Bombay HC clears Tata Group' EGM plans, but wants Wadia's seat kept vacant
17 December 2016
The Bombay High Court has allowed Tata Sons to go ahead with the proposed extraordinary shareholders meeting (EGM) to decide on a proposal to remove independent director Nusli Wadia from the boards of three group firms, but asked the Tata Group to keep the post vacant until it decides on the case.
The high court has allowed Tata Motors, Tata Chemicals and Tata Steel to go ahead with their scheduled extraordinary general meetings (EGMs) next week and to act upon the results of the voting on the removal of Wadia from these companies, but said one seat on the board has to be kept vacant until the suit filed by some minority shareholders is finally disposed of.
Irrespective of the outcome of shareholders polls in three Tata companies next week, independent director Nusli Wadia cannot be replaced in these entities, for now. Even if Wadia voted is out, his post will have to be kept vacant until further orders, the high court has ruled.
A bench of justice SJ Kathawalla refused to interfere with the EGMs, but ruled that Tata Sons will have to keep a seat vacant in each of these companies until the court decides on the legality of Wadia's removal or of the move to remove him.
In its interim order, issued on Friday, the Bombay high court directed Tata Sons to keep one seat of an independent director ''vacant until further orders'' in each of its three companies where industrialist Nusli Wadia currently serves as an independent director.
The directions come on a case filed by some Tata Group shareholders, including Janak Mathuradas, Yogesh Mathuradas, Chanda Mathuradas and Pramila Mathuradas challenging a rule in the Companies Act that allows promoters to vote on a resolution seeking removal of independent directors.
The four minority shareholders had sought among other things, that the capital market regulator Sebi and the union government be directed to amend the Act and restrain the companies from removing Wadia.
Tata Sons has issued a special notice seeking Wadia's ouster as independent director from three of its entities - Tata Chemicals, Tata Motors and Tata Steel. Each of these three companies is scheduled to conduct extraordinary general meetings (EGM) later this month, to vote on the requisition.
The four minority shareholders of these three companies moved the Bombay high court against the special notice on Wadia's removal earlier this month.
Wadia himself filed a defamation suit against Tata Sons on Thursday.
On Friday, the shareholders sought, by way of an interim relief, that either the voting in the EGMs be restricted, or that the results of the poll be kept in a sealed envelope before the court until the matter is decided finally.
The court, however, declined to stay the company's proposed EGM, even as NH Seervai and Janak Dwarkadas, the counsels of the shareholders and Wadia, respectively, argued that the notice seeking Wadia's removal was malicious, caused prejudice to the interest of minority shareholders, and that the sole aim of the move was to make the other independent directors ''toe the line''.
Wadia argued that he was being ''singled out and targeted'' only because he had publicly voiced his support for ousted chairperson of Tata Sons, Cyrus Mistry.