Mahima Datla v.

Renuka Datla CA 2776 OF 2022

Coram: Justices Vineet Saran and J K Maheshwari

Issue: Whether duomatic principle in Company Law applicable even in Indian context. Ratio:
Duomatic Principle applicable even in the Indian context - Strict adherence to a statutory
requirement may be dispensed with if it is demonstrated otherwise on facts, if the same is consented
by all members. Principle is only applicable in those cases wherein bona fide transactions are
involved.

Orbiter: Fraud is a clear exception.

Provisions: Section 196 of Companies Act, 2013, Schedule V, Section 397 of Companies Act, 1956,
Section 10-F of Companies Act, 1956. Cases

Referred: 1. Salmon’s case- a company is bound in a matter intra vires by the unanimous agreement
of its members. 2. Bowthorpe Holdings Ltd. v. Hills- Fraud is a clear exception to application of these
principles, be it Duomatic Principle or Doctrine of Indoor Management.

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Sangramsinh P. Gaekwad v. Shantadevi P. Gaekwad- A dispute as regards right of inheritance between

minority shareholders by the majority shareholders and/or mismanagement.

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the parties is eminently a civil dispute and cannot be said to be a dispute as regards oppression of

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Dwarka Prasad Agarwal v. Ramesh Chander Agarwal- the jurisdiction of the civil court is not
completely ousted by the provisions of the Companies Act, 1956. 2. Hanuman Prasad Bagri v. Bagress
Cereals (P) Ltd. the same principle has been reiterated.

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Judgement: According to Section 196 of Companies Act, 2013, Schedule V, no person shall be eligible

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to be a whole-time Director of a Company after attaining the age of 70 years unless such
appointment is approved by a special resolution of the Company. According to Section 397 of
Companies Act, 1956, an order could be made on application made under sub-section (1), if the

To
Court is of the opinion that (i) the Company's affairs are being conducted in a manner prejudicial to
public interest or in a manner oppressive of any member or members, and; (ii) the facts would justify
the making of a winding up order on the ground that it was just and equitable that the Company
should be wound up, and; (iii) the winding up order would unfairly prejudice the Petitioners - An
application 5L7U4L5P8R
for relief can betr-brought
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by any member who complain that the 25 affairs of the
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tr-5L7UCompany are being conducted in a manner prejudicial to public interest or in a manner oppressive to
any member or members. The intention of the legislature is that majority shareholders who oppress
the minority shareholders and conduct the affairs of the company prejudicial to public interest may
invoke the jurisdiction of CLB. According to Section 10- F9K
of4ICompanies Act, 1956, re-appraisal of
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entire evidence by the High Court is not permissible. It has to restrict its determination to the
purported questions of law arising from the order of CLB.
 LANDMARK CASES:

TATA SONS LTD. V. CYRUS MISTRY & ORS.

Issue:
The appeal was filed by the Tata Sons Ltd. against the order of the National Company Law
Appellate Tribunal that had re-instated Cyrus Mistry as the Chairman of the Tata Group.
Relevant Provision:
Section 241 (Companies Act, 2013). Application to Tribunal for relief in cases of oppression,
etc:
(1) Any member of a company who complains that—
(a) the affairs of the company have been or are being conducted in a manner prejudicial to

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public interest or in a manner prejudicial or oppressive to him or any other member or members
or in a manner prejudicial to the interests of the company; or

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(b) the material change, not being a change brought about by, or in the interests of, any

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creditors, including debenture holders or any class of shareholders of the company, has taken

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place in the management or control of the company, whether by an alteration in the Board of

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Directors, or manager, or in the ownership of the company‘s shares, or if it has no share capital,
in its membership, or in any other manner whatsoever, and that by reason of such change, it is

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likely that the affairs of the company will be conducted in a manner prejudicial to its interests

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or its members or any class of members,
may apply to the Tribunal, provided such member has a right to apply under section 244, for
an order under this Chapter.
Ratio:

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Observations:
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The Supreme Court set aside the order of the NCLAT and upheld the decision of the Board of
Tata Sons to remove Cyrus Mistry as Chairman.
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1. The removal of Cyrus Mistry by the Board of Tata Sons does not amount to oppression of
minority stakeholders or mismanagement.
2. The court also held that the Tata Sons and Cyrus Mistry were open to work out on their
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separation terms. tr-5C7A4K5C8B

Cyrus Investments Pvt. Ltd. & Anr. v. Tata Sons

Ltd.& Ors
Facts of the Case
 The National Company Law Tribunal, Mumbai Bench (“NCLT”) handed down a
significant ruling in the case of Cyrus Investments Private Limited & Others
(“Petitioners”) v. Tata Sons Limited & Others1 (“Respondents”) on oppression
and mismanagement under the company law regime. Hon’ble Mr. B.S.V.
Prakash Kumar, Member (Judicial), and Hon’ble Mr. V. Nallasenapathy,
Member (Judicial), delivered the decision (Technical).

In this case, Cyril Mistry joined the board of the Shapoorji Pallonji group and
became the largest stakeholder of TATA and Sons in the year 1991.

In 1994, he was named a director of the company. Around 80% of the shares
in TATA Sons are owned by his firm. Cyrus Mistry joined the Tata Sons Board

TATA Group in November 2011.

