Holding

NCLAT exceeded its jurisdiction by declaring oppression, ordering reinstatement, muting Article 75 and treating the affirmative voting rights as oppressive; the reconversion of Tata Sons was lawful under the Companies Act, 2013.

Summary

The Supreme Court examined the NCLAT order that had declared Tata Sons' affairs oppressive and prejudicial, reinstated Cyrus Pallonji Mistry (CPM) as Executive Chairman and Director, restrained the Tata Trust nominees, and set aside the conversion of Tata Sons from a public to a private company. The Court held that the removal of CPM was not an act of oppression, that Sections 241 and 242 of the Companies Act, 2013 do not empower a tribunal to order reinstatement or to mute Article 75, and that the affirmative voting rights of the Trust nominees were not oppressive. It further ruled that the reconversion of Tata Sons was lawful under the 2013 Act and did not require the approvals alleged by the appellants. Consequently, the Court set aside the NCLAT judgment, allowed the appeals filed by the Tata group, and dismissed the appeal of the SP group. The decision clarified the limited scope of reliefs under s.241/242 and reaffirmed the principle of legality in company law.

Issues considered

The appropriateness of NCLAT's finding that Tata Sons' affairs were conducted in a manner oppressive or prejudicial to some members and justified winding up on a just and equitable ground.
Whether the reliefs granted by NCLAT, including reinstatement of CPM and restrictions on the Trust nominees, were within the powers conferred by Section 242 of the Companies Act, 2013.
Whether NCLAT could, by implication, mute the effect of Article 75 of Tata Sons' Articles of Association.
Whether the affirmative voting rights under Articles 104B, 121 and related provisions constitute oppression or prejudice.
Whether the conversion of Tata Sons from a public to a private company required compliance with Section 14 of the Companies Act, 2013 or Section 43A(4) of the Companies Act, 1956.

Legislation cited

Companies Act, 1913s. 153C
Companies Act, 1950
Companies Act, 1956s. 27, s. 3, s. 397, s. 398, s. 402, s. 43A
Companies Act, 1985s. 459, s. 460, s. 461
Companies Act, 2006s. 994, s. 995, s. 996
Companies Act, 2013s. 14, s. 149, s. 151, s. 163, s. 166, s. 177, s. 241, s. 242, s. 420, s. 424, s. 43A
Specific Relief Act, 1963s. 14

Subjects

oppressionmismanagementSection 241Section 242reinstatementaffirmative voting rightsArticle 75just and equitable winding upcorporate governanceconversion private publiccompany law

Judgment

[2021] 12 S.C.R. 903 903

TATA CONSULTANCY SERVICES LIMITED A
v.
CYRUS INVESTMENTS PVT. LTD. AND ORS.
(Civil Appeal Nos. 440-441 of 2020)
MARCH 26, 2021 B
[S.A. BOBDE, CJI, A.S. BOPANNA AND
V. RAMASUBRAMANIAN, JJ.]
Companies Act, 2013 – ss. 241 and 242 – Held: The sine qua
non for invoking s.241 is that the affairs of the Company should
C
have been conducted or are being conducted in a manner
oppressive or prejudicial to some of the members – In a petition u/
s.241, the Tribunal cannot ask the question whether the removal of
a Director was legally valid and/or justified or not – The question
to be asked is whether such a removal tantamount to a conduct
oppressive or prejudicial to some members – Even in cases where D
the Tribunal finds that the removal of a Director was not in
accordance with law or was not justified on facts, the Tribunal
cannot grant a relief u/s.242 unless the removal was oppressive or
prejudicial – There may be cases where the removal of a Director
might have been carried out perfectly in accordance with law and
E
yet may be part of a larger design to oppress or prejudice the interests
of some members – It is only in such cases that the Tribunal can
grant a relief u/s.242 – The validity and justification for the removal
of a person can never be the primary focus of a Tribunal u/s.242
unless the same is in furtherance of a conduct oppressive or
prejudicial to some of the members – On facts, the removal of a F
person from the post of Executive Chairman cannot be termed as
oppressive or prejudicial –The original cause of action for the
complainant companies to approach NCLT was the removal of CPM
from the post of Executive Chairman – Though the complainant
companies padded up their actual grievance with various historical
G
facts to make a deceptive appearance, the causa proxima for the
complaint was the removal of CPM from the office of Executive
Chairman – His removal from Directorship happened subsequent
to the filing of the original complaint and that too for valid and

H
903
904 SUPREME COURT REPORTS [2021] 12 S.C.R.

A justifiable reasons and hence NCLAT could not have laboured so
much on the removal of CPM, for granting relief u/ss.241 and 242.
Company Law – Held: Company Tribunal is not a labour
Court or an administrative Tribunal to focus entirely on the manner
of removal of a person from Directorship.
B Company Law – Winding up order on just and equitable
grounds – Held: There must lie a justifiable lack of confidence in
the conduct and management of the company’s affairs, at the
foundation of applications for winding up – The case on hand does
not fall anywhere near the just and equitable standard, for the simple
C reason that it was the very same complaining minority whose
representative was not merely given a berth on the Board but was
also projected as the successor to the Office of Chairman – For
invocation of just and equitable clause, there must be a justifiable
lack of confidence on the conduct of the directors – A mere lack of
confidence between the majority shareholders and minority
D shareholders would not be sufficient – On facts, Tata Sons is a
principal investment holding Company, of which the majority
shareholding is with philanthropic Trusts – The majority
shareholders are not individuals or corporate entities having deep
pockets into which the dividends find their way if the Company
E does well and declares dividends – The dividends that the Trusts
get are to find their way eventually to the fulfilment of charitable
purposes – Therefore, NCLAT should have raised the most
fundamental question whether it would be equitable to wind up the
Company and thereby starve to death those charitable Trusts,
especially on the basis of un-charitable allegations of oppressive
F and prejudicial conduct – Finding of NCLAT that the facts otherwise
justify the winding up of the Company under the just and equitable
clause, was completely flawed.
Companies Act, 2013 – ss. 241 and 242 – ss.241 and 242 do
not specifically confer the power of reinstatement, nor there is any
G scope for holding that such a power to reinstate can be implied or
inferred from any of the powers specifically conferred – The
architecture of ss.241 and 242 does not permit the Tribunal to read
into the Sections, a power to make an order (for reinstatement) which
is barred by law vide s.14 of the Specific Relief Act, 1963 with or
H without the amendment in 2018.
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 905
INVESTMENTS PVT. LTD. AND ORS.

Company Law – Law relating to oppression and A
mismanagement – Held: Despite the law relating to oppression and
mismanagement undergoing several changes, the object that a
Tribunal should keep in mind while passing an order in an
application complaining of oppression and mismanagement, has
remained the same for decades – This object is that the Tribunal, by
B
its order, should bring to an end the matters complained of – The
purpose of an order both under the English Law and under the
Indian Law, irrespective of whether the regime is one of “oppressive
conduct” or “unfairly prejudicial conduct” or a mere “prejudicial
conduct”, is to bring to an end the matters complained of by
providing a solution – The object cannot be to provide a remedy C
worse than the disease – The object should be to put an end to the
matters complained of and not to put an end to the company itself,
forsaking the interests of other stakeholders.
Company Law – Articles of Association of a company – Held:
That Articles of Association of a company constitute a contract among D
shareholders, is the bedrock of Company Law – A person who
willingly became a shareholder and thereby subscribed to the Articles
of Association and who was a willing and consenting party to the
amendments carried out to those Articles, cannot later on turn
around and challenge those Articles – The same would tantamount
to requesting the Court to rewrite a contract to which he became a E
party with eyes wide open.
Companies Act, 2013 – s.241 – s.241 is not intended to
discipline a Management in respect of a possible future conduct.
Companies Act, 2013 – s.242 – Articles of Association of a F
company – Held: The Tribunal has the power u/s.242 to set aside
any amendment to the Articles that takes away recognised proprietary
rights of shareholders – But this is on the premise that the bringing
up of amendment itself was a conduct that was oppressive or
prejudicial – On facts, the order of NCLAT tinkering with the power
available under Article 75 of the Articles of Association was wholly G
unsustainable.
In the instant matter, Tata Sons (Private) Limited
challenged a final order dated 18-12-2019 passed by the National
Company Law Appellate Tribunal (NCLAT) (i) holding as illegal,
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906 SUPREME COURT REPORTS [2021] 12 S.C.R.

A the proceedings of the sixth meeting of the Board of Directors of
TATA Sons Limited held on 24.10.2016 in so far as it related to
the removal of Shri Cyrus Pallonji Mistry (“CPM”); (ii) restoring
the position of CPM as the Executive Chairman of Tata Sons
Limited and consequently as a Director of the Tata Companies
for the rest of the tenure; (iii) declaring as illegal the appointment
B
of someone else in the place of CPM as Executive Chairman;
(iv) restraining Shri Ratan N. Tata (“RNT”) and the nominees of
Tata Trust from taking any decision in advance; (v) restraining
the Company, its Board of Directors and Shareholders from
exercising the power under Article 75 of the Articles of
C Association against the minority members except in exceptional
circumstances and in the interest of the Company; and (vi)
declaring as illegal, the decision of the Registrar of Companies
for changing the status of Tata Sons Limited from being a public
company into a private company.
D The questions of law that arose for consideration were:
(i) Whether the formation of opinion by the Appellate
Tribunal that the company’s affairs have been or are being
conducted in a manner prejudicial and oppressive to some
members and that the facts otherwise justify the winding up of
E the company on just and equitable ground, is in tune with the
well settled principles and parameters, especially in the light of
the fact that the findings of NCLT on facts were not individually
and specifically overturned by the Appellate Tribunal?
(ii) Whether the reliefs granted and the directions issued
F by the Appellate Tribunal, including the reinstatement of CPM
into the Board of Tata Sons and other Tata companies, are in
consonance with the pleadings made, the reliefs sought and the
powers available under Sub-section (2) of Section 242 of the
Companies Act, 2013?

