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conduct. NCLAT has stretched Section 241(1)(a) to cover the
likelihood of a future bad conduct, which is impermissible in law.
[Para 18.4][1030-G]
3.3. That Articles of Association of a company constitute a
contract among shareholders, is the bedrock of Company Law.
In fact, Article 75 was not an invention of the recent origin in
Tata Sons. It has been there for nearly a century in one form or
the other. The Company was incorporated in the year 1917 and
S.P. Group acquired shares nearly after 50 years in the year 1965.
Even at that time Article 75 was in existence in a different form.
After 1965, Article 75 underwent several rounds of amendments,
to which the S.P. Group, CPM's father and CPM were parties.
CPM himself was a party to an amendment made to Article 75 on
13.09.2000. The Article in its present form was made only on
13.09.2000 and the amendment was unanimously carried through
in the presence of and with the consent of CPM. [Para 18.5]
[1030-H; 1031-A-C]
3.4. A person who willingly became a shareholder and
thereby subscribed to the Articles of Association and who was a
willing and consenting party to the amendments carried out to
those Articles, cannot later on turn around and challenge those
Articles. The same would tantamount to requesting the Court to
rewrite a contract to which he became a party with eyes wide
open. [Para 18.6][1031-C-D]
3.5. It is not as though CPM or his father who was also a
Director for nearly 25 years, were not aware of or blind to the
existence of Article 75. The pleading on the part of the
complainant companies was sufficient to throw the challenge to
Article 75 out, as it did not correlate to an actual conduct but the
possibility of a future conduct. Section 241 is not intended to
discipline a Management in respect of a possible future conduct.
[Para 18.7][1031-D-G]
3.6. It is no doubt true that the Tribunal has the power under
Section 242 to set aside any amendment to the Articles that takes
away recognised proprietary rights of shareholders. But this
is on the premise that the bringing up of amendment itself was
a conduct that was oppressive or prejudicial. [Para 18.8]
[1031-G-H]
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3.7. The order of NCLAT tinkering with the power available
under Article 75 of the Articles of Association is wholly
unsustainable. [Para 18.11][1032-D]
Question No.4
4. The fourth question of law - whether the characterisation
by the Tribunal, of the affirmative voting rights available under
Article 121 to the Directors nominated by the Trusts in terms of
Article 104B, as oppressive and prejudicial, is justified especially
after the challenge to these Articles have been given up expressly
and whether the Tribunal could have granted a direction to RNT
and the Nominee directors virtually nullifying the effect of these
Articles - is also to be answered in favour of the Tata group and
the claim in the cross appeal relating to affirmative voting rights
and proportionate representation are liable to be rejected.
[Para 19.1 and 19.50][1032-F; 1052-B]
Question No.5
5. The 5th question of law formulated - whether the reconversion of Tata Sons from a public company into a private
company, required the necessary approval under section 14 of
the Companies Act, 2013 or at least an action under section 43A(4) of the Companies Act, 1956 during the period from 2000
(when Act 53 of 2000 came into force) to 2013 (when the 2013
Act was enacted) as held by NCLAT - is answered in favour of
Tata Sons and as a consequence, all the observations made against
the appellants and the Registrar of companies in Paragraphs 181,
186 and 187 (iv) of the impugned judgment are set aside.
[Para 20.1 and Para 20.44][1052-C-D; 1069-C-D]
Central Bank of India Ltd. v. Hartford Fire Insurance
Co. Ltd. AIR 1965 SC 1288; M.I. Builders Pvt. Limited
v. Radhey Shyam Sahu & Others (1999) 6 SCC 464:
[1999] 3 SCR 1066 and Vodafone International
Holdings BV v. Union of India (2012) 6 SCC 613:
[2012] 1 SCR 573 - distinguished.
Hanuman Prasad Bagri & Ors. v. Bagress Cereals
Pvt. Ltd. (2001) 4 SCC 420: [2001] 2 SCR 811;
Rajahmundry Electric Supply Corpn. Ltd. v.
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Nageshwara Rao [1955] 2 SCR 1066; S.P. Jain v.
Kalinga Tubes Ltd. AIR 1965 SC 1535 : [1965] 2 SCR
720; Ram Parshotam Mittal v. Hillcrest Realty (2009) 8
SCC 709 : [2009] 10 SCR 1121 and Darius Rutton
Kavasmaneck v. Gharda Chemicals Ltd (2015) 14 SCC
277:[2014] 11 SCR 1119 - relied on.
Needle Industries (India) Ltd. and Ors. v. Needle
Industries Newey (India) Ltd. and ors. (1981) 3 SCC
333 : [1981] 3 SCR 698; Raj Kumar Dey v. Tarapada
Dey (1987) 4 SCC 398 : [1988] 1 SCR 118; Mohd.
