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

RoC may soon change Tata Sons classification to a public company
Money Tatas vs Mistry Saturday, December 21, 2019 - 15:45

Just when the Tata Group is facing a legal tussle following the order by the NCLAT reinstating Cyrus Mistry, there’s a side show playing out at the Ministry of Corporate Affairs. NCLAT’s order also includes a finding that the converting of Tata Sons from being a Public Company to a Private Company in 2018, by the Registrar of Companies (RoC), is illegal. RoC functions under the Ministry of Corporate Affairs.

The debate within the RoC and the Ministry is should this order of the NCLAT be contested in the court? There is even an opinion from some quarters that the RoC should implead itself in the appeal against the NCLAT order to be filed by the Tatas. The reason being given is that the Registrar’s office had followed due procedure and had indeed obtained the approval of the NCLT before making the change in its records of Tata Sons being a private company instead of a public company. At the same time, some at RoC feel not reversing the change and delaying the classification of Tata Sons as a Public Company may tantamount to contempt, since the NCLAT is a quasi-judicial body.

The issue assumes importance because Cyrus Mistry, his family entity Shapoorji Pallonji Mistry & Co and the legal team assisting them in the case want that Tata Sons must be announced as a public company. They have already approached the RoC, Mumbai and are hoping that the decision is reversed.

The ‘corporate governance’ angle is again being pushed to the forefront, the understanding being that a public company will be more obligated to follow better governance at all levels.

The argument put forth at the NCLAT hearings by the lawyers of Cyrus Mistry was that the minority shareholders in Tata Sons, Shapoorji Pallonji were impacted by this decision to change the nature of the entity into a private one. The NCLAT had also referred to this act of the RoC as ‘helping’ Tata Sons.

Finally, though the NCLAT has allowed a month’s stay of its order for implementation, it is being interpreted to apply only to the decision on the Cyrus Mistry’s removal and does not cover the RoC decision. 

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