G (iii) Whether the Appellate Tribunal could have, in law,
muted the power of the Company under Article 75 of the Articles
of Association, to demand any member to transfer his
ordinary shares, by simply injuncting the company from exercising
such a right without setting aside the Article?

H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 907
INVESTMENTS PVT. LTD. AND ORS.

(iv) Whether the characterisation by the Tribunal, of the A
affirmative voting rights available under Article 121 to the
Directors nominated by the Trusts in terms of Article 104B, as
oppressive and prejudicial, is justified especially after the
challenge to these Articles have been given up expressly
and whether the Tribunal could have granted a direction to
B
RNT and the Nominee Directors virtually nullifying the effect of
these Articles ?
(v) whether the re-conversion of Tata Sons from a public
company into a private company, required the necessary approval
under section 14 of the Companies Act, 2013 or at least an action
under section 43A(4) of the Companies Act, 1956 during the C
period from 2000 (when Act 53 of 2000 came into force) to 2013
(when the 2013 Act was enacted) as held by NCLAT ?
Answering all the questions of law in favour of the Tata
Group, the Court
D
HELD:
Question No.1
1.1. The real reason why the complainant companies thought
fit, quite tactfully, not to press for the reinstatement of CPM is
that the mere termination of Directorship cannot be projected as E
something that would trigger the just and equitable clause for
winding up or to grant relief under Sections 241 and 242.
[Para 16.21][1002-A-B]
1.2. It must be remembered : (i) that a provision for
inclusion of a representative of small shareholders in the Board F
of Directors, is of a recent origin under Section 151 of the
Companies Act, 2013 and it is applicable only to a listed company;
(ii) that Tata sons is not a listed Company; (iii) that the Articles of
Association of Tata sons, to which the complainant companies,
CPM and his father had subscribed, do not provide for any
G
representation; (iv) that despite there being no statutory or
contractual obligation, Tata Sons inducted CPM’s father as a
director on the board in the year 1980 and continued him for a
period of almost 25 years; (v) that CPM himself was inducted,
again without reference to any statutory or contractual obligation,
H
908 SUPREME COURT REPORTS [2021] 12 S.C.R.

A as a Director on the Board in August, 2006; and (vi) that within 6
years of such induction, CPM was identified as a successor to
RNT and was appointed as Executive Deputy Chairman
and elevated to the position of Executive Chairman.
[Para 16.22][1002-B-E]
B 1.3. It is an irony that the very same person who represents
shareholders owning just 18.37% of the total paid up share capital
and yet identified as the successor to the empire, has chosen to
accuse the very same Board, of conduct, oppressive and unfairly
prejudicial to the interests of the minorities. [Para 16.23]
[1002-E-F]
C 1.4. The fact that the removal of CPM was only from the
Executive Chairmanship and not the Directorship of the company
as on the date of filing of the petition and the fact that in law, even
the removal from Directorship can never be held to be an
oppressive or prejudicial conduct, was sufficient to throw the
petition under section 241 out, especially since NCLAT chose
D
not to interfere with the findings of fact on certain business
decisions. [Para 16.24][1002-G-H; 1003-A]
1.5. The subsequent conduct on the part of CPM in leaking
his mail dated 25-10-2016 to the Press and sending replies to
the Income Tax Authorities enclosing 4 box files, even while
E continuing as a Director, justified his removal even from the
Directorship of Tata Sons and other group companies. A person
who tries to set his own house on fire for not getting what he
perceives as legitimately due to him, does not deserve to
continue as part of any decision making body (not just the Board
of a company). [Para 16.25][1003-B-C]
F
1.6. In a petition under Section 241 of the Companies Act,
2013, the Tribunal cannot ask the question whether the removal
of a Director was legally valid and/or justified or not. The question
to be asked is whether such a removal tantamount to a conduct
oppressive or prejudicial to some members. Even in cases where
G the Tribunal finds that the removal of a Director was not in
accordance with law or was not justified on facts, the Tribunal
cannot grant a relief under Section 242 unless the removal was
oppressive or prejudicial. [Para 16.28][1003-H; 1004-A-B]
1.7. There may be cases where the removal of a Director
might have been carried out perfectly in accordance with law and
H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 909
INVESTMENTS PVT. LTD. AND ORS.

yet may be part of a larger design to oppress or prejudice the A
interests of some members. It is only in such cases that the
Tribunal can grant a relief under Section 242. The Company
Tribunal is not a labour Court or an administrative Tribunal to
focus entirely on the manner of removal of a person from
Directorship. [Para 16.29][1004-B-C]
B
1.8. The validity of and justification for the removal of a
person can never be the primary focus of a Tribunal under Section
242 unless the same is in furtherance of a conduct oppressive or
prejudicial to some of the members. In fact the post of Executive
Chairman is not statutorily recognised or regulated, though the
post of a Director is. CPM was removed only from the post of (or C
designation as) Executive Chairman and not from the post of
Director till the Company Petition was filed. But CPM himself
invited trouble, by declaring an all out war, which led to his
removal from Directorship. [Para 16.31][1004-E-F]
1.9. It is true that as per the evidence available on record D
he was requested before the Board meeting, to step down from
the post of Executive Chairman. That does not tantamount to
the act being pre-meditated. The induction of new members on
8.8.2016 into the Board and the Board securing a legal opinion
prior to the Board meeting, cannot make the act a pre-meditated E
one. There is a thin line of demarcation between a well-conceived
plan and a pre-meditated one and the line can many times be
blurred. [Para 16.32][1004-G-H]
1.10. In any event the removal of a person from the post of
Executive Chairman cannot be termed as oppressive or F
prejudicial. The original cause of action for the complainant
companies to approach NCLT was the removal of CPM from the
post of Executive Chairman. Though the complainant companies
padded up their actual grievance with various historical facts to
make a deceptive appearance, the causa proxima for the complaint
was the removal of CPM from the office of Executive Chairman. G
His removal from Directorship happened subsequent to the filing
of the original complaint and that too for valid and justifiable
reasons and hence NCLAT could not have laboured so much on
the removal of CPM, for granting relief under Sections 241 and
242. [Para 16.42][1008-B-C] H
910 SUPREME COURT REPORTS [2021] 12 S.C.R.

A 1.11. NCLAT has recorded a finding, though not based upon
any factual foundation, that the facts otherwise justify the making
of a winding up order on just and equitable ground. But as held
by the Privy Council in Loch v. John Blackwood ,”there must lie a
justifiable lack of confidence in the conduct and management of
the company’s affairs, at the foundation of applications for winding
B
up.” More importantly, “the lack of confidence must spring not
from dissatisfaction at being out-voted on the business affairs or on
what is called the domestic policy of the company”. But, “wherever
the lack of confidence is rested on a lack of probity in the conduct
of the company’s affairs, then the former is justified by the latter.”
C [Para 16.43][1008-D-F]
1.12. The case on hand will not fall anywhere near the just
and equitable standard, for the simple reason that it was the very
same complaining minority whose representative was not merely
given a berth on the Board but was also projected as the successor
D to the Office of Chairman. [Para 16.45][1009-C-D]
1.13. For invoking the just and equitable standard, the
underlying principle is that the Court should be satisfied either
that the partners cannot carry on together or that one of them
cannot certainly carry on with the other. [Para 16.50][1011-C]
E 1.14. In the case in hand there was never and there could
never have been a relationship in the nature of quasi partnership
between the Tata Group and S.P. Group. S.P. Group boarded the
train half-way through the journey of Tata Sons. Functional dead
lock is not even pleaded nor proved. [Para 16.51][1011-C-D]
F 1.15. For the invocation of just and equitable clause, there
must be a justifiable lack of confidence on the conduct of the
directors. A mere lack of confidence between the majority
shareholders and minority shareholders would not be sufficient.
[Para 16.52][1011-E]
G 1.16. Tata Sons is a principal investment holding Company,
of which the majority shareholding is with philanthropic Trusts.
The majority shareholders are not individuals or corporate entities
having deep pockets into which the dividends find their way if
the Company does well and declares dividends. The dividends
that the Trusts get are to find their way eventually to the fulfilment
H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 911
INVESTMENTS PVT. LTD. AND ORS.