Gazi v. State of Madhya Pradesh (2000) 4 SCC 342:
[2000] 2 SCR 871 and Dr. S.B. Dutt v.University of Delhi
[1959] SCR 1236 - referred to.
Scottish Cooperative Wholesale Society v. Meyer 1959
A.C.324; Loch v. John Blackwood [1924] AC 783;
Baird v. Lees, (1924) SC 83 Scottish Supreme Court;
Ebrahimi v. Westbourne Galleries Ltd. [1972] 2 WLR
1289; Lau v. Chu [2020] 1 WLR 4656; In Re Sailing
Ship Kentmere Co. [1897] WN 58; Nelson v. James
Nelson 1914-2 K.B. 770; Central Bank of Ecuador and
others v. Conticorp SA and others (Bahamas) (2015)
UKPC 11 Judicial Committee of the Privy council
(UK) and Re: Neath Rugby Limited (2010) B.C.C. 597
- referred to.
Case Law Reference
[2001] 2 SCR 811
relied on
Para 16.21
AIR 1965 SC 1288
distinguished
Para 16.40
[1999] 3 SCR 1066
distinguished
Para 16.41
[1955] 2 SCR 1066
relied on
Para 16.52
[1965] 2 SCR 720
relied on
Para 16.52
[1981] 3 SCR 698
referred to
Para 16.53
[1988] 1 SCR 118
referred to
Para 17.11
[2000] 2 SCR 871
referred to
Para 17.11
[1959] SCR 1236
referred to
Para 17.16
TATA CONSULTANCY SERVICES LIMITED v. CYRUS
INVESTMENTS PVT. LTD. AND ORS.
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[2021] 12 S.C.R.
[2012] 1 SCR 573
distinguished
Para 19.31
[2009] 10 SCR 1121
relied on
Para 20.36
[2014] 11 SCR 1119
relied on
Para 20.39
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 440441 of 2020.
From the Judgment and Order dated 18.12.2019 of the National
Company Law Appellate Tribunal, New Delhi in Company Appeal Nos.
254 and 268 of 2018.
With
Civil Appeal Nos. 13-14, 442-443, 19-20, 444-445, 448-449,
263-264, 1802 of 2020.
Tushar Mehta, SG, Balbir Singh, K.M. Nataraj, ASGs, Harish N.
Salve, Dr. A.M. Singhvi, S.N. Mookherjee, Mohan Parasaran, Mohan
Parasaran, Zal Andhyarujina, C.A. Sundaram, Shyam Divan, Janak
Dwarkadas, Sr. Advs., Ms. Fereshte D. Sethna, Ms. Anuradha Dutt,
Ms. Suman Yadav, Haaris Fazili, Adhiraj Malhotra, Hasmukh Ravaria,
Aditya Sarin, Shreyash Taparia, Kunal Dutt, Ms. Rashi Verma, Ms. Aboli
Mandlik, Ms. B. Vijayalakshmi Menon, Ms. Ruby Singh Ahuja, Dhruv
Dewan, Ms. Tahira Karanjawala, Anupam Prakash, Avishkar Singhvi,
Rohan Batra, Ms. Reena Choudhary, Arjun Sharma, Shravan Sahny,
Ashutosh P.Shukla, Utkarsh Maria, L. Nidhiram Sharma, Ms. Harshita
Choubey, Dhruv Sethi for M/s. Karanjawala & Co., Nitesh Jain, Anuj
Berry, Sidharth Sharma, Chaitanya Safaya, Kostubh Devnani, Adrish
Majumdar, S. S. Shroff, Rohan Batra, Ms. Aditi Dani, Ashwin Kumar
D.S., M/s. Karanjawala & Co., Akshay Amritanshu, Navanjay
Mahapatra, Piyush Beriwal, Kanu Agrawal, Ms. Vanshaja Shukla, Mohd.
Akhil, Arvind Kumar Sharma, J.N. Mistry, Ms. Namrata Parikh, Saswat
Pattnaik, Hasan Murtaza, Somasekhar Sundaresan, Manik Dogra, Ms.
Rohini Musa, Rohan Jaitely, Apurva Diwanji, Ms. Sonali Jaitely Bakshi,
Ruzbeh Mistry, Anoj Menon, Abhishek Venkataraman, Ravi Tyagi,
Shubhanshu Gupta, Ms. Rini Badoni, Pragalbh Bhardwaj, Gunjan Shah,
Akshay Doctor, Himank Singh, P. V. Yogeswaran, Akshay Makhija, Ms.