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of Directors in September 2006, following his father’s retirement from the

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Following Ratan Tata’s retirement, Cyrus Mistry was named Deputy
Chairman, then in December 2012, Cyrus Mistry was named Chairman of

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chosen Chairman of Tata and Sons in January 2017.
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Tata Sons. N. Chandrasekhar, CEO of Tata Consultancy Services Limited, was

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The Board called Cyrus Pallonji Mistry to be removed as a director on

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February 6, 2017. This resulted in a dispute between Cyrus Mistry and TATA,

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which was broadcast throughout the world, and everyone learned of Cyrus
Mistry’s dismissal from his position.

tr-5L7UMinister
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This elimination was not made on the spur of the moment, but rather after
much thought. Ratantr-5L
Tata’s next
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in which he mentioned the termination of the group’s chairman.

The reason given for Cyrus Mistry’s dismissal was that he did not perform
his duties properly. Cyrus Mistry filed
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Law Tribunal; however, it was dismissed since the TATA Group company had
no such mismanagement.

Judgement

On December 18, 2019, the National Company Law Tribunal reinstated Cyrus
Mistry as chairman of TATA Sons and gave TATA a four-week period to file
an appeal against the NCLAT judgement.
 The Supreme Court then issued an injunction against the NCLAT’s order,
stating that it has gaps and several flaws. The Supreme Court ordered that
the matter be thoroughly investigated.

Cyrus Mistry won the case because he demonstrated that he had done
nothing wrong and that his dismissal was unconstitutional. The Shapoorji
Pallonji Group has stated that they are not going through any difficulties and
that no legal action against TATA Sons will be considered.

Even though TATA filed a caveat in all courts, Cyrus Mistry stated that he
would not take legal action against the corporation, but that he would
consult a law firm about possible steps ahead of his dismissal.

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Because of Cyrus Mistry’s dismissal from his post, the corporate sector was
stunned, and the company’s stocks plunged 3.16 percent in the stock
market.

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According to the company’s Articles of Association, the chairman can only be

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removed by the board members if he is found to have committed any fraud,

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been involved in any kind of internal mismanagement, or been found

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disloyal to the company; however, Cyrus Mistry has not met any of the above
conditions.
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Finally, the National Company Law Appellate Tribunal (NCLAT) rules that

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Cyrus Mistry’s removal was unconstitutional. TATA Sons’ transition from
public to private corporation was also halted by the NCLAT. Also announces
the return of mysterytr-5L
to7Uthe TATA
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The NCLAT’s order has been delayed by the Supreme Court because it
contains “Fundamental Mistakes.” The Tribunal had approved a prayer that
had not been requested, according to7A4K
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Tata Consultancy Services Limited v. Cyrus

Investments Pvt. Ltd.
Facts of the Case

The Sapoorji Pallonji Group (SP Group), led by Cyrus Mistry, owned 18.37
percent of Tata Sons Limited’s total paid-up share capital. Cyrus Mistry was
 named as the Tata Sons’ Executive Deputy Chairman for a five-year term in
2012.

By the end of the year, the Board of Directors had named Cyrus as the
Executive Chairman of Tata Sons, effective December 29, 2012, while Ratan
Tata was named Chairman Emeritus. On October 24, 2016, the Tata Sons
Board of Directors issued a resolution removing Cyrus from his role as
Executive Chairman of the company.”

Cyrus was later dismissed from the board of directors of Tata Industries Ltd.,
Tata Consultancy Services Ltd., and Tata Teleservices Ltd., after separate
shareholder votes.

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Following that, Cyrus resigned from a few additional board positions.
Following that, two SP Group firms, Cyrus Investments Pvt. Ltd. and Sterling

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Investment Corporation Pvt. Ltd., filed a company petition under Sections
241, 242, and 244 of the Companies Act, 2013, alleging mismanagement,
oppression, and discrimination.

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The complainants also questioned Tata Sons’ shift from a public to a private

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company.” The National Company Law Tribunal ruled that Cyrus Mistry’s

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dismissal as executive chairman was unconstitutional and ordered that he be
reinstated.

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tr-5L7Upersecution
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The Supreme Court delayed the NCLAT order in January 2020, and the
verdict was postponed until December 17, 2020. The Supreme Court has
now ruled that Tata Sons’ conduct
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or mismanagement.
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Judgement
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The judgement went in the Tata Group’s favour.

The bench dismissed all of Cyrus Mistry’s allegations of persecution and

mismanagement levelled against Tata Sons Limited. A Supreme Court bench
led by Chief Justice S A Bobde, Justice V Ramasubramanian, and Justice A S
Bopanna made the judgement.

On December 18, 2019, the Supreme Court postponed the ruling of the
National Company Law Appellate Tribunal (NCLAT) to reinstate Cyrus Mistry
as executive chairman of Tata Sons.
 The Supreme Court held that the Company Law Tribunal cannot intervene in
the removal of a person as a Chairman of a Company in a petition filed under
Section 241 of the Companies Act, 2013, unless the removal is oppressive,
mismanaged, or done in a prejudicial manner harming the company, its
members, or the public at large.

The court decided that removing a person as Chairman of the Company is

not a subject matter under Section 241 of the Companies Act unless it is
proven to be “oppressive or harmful.” Sections 241 and 242 of the
Companies Act of 2013 do not specifically give reinstatement authority,
according to the court.

As a result, on December 18, 2019, the Supreme Court overturned the

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National Company Law Appellate Tribunal’s (NCLAT) order to reinstate Cyrus
Mistry as executive chairman of Tata Sons.

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