of charitable purposes. Therefore, NCLAT should have raised A
the most fundamental question whether it would be equitable to
wind up the Company and thereby starve to death those charitable
Trusts, especially on the basis of un-charitable allegations of
oppressive and prejudicial conduct. Therefore, the finding of
NCLAT that the facts otherwise justify the winding up of the
B
Company under the just and equitable clause, is completely
flawed. [Para 16.54][1012-A-C]
Question No.2
2.1. Sections 241 and 242 of the Companies Act, 2013 do
not specifically confer the power of reinstatement, nor there is C
any scope for holding that such a power to reinstate can be implied
or inferred from any of the powers specifically conferred.
[Para 17.17][1024-C]
2.2. The following words at the end of sub-section (1) of
242 “the Tribunal may, with a view to bringing to an end the D
matters complained of, make such order as it thinks fit” cannot
be interpreted as conferring on the Tribunal any implied power
of directing reinstatement of a director or other officer of the
company who has been removed from such office. These words
can only be interpreted to mean as conferring the power to make
such order as the Tribunal thinks fit, where the power to make E
such an order is not specifically conferred but is found necessary
to remove any doubts and give effect to an order for which the
power is specifically conferred. For instance, sub-section (2) of
Section 242 confers the power to make an order directing several
actions. The words by which sub-section (1) of Section 242 ends, F
supra can be held to mean the power to make such orders to
bring an end, matters for which directions are given under sub-
section (2) of Section 242. [Para 17.18][1024-C-F]
2.3. The architecture of Sections 241 and 242 does not
permit the Tribunal to read into the Sections, a power to make an G
order (for reinstatement) which is barred by law vide Section 14
of the Specific Relief Act, 1963 with or without the amendment in
2018. [Para 17.19][1024-F-G]

H
912 SUPREME COURT REPORTS [2021] 12 S.C.R.

A 2.4. Despite the law relating to oppression and
mismanagement undergoing several changes, the object that a
Tribunal should keep in mind while passing an order in an
application complaining of oppression and mismanagement, has
remained the same for decades. This object is that the Tribunal,
by its order, should bring to an end the matters complained of.
B
[Para 17.33][1029-B-C]
2.5. The purpose of an order both under the English Law
and under the Indian Law, irrespective of whether the regime is
one of “oppressive conduct” or “unfairly prejudicial conduct” or a
mere “prejudicial conduct”, is to bring to an end the matters
C complained of by providing a solution. The object cannot be to
provide a remedy worse than the disease. The object should be
to put an end to the matters complained of and not to put an end
to the company itself, forsaking the interests of other
stakeholders. [Para 17.34][1029-D]
D 2.6. The NCLAT could not have granted the reliefs of (i)
reinstatement of CPM (ii) restriction on the right to invoke Article
75 (iii) restraining RNT and the Nominee Directors from taking
decisions in advance and (iv) setting aside the conversion of Tata
Sons into a private company. [Para 17.35][1029-F-G]
E Question No.3
3.1. The sine qua non for invoking Section 241 is that the
affairs of the Company should have been conducted or are being
conducted in a manner oppressive or prejudicial to some of the
members. No single instance even of invocation of Article 75,
F leave alone misuse, is averred in the main company petition or in
the application for amendment. Therefore, NCLAT could not have
and should not have made Article 75 completely ineffective by
passing an order of restraint. [Para 18.3][1030-E-F]
3.2. As a matter of fact, NCLAT has agreed, on first
G principles, that it has no jurisdiction to declare any of the Articles
of Association illegal. After having set a benchmark correctly,
NCLAT neutralised Article 75 merely on the basis of likelihood
of misuse. Section 241(1)(a) provides for a remedy, only in respect
of past and present conduct or past and present continuous
H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 913
INVESTMENTS PVT. LTD. AND ORS.

conduct. NCLAT has stretched Section 241(1)(a) to cover the A
likelihood of a future bad conduct, which is impermissible in law.
[Para 18.4][1030-G]
3.3. That Articles of Association of a company constitute a
contract among shareholders, is the bedrock of Company Law.
In fact, Article 75 was not an invention of the recent origin in B
Tata Sons. It has been there for nearly a century in one form or
the other. The Company was incorporated in the year 1917 and
S.P. Group acquired shares nearly after 50 years in the year 1965.
Even at that time Article 75 was in existence in a different form.
After 1965, Article 75 underwent several rounds of amendments,
to which the S.P. Group, CPM’s father and CPM were parties. C
CPM himself was a party to an amendment made to Article 75 on
13.09.2000. The Article in its present form was made only on
13.09.2000 and the amendment was unanimously carried through
in the presence of and with the consent of CPM. [Para 18.5]
[1030-H; 1031-A-C] D
3.4. A person who willingly became a shareholder and
thereby subscribed to the Articles of Association and who was a
willing and consenting party to the amendments carried out to
those Articles, cannot later on turn around and challenge those
Articles. The same would tantamount to requesting the Court to E
rewrite a contract to which he became a party with eyes wide
open. [Para 18.6][1031-C-D]
3.5. It is not as though CPM or his father who was also a
Director for nearly 25 years, were not aware of or blind to the
existence of Article 75. The pleading on the part of the F
complainant companies was sufficient to throw the challenge to
Article 75 out, as it did not correlate to an actual conduct but the
possibility of a future conduct. Section 241 is not intended to
discipline a Management in respect of a possible future conduct.
[Para 18.7][1031-D-G]
G
3.6. It is no doubt true that the Tribunal has the power under
Section 242 to set aside any amendment to the Articles that takes
away recognised proprietary rights of shareholders. But this
is on the premise that the bringing up of amendment itself was
a conduct that was oppressive or prejudicial. [Para 18.8]
[1031-G-H] H
914 SUPREME COURT REPORTS [2021] 12 S.C.R.

A 3.7. The order of NCLAT tinkering with the power available
under Article 75 of the Articles of Association is wholly
unsustainable. [Para 18.11][1032-D]
Question No.4
4. The fourth question of law - whether the characterisation
B by the Tribunal, of the affirmative voting rights available under
Article 121 to the Directors nominated by the Trusts in terms of
Article 104B, as oppressive and prejudicial, is justified especially
after the challenge to these Articles have been given up expressly
and whether the Tribunal could have granted a direction to RNT
C and the Nominee directors virtually nullifying the effect of these
Articles - is also to be answered in favour of the Tata group and
the claim in the cross appeal relating to affirmative voting rights
and proportionate representation are liable to be rejected.
[Para 19.1 and 19.50][1032-F; 1052-B]
D Question No.5
5. The 5 th question of law formulated - whether the re-
conversion of Tata Sons from a public company into a private
company, required the necessary approval under section 14 of
the Companies Act, 2013 or at least an action under section 43-
E A(4) of the Companies Act, 1956 during the period from 2000
(when Act 53 of 2000 came into force) to 2013 (when the 2013
Act was enacted) as held by NCLAT – is answered in favour of
Tata Sons and as a consequence, all the observations made against
the appellants and the Registrar of companies in Paragraphs 181,
186 and 187 (iv) of the impugned judgment are set aside.
F [Para 20.1 and Para 20.44][1052-C-D; 1069-C-D]
Central Bank of India Ltd. v. Hartford Fire Insurance
Co. Ltd. AIR 1965 SC 1288; M.I. Builders Pvt. Limited
v. Radhey Shyam Sahu & Others (1999) 6 SCC 464:
[1999] 3 SCR 1066 and Vodafone International
G Holdings BV v. Union of India (2012) 6 SCC 613:
[2012] 1 SCR 573 – distinguished.
Hanuman Prasad Bagri & Ors. v. Bagress Cereals
Pvt. Ltd. (2001) 4 SCC 420: [2001] 2 SCR 811;
Rajahmundry Electric Supply Corpn. Ltd. v.
H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 915
INVESTMENTS PVT. LTD. AND ORS.

Nageshwara Rao [1955] 2 SCR 1066; S.P. Jain v. A
Kalinga Tubes Ltd. AIR 1965 SC 1535 : [1965] 2 SCR
720; Ram Parshotam Mittal v. Hillcrest Realty (2009) 8
SCC 709 : [2009] 10 SCR 1121 and Darius Rutton
Kavasmaneck v. Gharda Chemicals Ltd (2015) 14 SCC
277:[2014] 11 SCR 1119 – relied on.
B
Needle Industries (India) Ltd. and Ors. v. Needle
Industries Newey (India) Ltd. and ors. (1981) 3 SCC
333 : [1981] 3 SCR 698; Raj Kumar Dey v. Tarapada
Dey (1987) 4 SCC 398 : [1988] 1 SCR 118; Mohd.
Gazi v. State of Madhya Pradesh (2000) 4 SCC 342:
[2000] 2 SCR 871 and Dr. S.B. Dutt v.University of Delhi C
[1959] SCR 1236 – referred to.
Scottish Cooperative Wholesale Society v. Meyer 1959
A.C.324; Loch v. John Blackwood [1924] AC 783;
Baird v. Lees, (1924) SC 83 Scottish Supreme Court;
Ebrahimi v. Westbourne Galleries Ltd. [1972] 2 WLR D
1289; Lau v. Chu [2020] 1 WLR 4656; In Re Sailing
Ship Kentmere Co. [1897] WN 58; Nelson v. James
Nelson 1914-2 K.B. 770; Central Bank of Ecuador and
others v. Conticorp SA and others (Bahamas) (2015)
UKPC 11 Judicial Committee of the Privy council E
(UK) and Re: Neath Rugby Limited (2010) B.C.C. 597
– referred to.
Case Law Reference
[2001] 2 SCR 811 relied on Para 16.21
F
AIR 1965 SC 1288 distinguished Para 16.40
[1999] 3 SCR 1066 distinguished Para 16.41
[1955] 2 SCR 1066 relied on Para 16.52
[1965] 2 SCR 720 relied on Para 16.52
G
[1981] 3 SCR 698 referred to Para 16.53
[1988] 1 SCR 118 referred to Para 17.11
[2000] 2 SCR 871 referred to Para 17.11
[1959] SCR 1236 referred to Para 17.16
H
916 SUPREME COURT REPORTS [2021] 12 S.C.R.