Jyoti Mendiratta, Ashish Prasad, Mahfooz Ahsan Nazki, Polanki
Gowtham, Amitabh Sinha, Shrey Sharma, Advs. for the appearing parties.
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The following Judgment of the Court was delivered :
JUDGMENT
1. Lis in the Appeals
1.1 Tata Sons (Private) Limited has come up with two appeals in
Civil Appeal Nos.13-14 of 2020, challenging a final order dated 18-122019 passed by the National Company Law Appellate Tribunal
("NCLAT" for short) (i) holding as illegal, the proceedings of the sixth
meeting of the Board of Directors of TATA Sons Limited held on
24.10.2016 in so far as it relates to the removal of Shri Cyrus Pallonji
Mistry ("CPM" for short); (ii) restoring the position of CPM as the
Executive Chairman of Tata Sons Limited and consequently as a Director
of the Tata Companies for the rest of the tenure; (iii) declaring as illegal
the appointment of someone else in the place of CPM as Executive
Chairman; (iv) restraining Shri Ratan N. Tata ("RNT" for short) and
the nominees of Tata Trust from taking any decision in advance; (v)
restraining the Company, its Board of Directors and Shareholders from
exercising the power under Article 75 of the Articles of Association
against the minority members except in exceptional circumstances and
in the interest of the Company; and (vi) declaring as illegal, the decision
of the Registrar of Companies for changing the status of Tata Sons
Limited from being a public company into a private company.
1.2 RNT has come up with two independent appeals in Civil Appeal
Nos.19-20 of 2020 against the same Order of the NCLAT, on similar
grounds.
1.3 The trustees of two Trusts namely Sir Ratan Tata Trust and
Sir Dorabji Tata Trust have come up with two independent appeals in
Civil Appeal Nos.444-445 of 2020, challenging the impugned order of
the Appellate Tribunal. A few companies of the Tata Group, which were
referred to in the course of arguments, as the operating companies or
downstream companies, such as the Tata Consultancy Services Limited,
the Tata Teleservices Limited and Tata Industries Limited have come
up with separate appeals in Civil Appeal Nos.440-441 of 2020, 442-443
of 2020 and 448-449 of 2020. The grievance of RNT as well as the
Trustees of the two Trusts, is as regards the injunctive order of the
Appellate Tribunal restraining them from taking any decision. The
grievance of the three operating companies which have filed 6 Civil
Appeals is that CPM has been directed to be reinstated as Director of
these companies by the impugned Order, for the rest of the tenure.
TATA CONSULTANCY SERVICES LIMITED v. CYRUS
INVESTMENTS PVT. LTD. AND ORS.
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[2021] 12 S.C.R.
1.4 The original complainants before the National Company Law
Tribunal ("NCLT"for short), who initiated the proceedings under Sections
241 and 242 of the Companies Act, 2013 namely (i) Cyrus Investments
Private Limited (ii) Sterling Investment Corporation Private Limited,
have come up with a cross appeal in Civil Appeal No.1802 of 2020.
Their grievance is that in addition to the reliefs already granted, the
NCLAT ought to have also granted a direction to provide them
proportionate representation on the Board of Directors of Tata Sons
Limited and in all Committees formed by the Board of Directors. They
have one more grievance namely that the Appellate Tribunal ought to
have deleted the requirement of an affirmative Vote in the hands of
select Directors under Article 121 or at least ought to have restricted the
affirmative vote to matters covered by Article 121A.
1.5 In addition to C.A.Nos. 13 and 14 of 2020, Tata Sons have
also come up with 2 more appeals in C.A.Nos. 263 and 264 of 2020.
These appeals arise out of an order passed by NCLAT on 06-01-2020 in
two interlocutory applications filed by the Registrar of Companies,
Mumbai, seeking amendment of the final order passed by NCLAT in the
main appeals. The reason why the Registrar of Companies was
constrained to file 2 interlocutory applications in the disposed of appeals,
was that in the final order passed on 18-12-2019 by NCLAT in the 2
company appeals, there were some remarks against the Registrar of
Companies for having issued an amended certificate of incorporation to
Tata Sons by striking off the word "Public" and inserting the word
"Private". NCLAT dismissed these 2 applications by an order dated 0601-2020, not merely holding that there were no adverse remarks against
the Registrar of Companies but also giving additional reasons to justify
its findings in the disposed of appeals, in the purported exercise of the
power available under section 420 of the Companies Act, 2013. Therefore,
Tata Sons have come up with these 2 appeals in C.A.Nos. 263 and 264
of 2020.
1.6 Thus we have on hand, 15 Civil Appeals, 14 of which are on
one side, assailing the Order of NCLAT in entirety. The remaining appeal
is filed by the opposite group, seeking more reliefs than what had been
granted by the Tribunal.
