The Bombay high court, in an interim order on Friday, directed Tata Sons to keep one seat of an independent director “vacant until further orders” in each of its companies where industrialist Nusli Wadia serves as independent director.
The directions came in the backdrop of the dispute between Wadia and Tata Sons, following a special notice issued by the latter seeking Wadia’s ouster as the 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 Wadia’s removal.
Wadia filed a defamation suit against Tata Sons on Thursday, arguing that he was being “singled out and targeted” because of public support for ousted chairperson of Tata Sons, Cyrus Mistry. He said that Tata Sons feared that he was “galvanising” other directors to support Mistry.
Earlier this month, four minority shareholders of these companies -- Janak Mathuradas, Yogesh Mathuradas, Chanda Mathuradas and Pramila Mathuradas -- also moved the Bombay high court against the special notice on Wadia’s removal, and challenged a rule in the Companies Act that allows promoters to vote on a resolution seeking removal of independent directors.
Among other things, they sought that the SEBI and the Union government be directed to amend the Act and restrain the companies from removing Wadia.
SEBI, however, said that it could “not act on a case to case basis and instead, but it was examining if the Act needed to be amended and would make a suggestion to the legislature accordingly”.
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.
While justice SJ Kathawalla refused to interfere with the EGMs, he ruled that Tata Sons will have to keep a seat vacant in each of these companies so that if the companies decide on Wadia’s removal, and if the court ultimately decides that such removal was unauthorised, Wadia can be reinstated as independent director.
The directions came after the shareholders as well as Wadia argued that the removal notice was malicious, caused prejudice to the interest of other minority shareholders, and that the sole aim of the move was to make the other independent directors “toe the line”.
Tata Sons, meanwhile, argued that the group was well within its powers to seek Wadia’s removal since the Company’s Act provided for such an action if the “conduct of an independent director changes”.
HC has now asked Tata Sons to file a reply by January 15 next year, the minority shareholders to file a rejoinder by January 25, and has scheduled the matter for final hearing on February 6 next year.