A [2012] 1 SCR 573 distinguished Para 19.31
[2009] 10 SCR 1121 relied on Para 20.36
[2014] 11 SCR 1119 relied on Para 20.39
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 440-
B 441 of 2020.
From the Judgment and Order dated 18.12.2019 of the National
Company Law Appellate Tribunal, New Delhi in Company Appeal Nos.
254 and 268 of 2018.
With
C
Civil Appeal Nos. 13-14, 442-443, 19-20, 444-445, 448-449,
263-264, 1802 of 2020.
Tushar Mehta, SG, Balbir Singh, K.M. Nataraj, ASGs, Harish N.
Salve, Dr. A.M. Singhvi, S.N. Mookherjee, Mohan Parasaran, Mohan
Parasaran, Zal Andhyarujina, C.A. Sundaram, Shyam Divan, Janak
D
Dwarkadas, Sr. Advs., Ms. Fereshte D. Sethna, Ms. Anuradha Dutt,
Ms. Suman Yadav, Haaris Fazili, Adhiraj Malhotra, Hasmukh Ravaria,
Aditya Sarin, Shreyash Taparia, Kunal Dutt, Ms. Rashi Verma, Ms. Aboli
Mandlik, Ms. B. Vijayalakshmi Menon, Ms. Ruby Singh Ahuja, Dhruv
Dewan, Ms. Tahira Karanjawala, Anupam Prakash, Avishkar Singhvi,
E Rohan Batra, Ms. Reena Choudhary, Arjun Sharma, Shravan Sahny,
Ashutosh P.Shukla, Utkarsh Maria, L. Nidhiram Sharma, Ms. Harshita
Choubey, Dhruv Sethi for M/s. Karanjawala & Co., Nitesh Jain, Anuj
Berry, Sidharth Sharma, Chaitanya Safaya, Kostubh Devnani, Adrish
Majumdar, S. S. Shroff, Rohan Batra, Ms. Aditi Dani, Ashwin Kumar
D.S., M/s. Karanjawala & Co., Akshay Amritanshu, Navanjay
F
Mahapatra, Piyush Beriwal, Kanu Agrawal, Ms. Vanshaja Shukla, Mohd.
Akhil, Arvind Kumar Sharma, J.N. Mistry, Ms. Namrata Parikh, Saswat
Pattnaik, Hasan Murtaza, Somasekhar Sundaresan, Manik Dogra, Ms.
Rohini Musa, Rohan Jaitely, Apurva Diwanji, Ms. Sonali Jaitely Bakshi,
Ruzbeh Mistry, Anoj Menon, Abhishek Venkataraman, Ravi Tyagi,
G Shubhanshu Gupta, Ms. Rini Badoni, Pragalbh Bhardwaj, Gunjan Shah,
Akshay Doctor, Himank Singh, P. V. Yogeswaran, Akshay Makhija, Ms.
Jyoti Mendiratta, Ashish Prasad, Mahfooz Ahsan Nazki, Polanki
Gowtham, Amitabh Sinha, Shrey Sharma, Advs. for the appearing parties.

H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 917
INVESTMENTS PVT. LTD. AND ORS.

The following Judgment of the Court was delivered : A
JUDGMENT
1. Lis in the Appeals
1.1 Tata Sons (Private) Limited has come up with two appeals in
Civil Appeal Nos.13-14 of 2020, challenging a final order dated 18-12-
2019 passed by the National Company Law Appellate Tribunal B
(“NCLAT” for short) (i) holding as illegal, the proceedings of the sixth
meeting of the Board of Directors of TATA Sons Limited held on
24.10.2016 in so far as it relates to the removal of Shri Cyrus Pallonji
Mistry (“CPM” for short); (ii) restoring the position of CPM as the
Executive Chairman of Tata Sons Limited and consequently as a Director C
of the Tata Companies for the rest of the tenure; (iii) declaring as illegal
the appointment of someone else in the place of CPM as Executive
Chairman; (iv) restraining Shri Ratan N. Tata (“RNT” for short) and
the nominees of Tata Trust from taking any decision in advance; (v)
restraining the Company, its Board of Directors and Shareholders from
exercising the power under Article 75 of the Articles of Association D
against the minority members except in exceptional circumstances and
in the interest of the Company; and (vi) declaring as illegal, the decision
of the Registrar of Companies for changing the status of Tata Sons
Limited from being a public company into a private company.
1.2 RNT has come up with two independent appeals in Civil Appeal E
Nos.19-20 of 2020 against the same Order of the NCLAT, on similar
grounds.
1.3 The trustees of two Trusts namely Sir Ratan Tata Trust and
Sir Dorabji Tata Trust have come up with two independent appeals in
Civil Appeal Nos.444-445 of 2020, challenging the impugned order of F
the Appellate Tribunal. A few companies of the Tata Group, which were
referred to in the course of arguments, as the operating companies or
downstream companies, such as the Tata Consultancy Services Limited,
the Tata Teleservices Limited and Tata Industries Limited have come
up with separate appeals in Civil Appeal Nos.440-441 of 2020, 442-443
of 2020 and 448-449 of 2020. The grievance of RNT as well as the G
Trustees of the two Trusts, is as regards the injunctive order of the
Appellate Tribunal restraining them from taking any decision. The
grievance of the three operating companies which have filed 6 Civil
Appeals is that CPM has been directed to be reinstated as Director of
these companies by the impugned Order, for the rest of the tenure.
H
918 SUPREME COURT REPORTS [2021] 12 S.C.R.

A 1.4 The original complainants before the National Company Law
Tribunal (“NCLT”for short), who initiated the proceedings under Sections
241 and 242 of the Companies Act, 2013 namely (i) Cyrus Investments
Private Limited (ii) Sterling Investment Corporation Private Limited,
have come up with a cross appeal in Civil Appeal No.1802 of 2020.
Their grievance is that in addition to the reliefs already granted, the
B
NCLAT ought to have also granted a direction to provide them
proportionate representation on the Board of Directors of Tata Sons
Limited and in all Committees formed by the Board of Directors. They
have one more grievance namely that the Appellate Tribunal ought to
have deleted the requirement of an affirmative Vote in the hands of
C select Directors under Article 121 or at least ought to have restricted the
affirmative vote to matters covered by Article 121A.
1.5 In addition to C.A.Nos. 13 and 14 of 2020, Tata Sons have
also come up with 2 more appeals in C.A.Nos. 263 and 264 of 2020.
These appeals arise out of an order passed by NCLAT on 06-01-2020 in
D two interlocutory applications filed by the Registrar of Companies,
Mumbai, seeking amendment of the final order passed by NCLAT in the
main appeals. The reason why the Registrar of Companies was
constrained to file 2 interlocutory applications in the disposed of appeals,
was that in the final order passed on 18-12-2019 by NCLAT in the 2
company appeals, there were some remarks against the Registrar of
E Companies for having issued an amended certificate of incorporation to
Tata Sons by striking off the word “Public” and inserting the word
“Private”. NCLAT dismissed these 2 applications by an order dated 06-
01-2020, not merely holding that there were no adverse remarks against
the Registrar of Companies but also giving additional reasons to justify
F its findings in the disposed of appeals, in the purported exercise of the
power available under section 420 of the Companies Act, 2013. Therefore,
Tata Sons have come up with these 2 appeals in C.A.Nos. 263 and 264
of 2020.
1.6 Thus we have on hand, 15 Civil Appeals, 14 of which are on
G one side, assailing the Order of NCLAT in entirety. The remaining appeal
is filed by the opposite group, seeking more reliefs than what had been
granted by the Tribunal.
1.7 For the purpose of easy appreciation, we shall refer to the
appellants in the set of 14 Civil Appeals as “the Tata Group” or “the
H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 919
INVESTMENTS PVT. LTD. AND ORS.