1.7 For the purpose of easy appreciation, we shall refer to the
appellants in the set of 14 Civil Appeals as "the Tata Group" or "the
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Appellants". We shall refer to the other group as "SP Group" (Shapoorji
Pallonji Group) or "the respondents". Similarly we shall refer to Tata
Sons Limited (or Tata Sons Private Limited) merely as 'Tata Sons', as
there is a controversy regarding the usage of the word "Private" before
the word "Limited".
2. Background of the Litigation
2.1 On 08.11.1917, Tata Sons was incorporated as a Private Limited
Company under the Companies Act, 1913.
2.2 Two companies by name Cyrus Investments Private Limited
and Sterling Investment Corporation Private Limited, forming part of
the SP Group respectively acquired 48 preference shares and 40 equity
shares of the paid-up share capital of Tata Sons, from an existing member
by name Mrs. Rodabeh Sawhney. Over the years, the share-holding of
SP Group in Tata Sons has grown to 18.37% of the total paid-up share
capital.
2.3 The shareholding pattern of Tata Sons Limited is as follows:
The balance is held by RNT and a few others.
2.4 From 25.06.1980 to 15.12.2004 Shri Pallonji S. Mistry, the
father of CPM was a Non-Executive Director on the Board of Tata
Sons. On 10.08.2006 CPM was appointed as a Non-Executive Director
on the Board.
2.5 By a Resolution of the Board of Directors of Tata Sons dated
16.03.2012, CPM was appointed as Executive Deputy Chairman for a
period of five years from 01.04.2012 to 31.03.2017, subject however to
the approval of the shareholders at a General Meeting. The General
Meeting gave its approval on 01.08.2012.
2.6 By a Resolution dated 18.12.2012, the Board of Directors of
Tata Sons redesignated CPM as its Executive Chairman with effect
from 29.12.2012, even while designating RNT as Chairman Emeritus.
TATA CONSULTANCY SERVICES LIMITED v. CYRUS
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2.7 By a Resolution passed on 24.10.2016, the Board of Directors
of Tata Sons replaced CPM with RNT as the interim Non-Executive
Chairman. It is relevant to note that CPM was replaced only from the
post of Executive Chairman and it was left to his choice to continue or
not, as Non-Executive Director of Tata Sons.
2.8 As a follow up, certain things happened and by separate
Resolutions passed at the meetings of the shareholders of Tata Industries
Limited, Tata Consultancy Services Limited and Tata Teleservices
Limited, CPM was removed from Directorship of those companies. CPM
then resigned from the Directorship of a few other operating companies
such as the Indian Hotels Company Limited, Tata Steel Limited, Tata
Motors Limited, Tata Chemicals Limited and Tata Power Company
Limited, after coming to know of the impending resolutions to remove
him from Directorship.
2.9 Thereafter, 2 companies by name, Cyrus Investments Private
Limited and Sterling Investment Corporation Private Limited, belonging
to the SP Group, in which CPM holds a controlling interest, filed a
company petition in C.P No.82 of 2016 before the National Company
Law Tribunal under Sections 241 and 242 read with 244 of the Companies
Act, 2013, on the grounds of unfair prejudice, oppression and
mismanagement.
2.10 But these two companies, hereinafter referred to as 'the
complainant-companies', together had only around 2% of the total issued
share capital of Tata Sons. This is far below the de-minimus qualification
prescribed under Section 244(1)(a) to invoke sections 241 and 242.
Therefore, the complainant companies filed a miscellaneous application
under the proviso to Sub-section (1) of Section 244 seeking waiver of
the requirement of Section 244(1)(a), which requires atleast one hundred
members of the company having a share capital or one-tenth of the total
number of fixed members or any member or members holding not less
than one-tenth of the issued share capital of the company alone to be
entitled to be the applicant/applicants.
2.11 Along with the application for waiver of the requirement of
Section 244(1)(a), the complainant companies also moved an application
for stay of an Extra-ordinary General Meeting ("EGM" for short) of
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Tata Sons, in which a proposal for removing CPM as a Director of Tata
Sons had been moved. The NCLT refused stay, as a consequence of
which the EGM proceeded as scheduled and CPM was removed from
the Directorship of Tata Sons, by a Resolution dated 16.02.2017.
2.12 Subsequently, by an Order dated 06.03.2017, NCLT held the
main company petition to be not maintainable at the instance of persons
holding just around 2% of the issued share capital. This was followed by
another order dated 17.4.2017, by which NCLT dismissed the application
for waiver.
2.13 The complainant companies filed appeals before NCLAT
against both the Orders dated 06.03.2017 and 17.04.2017.