Tata case: SC stays NCLAT order dismissing plea seeking modification of verdict

The court recently stayed a December 18, 2019 judgment of the NCLAT reinstating Cyrus Mistry as Tata Sons' chairman.

Updated - January 24, 2020 06:16 pm IST

Published - January 24, 2020 03:05 pm IST - New Delhi

File photo of Cyrus Mistry with Ratan Tata.

File photo of Cyrus Mistry with Ratan Tata.

The Supreme Court on Friday stayed an order of the National Company Law Appellate Tribunal (NCLAT) rejecting a plea by the Registrar of Companies, Mumbai, to delete certain adverse comments made against it for  “converting” Tata Sons Private Limited (TSPL) into a 'private company'.

A Bench led by Chief Justice of India (CJI) Sharad A. Bobde stayed the January 6 order of the NCLAT and issued formal notice.

The court recently stayed a December 18, 2019 judgment of the NCLAT reinstating Cyrus Mistry as Tata Sons' chairman.

The current petition concerning the Registrar of Companies (RoC) also emanates from the same December 18 verdict. The NCLAT had made scathing comments in the judgment about the RoC for altering the certificate of incorporation to facilitate the “purported conversion” of Tata Sons from a public entity to a private company on August 6, 2018.

The comments in the verdict prompted the RoC to move the NCLAT, saying they were made in a litigation process in which the RoC was neither made a party nor heard. The RoC's application was dismissed by the tribunal, leading TSPL to move the apex court.

For one, TSPL, represented by senior advocate A.M. Singhvi, said the January 6 order, instead of correcting the errors made in the December 18 verdict, amplified and justified the adverse comments against the RoC. Fresh conclusions were drawn by the NCLAT against the RoC. TSPL described the January 6 order as a “fatal anomaly”.

Contending on the merits of the January 6 order, TSPL said the tribunal reached an “anomalous and absurd” conclusion that there cannot be a private limited company since the minimum paid-up capital had not been prescribed by Centre.

TSPL said the absence of any requirement for a minimum paid-up share capital only proved that there was no such need for the purpose of constituting a private limited company under the Companies Act of 2013.

Secondly,TSPL argued that post the coming into effect of the Companies (Amendment) Act of 2000, power has been conferred on the RoC to “effect changes and alterations in the Certificate of Incorporation in a case where a deemed public limited company became a private limited company by operation of law”.

Lastly, TSPL is a de jure private company and required no amendment to be made to its articles/memorandum that would have the effect of converting it into a private limited company. 

“In other words, since the appellant [TSPL] is already a private limited company, it does not need to re-convert into a private company in terms of the procedure under Sections 14 and 18 of the 2013 Act,” TSPL contended in the apex court.

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