Appellants”. We shall refer to the other group as “SP Group” (Shapoorji A
Pallonji Group) or “the respondents”. Similarly we shall refer to Tata
Sons Limited (or Tata Sons Private Limited) merely as ‘Tata Sons’, as
there is a controversy regarding the usage of the word “Private” before
the word “Limited”.
2. Background of the Litigation B
2.1 On 08.11.1917, Tata Sons was incorporated as a Private Limited
Company under the Companies Act, 1913.
2.2 Two companies by name Cyrus Investments Private Limited
and Sterling Investment Corporation Private Limited, forming part of
the SP Group respectively acquired 48 preference shares and 40 equity C
shares of the paid-up share capital of Tata Sons, from an existing member
by name Mrs. Rodabeh Sawhney. Over the years, the share-holding of
SP Group in Tata Sons has grown to 18.37% of the total paid-up share
capital.
2.3 The shareholding pattern of Tata Sons Limited is as follows: D

The balance is held by RNT and a few others. E

2.4 From 25.06.1980 to 15.12.2004 Shri Pallonji S. Mistry, the
father of CPM was a Non-Executive Director on the Board of Tata
Sons. On 10.08.2006 CPM was appointed as a Non-Executive Director
on the Board.
F
2.5 By a Resolution of the Board of Directors of Tata Sons dated
16.03.2012, CPM was appointed as Executive Deputy Chairman for a
period of five years from 01.04.2012 to 31.03.2017, subject however to
the approval of the shareholders at a General Meeting. The General
Meeting gave its approval on 01.08.2012.
G
2.6 By a Resolution dated 18.12.2012, the Board of Directors of
Tata Sons redesignated CPM as its Executive Chairman with effect
from 29.12.2012, even while designating RNT as Chairman Emeritus.

H
920 SUPREME COURT REPORTS [2021] 12 S.C.R.

A 2.7 By a Resolution passed on 24.10.2016, the Board of Directors
of Tata Sons replaced CPM with RNT as the interim Non-Executive
Chairman. It is relevant to note that CPM was replaced only from the
post of Executive Chairman and it was left to his choice to continue or
not, as Non-Executive Director of Tata Sons.
B 2.8 As a follow up, certain things happened and by separate
Resolutions passed at the meetings of the shareholders of Tata Industries
Limited, Tata Consultancy Services Limited and Tata Teleservices
Limited, CPM was removed from Directorship of those companies. CPM
then resigned from the Directorship of a few other operating companies
such as the Indian Hotels Company Limited, Tata Steel Limited, Tata
C Motors Limited, Tata Chemicals Limited and Tata Power Company
Limited, after coming to know of the impending resolutions to remove
him from Directorship.
2.9 Thereafter, 2 companies by name, Cyrus Investments Private
Limited and Sterling Investment Corporation Private Limited, belonging
D to the SP Group, in which CPM holds a controlling interest, filed a
company petition in C.P No.82 of 2016 before the National Company
Law Tribunal under Sections 241 and 242 read with 244 of the Companies
Act, 2013, on the grounds of unfair prejudice, oppression and
mismanagement.
E 2.10 But these two companies, hereinafter referred to as ‘the
complainant-companies’, together had only around 2% of the total issued
share capital of Tata Sons. This is far below the de-minimus qualification
prescribed under Section 244(1)(a) to invoke sections 241 and 242.
Therefore, the complainant companies filed a miscellaneous application
F under the proviso to Sub-section (1) of Section 244 seeking waiver of
the requirement of Section 244(1)(a), which requires atleast one hundred
members of the company having a share capital or one-tenth of the total
number of fixed members or any member or members holding not less
than one-tenth of the issued share capital of the company alone to be
entitled to be the applicant/applicants.
G
2.11 Along with the application for waiver of the requirement of
Section 244(1)(a), the complainant companies also moved an application
for stay of an Extra-ordinary General Meeting (“EGM” for short) of

H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 921
INVESTMENTS PVT. LTD. AND ORS.

Tata Sons, in which a proposal for removing CPM as a Director of Tata A
Sons had been moved. The NCLT refused stay, as a consequence of
which the EGM proceeded as scheduled and CPM was removed from
the Directorship of Tata Sons, by a Resolution dated 16.02.2017.
2.12 Subsequently, by an Order dated 06.03.2017, NCLT held the
main company petition to be not maintainable at the instance of persons B
holding just around 2% of the issued share capital. This was followed by
another order dated 17.4.2017, by which NCLT dismissed the application
for waiver.
2.13 The complainant companies filed appeals before NCLAT
against both the Orders dated 06.03.2017 and 17.04.2017. These appeals C
were allowed on 21.09.2017, granting waiver of the requirement of
Section 244(1)(a) and remanding the matter back to NCLT for disposal
on merits. Tata Group did not challenge this order.
2.14 Thereafter, NCLT heard the company petition on merits and
dismissed the same by an Order dated 09.07.2018. D
2.15 Challenging the order of the NCLT, the two complainant
companies filed one appeal. CPM filed another appeal. Both these appeals
were allowed by the Appellate Tribunal by a final Order dated 18.12.2019
granting the following reliefs:
(i) The proceedings of the sixth meeting of the Board E
of Directors of ‘Tata Sons Limited’ held on Monday,
24 th October, 2016 so far as it relates to removal
and other actions taken against Mr. Cyrus Pallonji
Mistry (11th Respondent) is declared illegal and is
set aside. In the result, Mr. Cyrus Pallonji Mistry F
(11th Respondent) is restored to his original position
as Executive Chairman of ‘Tata Sons Limited’ and
consequently as Director of the ‘Tata Companies’
for rest of the tenure.
As a sequel thereto, the person who has been
G
appointed as ‘Executive Chairman’ in place of Mr.
Cyrus Pallonji Mistry (11 th Respondent), his
consequential appointment is declared illegal.

H
922 SUPREME COURT REPORTS [2021] 12 S.C.R.

A (ii) Mr. Ratan N. Tata (2nd Respondent) and the nominee
of the ‘Tata Trusts’ shall desist from taking any
decision in advance which requires majority decision
of the Board of Directors or in the Annual General
Meeting.
B (iii) In view of ‘prejudicial’ and ‘oppressive’ decision
taken during last few years, the Company, its Board
of Directors and shareholders which has not
exercised its power under Article 75 since inception,
will not exercise its power under Article 75 against
Appellants and other minority member. Such power
C can be exercised only in exceptional circumstances
and in the interest of the company, but before
exercising such power, reasons should be recorded
in writing and intimated to the concerned
shareholders whose right will be affected.
D (iv) The decision of the Registrar of Companies
changing the Company (‘Tata Sons Limited’) from
‘Public Company’ to ‘Private Company’ is declared
illegal and set aside. The Company (‘Tata Sons
Limited’) shall be recorded as ‘Public Company’.
E The ‘Registrar of Companies’ will make correction
in its record showing the Company (‘Tata Sons
Limited’) as ‘Public Company’.”
2.16 After NCLAT disposed of the appeals by its order dated 18-
12-2019, the Registrar of Companies moved 2 interlocutory applications
F seeking the deletion of certain remarks made by NCLAT against them.
These applications were dismissed by NCLAT by order dated 06-01-
2020. Therefore, as against the final Order of NCLAT dated 18-12-
2019, (i) Tata Sons Private Limited (ii) RNT (iii) the Trustees of the
two Tata Trusts and (iv) three operating companies of Tata Group have
come up with 2 Civil Appeals each (totalling to 12 appeals) and the
G complainant companies have come up with one Civil Appeal. In addition,
Tata Sons have also come up with 2 more appeals against the order
dated 06-01-2020 passed by NCLAT on the applications of the Registrar
of Companies.

H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 923
INVESTMENTS PVT. LTD. AND ORS.

3. Case set up by the complainants in their petition under A
sections 241 and 242, Companies Act, 2013 and Reliefs sought
3.1 In the company petition as it was originally filed by S.P. Group
in December, 2016 before the NCLT, the complainant-companies claimed
that the affairs of Tata Sons, are carried out as though it was a proprietary
concern of RNT and that the oppressive conduct of the respondents B
was such that it would be just and equitable to wind up Tata Sons, but
such winding up would unfairly prejudice the interest of the petitioners
and that therefore the Tribunal should pass such orders so as to bring to
an end, the acts of oppression and mismanagement.
3.2 The acts of oppression and mismanagement complained against C
Tata Sons revolved around (i) alleged abuse of the Articles of Association,
particularly Articles 121, 121A, 86, 104B and 118, to enable the trusts
and its nominee Directors to exercise control over the Board of Directors;
(ii) alleged illegal removal of CPM as Executive Chairman without any
notice and an all out attempt to remove him from the Directorship of all
the operating companies of the Tata group; (iii) alleged dubious D
transactions in relation to Tata Teleservices Limited, alongwith one Mr.
C. Sivasankaran; (iv) RNT allegedly treating Tata Sons as a
proprietorship concern with all others acting as puppets, resulting in the
Board of Directors failing the test of fairness and probity (v) acquisition
of Corus Group PLC of UK at an inflated price and then jeopardising E
the talks for its merger with Thyssen Krupp (vi) Nano car project
becoming a disaster with losses accumulating year after year and the
conflict of interest that RNT had in the supply of Nano gliders to a
company where he had stakes; (vii) providing corporate guarantee to
IL & FS Trust Company for the loan sanctioned by Standard Chartered
Bank to Sterling (viii) making Kalimati Investments Ltd, a subsidiary of F
Tata Steel to provide an inter corporate bridge loan to Sterling; (ix) the
dealings with NTT DoCoMo and Sterling resulting in an arbitration award
for a staggering amount; (x) leaking information to Siva of Sterling that
resulted in Siva issuing legal notices to Tata Teleservices and Tata Sons
(xi) RNT making a personal gain for himself through the sale of a flat G
owned by a Tata group company to Mehli Mistry; (xii) companies
controlled by Mehli Mistry receiving favours due to the personal
relationship that RNT had with him; and (xiii) fraudulent transactions in
the deal with Air Asia which led to financing of terrorism.

