RoC May Soon Classify TATA Sons As ‘Public Company’

Newsmantra — Fri, 20 Dec 2019 06:32:15 +0000

The Registrar of Companies (RoC) is studying Wednesday’s judgment by the National Company Law Appellate Tribunal (NCLAT) on the Tata-Mistry dispute, and may soon change Tata Sons’ classification to a ‘public company’ from a ‘private company’.

The NCLAT, in its 172-page order reinstating Cyrus Mistry as executive chairman of Tata Sons, had termed the conversion of Tata Sons into a private company ‘illegal’.

It had said that proper procedures — laid out in Section 14 of the Companies Act, 2013 — were not followed, and the permission of the National Company Law Tribunal had not been taken.Top officials in the corporate affairs ministry — which oversees the RoC — said the requisite documents are being sourced.

Mistry’s legal team is believed to be in touch with RoC officials to ensure the change happens quickly. “We don’t see any reason why the RoC cannot make the change as fast as it did for Tata Sons,” said a member of Mistry’s team.

“The first task for the RoC would be to complete the conversion process and record Tata Sons as a ‘public company’. There is a view to not defy the order as that would amount to contempt,” said an official in the know. He sought anonymity.

“The four-week stay granted by the NCLAT is on Cyrus Mistry assuming the office of executive chairman of Tata Sons. There is no stay on the RoC part of the verdict. So, there is a possibility that Tata Sons may move the Supreme Court against the part of the NCLAT order that termed the change in classification by RoC as illegal. The RoC is closely monitoring the same,” official said.

In September 2017, Tata Sons received shareholder approval to convert itself into a private entity. Mistry, whose family owns 18.4% stake in the Tata Group’s holding company, had opposed the move saying it “would impact fund raising ability of the holding company and restrict the sale of stakes to outsiders”.

Mistry’s lawyers had argued on similar lines before the NCLAT in August this year: “Just after the appeal was filed before this appellate tribunal, in the evening of August 6, 2018, the respondents (Tata Sons) hurriedly moved before the Registrar of Companies (RoC), Mumbai, who passed certificate converting the company as ‘Tata Sons Private Limited’.”

The NCLAT had observed that the RoC had ‘helped’ the respondent, i.e.- Tata Sons. “…The aforesaid action on the part of the company, its board of directors to take action to hurriedly change the company (‘Tata Sons Limited’) from ‘public company’ to a ‘private company’ without following the procedure under law (Section 14), with the help of the Registrar of Companies just before filing of the appeal, suggests that the nominated members of ‘Tata Trusts’ who have affirmative voting rights over the majority decision of the board of directors and other directors/members, acted in a manner ‘prejudicial’ to the members, including minority members (‘Shapoorji Pallonji Group’) and others as also ‘prejudicial’ to the company (‘Tata Sons Limited’),” the order said.

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RoC May Soon Classify TATA Sons As ‘Public Company’