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924 SUPREME COURT REPORTS [2021] 12 S.C.R.

A 3.3 On the foundation of the above, the complainant-companies
contended before NCLT:- (i) that the directors of Tata Sons are not
carrying out their fiduciary responsibilities for and on behalf of the
shareholders, but have become mere puppets controlled by RNT and
the Trustees of the two Trusts; (ii) that the powers contained in the
Articles of Association are being exercised in a malafide manner
B
prejudicial to the interest of the petitioners and to public interest; (iii)
that various operating decisions are taken either for emotional reasons
or for pampering the ego of RNT; (iv) that attempts are made to shield
persons responsible for fraudulent transactions at Air Asia; (v) that
attempts are made to ensure that no legal action is initiated against Siva
C who owes Rs. 694 crores; (vi) that Ratan Tata enabled his associates to
unjustly enrich themselves at the cost of Tata Sons; and (vii) that the
present directors of Tata Sons are not promoting the interests of
shareholders of Tata Sons and the interests of the shareholders of various
operating companies of the Tata group.
D 3.4 In the light of the above pleadings and contentions, the
petitioners before the NCLT sought a set of about 21 reliefs, whose
abridged version is as follows:
“(A) Supersede the existing Board of Directors of
Respondent No. 1 and appoint an administrator;
E (B) In the alternative to prayer (A) above, appoint a
retired Supreme Court Judge as the non-executive
Chairman of the Board of Directors of Respondent
No. 1 and appoint such number of new independent
directors;
F (C) restrain the so-called “Interim Chairman” i.e
Respondent No. 2 from attending any meeting of the
Board of Directors;
(D) restrain Respondent No. 14 from interfering in the
affairs of Respondent No. 1;
G
(E) direct Respondent No. 1 not to issue any securities
which results in dilution of the present paid-up equity
capital;

H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 925
INVESTMENTS PVT. LTD. AND ORS.

(F) direct the Respondents not to remove Respondent A
No. 11 as a director from the Board of Respondent
No. 1;
(G) restrain the Respondents from making any changes
to the Articles of Association of Respondent No. 1;
(H) order an investigation into the role of the Trustees B
of the Tata Trusts in the operations of Respondent
No. 1 and/or Tata Group companies and prohibit
the Trustees from interfering in the affairs of
Respondent No. 1 and/or Tata Group companies;
(I) appoint an independent auditor to conduct a C
forensic audit into transactions and dealings of
Respondent No. 1 with particular regard to all
transactions with C.Sivasankaran and his business
entities and all transactions involving Mr. Mehli
Mistry and his associated entities and such findings D
of the audit and investigation should be referred to
the Serious Fraud Investigation Office;
(J) Appoint an inspector (under applicable law) to
investigate into the breach of the SEBI (Prohibition
of Insider Trading) Regulations, 2015 and/or refer E
the findings of such investigation to the Serious
Fraud Investigation Office of the Ministry of
Corporate Affairs, Government of India.
(K) direct Respondent No.2 to pay Respondent No. 1
the amount of unjust enrichment that has accrued F
to Respondent No. 2 on account of surrender of the
sub-tenancy of the Bakhtawar flat;
(L) appoint a forensic auditor to re-investigate the
transactions executed by AirAsia with entities in
India and Singapore and such findings of the audit
G
should be referred by the Hon’ble Tribunal to the
Serious Fraud Investigation Office of the Ministry
of Corporate Affairs, Government of India;

H
926 SUPREME COURT REPORTS [2021] 12 S.C.R.

A (M) strike of Articles numbered 86, 104(B), 118, 121 and
121A in their entirety and in so far as Article 124 of
the Articles of Association of Respondent No. 1 is
concerned, the following portion of the said Article,
which is offending and/or repugnant, should be
deleted: “… Any committee empowered to decide on
B
matters which otherwise the Board is authorised to
decide shall have as its member at least one director
appointment pursuant to Article 104B. The
Provisions relating to quorum and the manner in
which matters will be decided contained in Articles
C 115 and 121 respectively shall apply mutatis
mutandis to the proceedings of the committee. “from
the Articles of Association of Respondent No. 1; and
substitute these articles with such articles as the
nature and circumstances of this case may require;
D (N) direct the Respondents (excluding Respondent Nos.
4, 10 &11) to bring back into Respondent No. 1, the
funds used by Respondent No. 1 for acquiring shares
of Tata Motors;
(O) restrain Respondent No. 1 from initiating any new
E line of business or acquiring any new business;
(P) restrain the trustees of the Trusts from interfering in
the affairs of Respondent No. 1 and in the various
companies;
(Q) restrain the existing Selection Committee from acting
F any further.
(R) direct that no candidate selected by the Selection
Committee constituted pursuant to Article 118 of the
Articles of Association of Respondent No. 1 to be
appointed without leave of this Hon’ble Tribunal;
G
(S) direct Respondent No. 1 not to demand and/or
procure any unpublished price sensitive information
from any listed operating companies within the Tata
Group;

H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 927
INVESTMENTS PVT. LTD. AND ORS.

(T) grant interim and ad-interim reliefs in terms of A
Prayers (A) to (S) above; and
(U) pass such further orders that this Hon’ble Tribunal
may, deem necessary for bringing an end to the acts
of oppression and mismanagement in the running
of Respondent No. 1.” B
4. Amendment of pleadings, addition and deletion of reliefs
4.1 The contents of Chapter-3 above, are the pleadings made and
the reliefs sought in the company petition, as it was originally filed on
20.12.2016. But the pleadings and the prayers underwent certain changes
in the course of the proceedings, partly due to subsequent developments C
and partly due to change of strategy/better counsel.
4.2 What is important to note here is that some of the changes to
the pleadings and the reliefs sought, were by way of proper applications
for amendment and some others were just by way of additional affidavits.
We shall advert to them in this part. D
4.3 The company petition filed on 20.12.2016 was taken up on
22.12.2016 and the NCLT passed an order to the following effect:-
“It has also been further agreed by all the parties more
specially by the petitioner counsel, or R-11 counsel and the
E
counsel on behalf of the answering respondents that they will
not file any interim application or initiate any action or
proceedings over this subject matter pending disposal of this
company petition.”
4.4 Soon, the matter got precipitated. Claiming that CPM sent
F
four box-files containing several documents relating to Tata Education
Trust, to the Deputy Commissioner of Income Tax with a view to create
trouble, a special notice was issued for convening the EGM of Tata
Sons on 06.02.2017 for considering the proposal for the removal of CPM
as a Director of Tata Sons.
G
4.5 Therefore, the complainant-companies moved a contempt
application. The said application was disposed of by NCLT by an order
dated 18.01.2017, permitting the complainant-companies and CPM to

H
928 SUPREME COURT REPORTS [2021] 12 S.C.R.

A file an additional affidavit limiting to the proposal for the removal of
Cyrus Pallonji Mistry from the Board.
4.6 Accordingly, an additional affidavit was filed on 21.01.2017.
However, the NCLT, by an order dated 31.01.2017 rejected the prayer
of S.P. Group for stay of EGM scheduled to be held on 06.02.2017.
B
4.7 S.P. Group filed an appeal against the order refusing the stay
of EGM. The appeal was disposed of on 03.02.2017, merely permitting
the S.P. Group to file a petition for amendment, in the event of CPM
being removed in the EGM. In the EGM held on 06.02.2017, CPM was
removed.
C
4.8 Therefore, the complainant-companies filed an amendment
application dated 10.02.2017 seeking addition of two more prayers
namely:- (i) to direct the respondents to reinstate the representative of
the complainant-companies on the Board of Tata Sons; and (ii) to direct
D the amendment of Articles of Association of Tata Sons to provide for
proportional representation of shareholders on the Board of Directors of
Tata Sons.
4.9 But the petition for contempt, the petition for interim stay of
EGM and the application for amendment to include additional prayers,
E all turned out to be exercises in futility, with the NCLT passing two
orders, one on 06.03.2017 and another on 17.04.2017. By the first order
dated 06.03.2017, NCLT held the company petition to be not maintainable,
on the ground that the two complainant companies did not hold at least
10% of the issued share capital of Tata Sons. By the second order dated
F 17.04.2017, NCLT rejected the application for grant of waiver filed under
the proviso to Sub-section (1) of Section 244.
4.10 But the aforesaid orders of NCLT dated 06.03.2017 and
17.04.2017 were reversed by NCLAT by an order dated 21.09.2017
and the matter was remanded back to NCLT.
G
4.11 Thereafter, the complainant-companies filed one additional
affidavit, one application for amendment, one application for stay and
one memo giving up some of the reliefs already sought.

H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 929
INVESTMENTS PVT. LTD. AND ORS.

The facts relating to these, can be compressed into a tabular column A
as follows:-

B

C

D

E

F

G

H
930 SUPREME COURT REPORTS [2021] 12 S.C.R.

A

B

C

D

E

F

5. Response of Tata Sons to the allegations made in the
Company Petition
G
5.1 Tata Sons filed a reply to the company petition contending
inter-alia : (i) that CPM, who was removed from the post of Executive
Chairman, after having lost the confidence of 7 out of 9 Directors, has
sought to use the complainant companies to besmirch the reputation of
Tata Group; (ii) that even the decisions to which CPM was a party have
H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 931
INVESTMENTS PVT. LTD. AND ORS.

been questioned in the petition; (iii) that Tata Group founded in 1868 is a A
global enterprise, headquartered in India, comprising over a hundred
operating companies, having presence in more than 100 countries across
six continents, collectively employing over 6,60,000 people; (iv) that the
revenue of Tata Group in 2015-16, was $103.51 billion; (v) that there
are 29 publicly listed companies in the Tata Group with a combined
B
market capitalisation of about $116.41 billion; (vi) that 65.3% of the
issued ordinary share capital of Tata Sons is held by philanthropic trusts
which support education, health, livelihood generation and art and culture;
(vii) that it was at the instance of CPM that RNT was designated as
Chairman Emeritus and he was requested to attend Board Meetings as
a special and permanent invitee and continue to guide the Board; (viii) C
that Articles 104B and 121 were introduced through a new version of
Articles of Association at the Annual General Meeting of Tata Sons held
on 13.09.2000 and Article 121 was subsequently amended by Resolution
dated 09.04.2014; (ix) that Shri Pallonji Shapoorji Mistry, who represented
the complainant companies, was present at the General meeting held on
D
13.09.2000; (x) that CPM himself was a party to the Resolution passed
by the shareholders on 09.04.2014, introducing Articles 121A and 121B;
(xi) that CPM’s leadership gave rise to certain issues such as insufficient
detail and discipline on capital allocation decisions, slow execution on
identified problems, lack of specificity and follow through in strategic
plan and business plan, failure to take meaningful steps to enter new E
growth businesses, weak top management team and reluctance to
embrace the Articles of Association that spelt out the governance
structure of the company and the rights of Tata Trusts; (xii) that there
was a growing trust deficit between the Board of Directors of Tata
Sons and CPM due to several reasons, such as the conflict of interest in
F
the matter of award of contracts to S.P. Group of companies and his
systematic and planned reduction of the representation of Tata Sons
Directors on the Boards of other major Tata Companies; (xiii) that even
when the Directors of Tata Sons resolved on 24.10.2016 to replace CPM
as Executive Chairman, the Board agreed to his continuance as a
Director of Tata Sons; (xiv) that however CPM addressed a vitriolic G
mail on 25.10.2016 to the Directors making false allegations; (xv) that
though the mail was marked confidential, it was simultaneously leaked
to the press; (xvi) that CPM also breached his fiduciary and contractual
duties by disclosing confidential information and documents pertaining
to Tata Sons to third parties; (xvii) that CPM made representations to
H
932 SUPREME COURT REPORTS [2021] 12 S.C.R.

A the shareholders of all operating companies, with unsubstantiated and
false allegations, thereby attempting to make the operating companies
vulnerable to make confidential data available for public inspection; (xviii)
that the shareholders of Tata Industries Limited, Tata Consultancy
Services and Tata Teleservices Limited passed Resolutions respectively
on 12.12.2016, 13.12.2016 and 14.12.2016 to remove CPM from
B
Directorship; (xix) that, therefore, CPM resigned from the Directorship
of the other companies also on 19.12.2016, when he faced the prospect
of being removed in the impending meetings; (xx) that the actions and
conduct of CPM after 24.10.2016 compelled Tata Sons to issue a special
notice and requisition for his removal from the Directorship of Tata Sons;
C (xxi) that the company petition was not about espousing the cause of
corporate governance or seeking remedies for oppression and
mismanagement of Tata Sons; (xxii) that prior to his removal as Executive
Chairman, CPM never raised any concerns regarding any oppression or
mismanagement; (xxiii) that many of the acts of oppression complained
of by the complainant companies, have happened long before the date
D
of filing of the company petition, showing thereby that the company
petition was hopelessly barred by delay and laches.
5.2 On the allegations of oppression and mismanagement, the
response of Tata Sons was as follows: (i) that the complainant companies
have cherry picked certain business decisions to launch a vitriolic attack
E on the Tata Trusts; (ii) that while the complainant companies have talked
about bad business deals, such as Corus acquisition and Nano Project,
they have deliberately omitted to talk about Tetley acquisition by Tata
Global Beverages Limited, the immensely successful Jaguar Land Rover
acquisition by Tata Motors and the phenomenal success of Tata
F Consultancy Services; (iii) that Corus acquisition, the Nano Project,
contracts awarded to the business concerns of Mr. Mehli Mistry and the
investment by Mr.C. Sivasankaran have surfaced only after the
replacement of Mr. Cyrus Mistry as the Executive Chairman; (iv) that
CPM has been the Director of Tata Sons since the year 2006 and was
also the Executive Chairman from December, 2012 to October, 2016
G and was fully aware of how the decisions relating to these projects were
taken when they were taken; (v) that courts cannot be called upon to sit
in judgment over the commercial decisions of the Board of Directors of
companies; and (vi) that even commercial mis-judgments of the Board
of Directors cannot be branded as instances of oppression and mis-
H management.
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 933
INVESTMENTS PVT. LTD. AND ORS.

5.3 On specific acts of oppression and mismanagement, raised in A
the company petition, such as (i) over priced and bleeding acquisition of
Corus PLC of UK; (ii) doomed Nano car project; (iii) loan advanced by
Kalimati Investments to Siva; (iv) sale of the residential flat to Mehli
Mistry; (v) unjust enrichment of Mehli Mistry and the companies
controlled by him, due to the personal equation of RNT with him; (vi)
B
aviation industry misadventures; and (vii) a huge loss due to purchase
of shares of Tata Motors, the reply filed by Tata Sons contained an
elaborate and graphic rebuttal. We shall take note of them later, while
dealing with the question whether or not the allegations constitute the
ingredients of sections 241 and 242 of the Act.
6. The approach of NCLT C

6.1 The NCLT, in its order dated 9.7.2018, went into each of the
allegations of oppression, mismanagement and prejudice and recorded
categorical findings. In brief, these findings, allegation-wise, were as
follows:
D
On the allegations revolving around Siva and Sterling group of
companies
(i) Tata Teleservices shares were acquired in the year 2006
with the approval of the Board and hence almost after
10 years, it cannot be raised as an issue. It is also a fact E
that the very complainant companies had acquired same
TTSL shares two months before, for Rs.15 per share.
(ii) The loan taken from Kalimati Investments was already
paid back by Siva Group of Companies and the company
was relieved of its undertaking by Siva himself who F
provided personal guarantee for the loan taken from
Standard Chartered Bank.
(iii) As to the allegation that Siva made a big profit by selling
shares to NTT DoCoMo @ Rs.117 per share, it is evident
from the record that these shares were sold in the year
G
2008 to NTT DoCoMo, while NTT DoCoMo was
acquiring shares in bulk from TTSL as well as from some
of the shareholders of TTSL including the brother and
father of CPM and also from Siva. They also equally
gained benefit just as Siva group gained from selling
shares of TTSL to NTT DoCoMo. But this was not H
934 SUPREME COURT REPORTS [2021] 12 S.C.R.

A disclosed by the complainant companies either in their
petition or in their rejoinder. The rate at which the
petitioners acquired shares of TTSL is less than the rate
at which Siva Group acquired and the gain that the
petitioners made by selling shares to NTT DoCoMo was
more than the gain Siva group got from selling shares to
B
NTT DoCoMo.
(iv) No material has been placed either by the petitioner or
by CPM to show that any information was leaked to
Siva Group either by RNT or by anyone else.
C (v) DoCoMo issue cropped up in 2016, when the award
was passed for payment of Rs.8450 crores. The letter
around which a controversy is raised, was written by
RNT in the year 2013. Hence that letter cannot be linked
to DoCoMo issue to show as if RNT was encouraging
Mr. Siva not to pay money to the company.
D
On the allegations relating to Air Asia
(i) Air Asia India Pvt. Ltd. is a joint venture between Air
Asia Berhad (Malaysian Company) and Tata Sons,
incorporated on 28.03.2013. The allegations relating to
E this, are mostly based on the emails sent by one Mr.
Bharat Vasani, who is not a party to this proceeding and
hence these allegations could not be put to test.
(ii) In the meeting held on 06.12.2012, CPM did not raise
any objection to the approval of the joint venture or for
F infusing funds in Air Asia India, until he was removed
as Chairman of the company.
(iii) In their desperate attempt to make a case out of nothing,
the complainant companies claim on the one hand that
CPM had no say in the Air Asia transaction, but on the
other hand, they claim that CPM protected the interest
G
of the company by limiting its exposure to 30% equity of
USD 30 million and by ensuring that no fall back liability
came on the company.
(iv) A person privy to a transaction is estopped from
questioning it, but the complainant companies and CPM
H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 935
INVESTMENTS PVT. LTD. AND ORS.

have made all kinds of allegations with impunity flouting A
all legal principles. They have proceeded as though they
did not take active part in the Air Asia incorporation and
as though CPM did not preside over the meeting on
15.09.2016 for further funding it. In addition, they have
made a scurrilous statement, without a shred of paper,
B
that RNT funded one Terrorist through hawala with
diversion of Air Asia India funds.
On the Transactions with Mehli Mistry, including the sale of the
flat (Bhakthawar) and a land (Alibaug)
(i) There is nothing to indicate that RNT got enriched at C
the cost of the company. Forbes Golak was not made a
Party and the transaction happened somewhere in the
year 2002, but the allegation is raised in the year 2016.
(ii) As to these allegations relating to Mehli deriving huge
benefits, the only document that the Petitioners and CPM D
filed and relied on, is an email Mr. Mehli addressed to
Mr. Padmanabhan of TPC among others.
(iii) In respect of the 1993 contract for dredging at Trombay,
it was awarded by Tata Power to MpCL for 9 years
after choosing them from amongst three vendors. E
Thereafter it was renewed 5 times for various tenures
from October 2002 to September, 2014 after obtaining
requisite approvals. When these approvals were given,
CPM was a Director of Tata Power. He held directorship
from 1996 to 2006 and again from 2011 to 2016, but
never raised any objection. F
Nano car project and the losses suffered by Tata Motors
(i) RNT has not been the director of Tata Motors at any
point of time during which the actions complained of
happened.
G
(ii) Tata Motors and Jayem incorporated a joint venture
company by name J.T. Special Vehicle Pvt. Ltd. with
50:50 shareholdings, in July 2016. This joint venture was
incorporated under the stewardship of CPM himself. It
is therefore entirely incorrect to say that Jayem has
benefited unduly from any patronage extended by RNT. H
936 SUPREME COURT REPORTS [2021] 12 S.C.R.

A Acquisition of Corus
(i) The acquisition of Corus was a collective decision of
Tata Steel and it was approved by CPM as a director of
the board of Tata Steel. This entire acquisition was
undertaken following the due governance process under
B the supervision of the board of directors of Tata Steel
without any dissent from any of the shareholders of Tata
Steel.
(ii) Tata Steel did not buy it for an inflated price, but it so
happened that Tata Steel took a unanimous decision to
C quote a price of GBP 608 pence per share while their
competitor CSN’s final bid was GBP 603 pence per
share. CPM or the complainant companies have not
placed any letter or email, seeking divesting or
restructuring of Corus.
D Private company vs Public company
(i) On the impact of Section 43A (2A) of the Companies
Act, 1956 and the issue of the amended certificate of
incorporation to Tata Sons, it has to be seen that Tata
Sons had not altered any of the Articles of Association
E so as to bring any new entrenchment to the Articles and
that the management had not done anything so as to
cause prejudice to the rights of the minority shareholders.
On the contention that a few Articles were oppressive or that
they were abused
F (i) The contention that Articles 104B, 121, 121A and 75 of
the Articles of Association were per se oppressive and
that they have been used as tools of oppression and
mismanagement, is unacceptable since CPM’s father
was party to the amendments made to the Articles of
Association on 13.09.2000. The amendment of Article
G
118 was passed on 06.12.2012 when CPM was the
Executive Deputy Chairman. CPM was also party to
the Resolutions passed on 09.04.2014, in which the
Articles were amended so as to confer affirmative rights
in favour of the Directors of the Trusts. In so far as
H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 937
INVESTMENTS PVT. LTD. AND ORS.

Article 75 is concerned, it was in existence throughout A
and hence the question whether persons who acquired
shares of such a company consciously despite the
presence of Article 75, can turn around later and project
them as oppressive, looms large.
(ii) The fact that the nominee Directors stepped out of the B
meeting of the Board held on 29.06.2016 to take
instructions from RNT on the issue of acquisition of
Welspun by Tata power, cannot be projected as an
incident where Article 121 was abused, since the issue
of acquisition of Welspun should have come up before
the Board of Tata Sons even prior to Tata Power taking C
a decision, in view of Article 121A-(h). Since Tata Power
had already signed the papers for the acquisition of
Welspun on 12.06.2016 itself, CPM really made the
Directors of Tata Sons as fait accompli. Therefore, it
was the action of CPM that was prejudicial to the D
interests of Tata Sons and not the other way around.
(iii) None of the Articles have ever been opposed either by
the complainant companies or by CPM at any point of
time in the past. And Article 75 has been in place even
before the complainant companies acquired shares. E
Allegation of Breach of fiduciary duties by the Directors
(i) In support of their allegation that there was breach of
fiduciary duties by the Trust nominee Directors and to
prove that the Directors of the Company were guilty of
dereliction of duties in the teeth of Sections 149 and 166 F
of the Companies Act, 2013 read with schedule IV (Code
for Independent Directors), the complainant companies
had not placed any material other than the Minutes of
the meeting held on 24.10.2016 (in which CPM was
removed from Chairmanship). Also the removal of CPM G
as Executive Chairman was not in deprivation of any of
the rights of the complainant companies as shareholders
and his removal had nothing to do with his association
with the complainant companies. The removal of CPM
as Executive Chairman cannot be projected as
oppression of minority shareholders merely because he H
938 SUPREME COURT REPORTS [2021] 12 S.C.R.

A also happens to have controlling interest in companies
that hold around 18.40% shareholding in the company.
(ii) The provision in the Articles of Association entitling the
two Trusts to have 1/3rd of the Directors on the Board
of Tata Sons with an affirmative vote, was actually a
B curtailment of their right to appoint majority of the
Directors to the Board and hence it cannot be construed
as oppressive of the minority.
On the removal of CPM
(i) The removal of CPM as Executive Chairman of Tata
C Sons on 24.10.2016 and his removal as Director on
06.02.2017, were on account of trust deficit and there
was no question of a Selection Committee going into the
issue of his removal.
(ii) There was no material to hold that CPM was removed
D on account of purported legacy issues. CPM created a
situation where he is not accountable either to the
majority shareholders or to the Trust nominee Directors
and hence his removal.
(iii) The letter dated 25.10.2016 issued by CPM could not
E have been leaked to the media by anyone other than
CPM and hence his removal from Directorship on
06.02.2017 became inevitable.
6.2 What we have provided in the preceding paragraph, is an
abridged version of the findings recorded by NCLT on every one of the
F allegations contained in the main company petition. Apart from those
findings recorded in the body of the judgment, NCLT itself gave a
summary of findings in paragraph 581 of its decision. It is extracted
verbatim as follows:
“a) Removal of Mr. Cyrus Mistry as Executive Chairman
G on 24.10.2016 is because the Board of Directors
and Majority of Shareholders, i.e., Tata Trusts lost
confidence in Mr. Cyrus as Chairman, not because
by contemplating that Mr. Cyrus would cause
discomfort to Mr. Tata, Mr. Soonawala and other
answering Respondents over purported legacy
H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 939
INVESTMENTS PVT. LTD. AND ORS.

issues. Board of Directors are competent to remove A
Executive Chairman; no selection committee
recommendation is required before removing him as
Executive Chairman.
b) Removal of Mr. Cyrus Mistry from the position of
Director is because he admittedly sent the company B
information to Income Tax Authorities; leaked the
company information to Media and openly come out
against the Board and the Trusts, which hardly
augurs well for smooth functioning of the company,
and we have not found any merit to believe that his
removal as director falls within the ambit of section C
241 of Companies Act 2013.
c) We have not found any merit to hold that
proportional representation on Board proportionate
to the shareholding of the petitioners is possible so
long as Articles do not have such mandate as D
envisaged under section 163 of Companies Act,
2013.
d) We have not found any merit in purported legacy
issues, such as Siva issue, TTSL issue, Nano car
issue, Corus issue, Mr. Mehli issue and Air Asia issue E
to state that those issues fall within the ambit of
section 247 and 242 of Companies Act 2013.
e) We also have not found any merit to say that the
company filing application under section 14 of
Companies Act 2013 asking this Tribunal to make it F
from Public to Private falls for consideration under
the jurisdiction of section 247 & 242 of Companies
Act 2013.
f) We have also found no merit in saying that Mr. Tata
& Mr. Soonawala giving advices and suggestions G
amounted to interference in administering the affairs
of the company, so that to consider their conduct as
prejudicial to the interest of the company under
section 241 of Companies Act 2013.
H
940 SUPREME COURT REPORTS [2021] 12 S.C.R.

A g) We have found no merit in the argument that Mr.
Tata and Mr. Soonawala acted as shadow directors
superimposing their wish upon the company so that
action to be taken under section 241 & 242 of
Companies Act 2013.
B h) We have not found any merit in the argument that
Articles 75, 104B, 118, 121 of the Articles of
Association per se oppressive against the petitioners.
i) We have not found any merit in the argument that
Majority Rule has taken back seat by introduction
C of corporate governance in Companies Act, 2013,
it is like corporate democracy is genesis, and
corporate governance is species. They are never in
conflict with each other; the management is rather
more accountable to the shareholders under the
present regime. Corporate governance is collective
D responsibility, not based on assumed free-hand rule
which is alien to the concept of collective
responsibility endowed upon the Board.

j) We have observed that prejudice remedy has been
included in 2013 Act in addition to oppressive remedy
E
already there and also included application of “just
and equitable” ground as precondition to pass any
relief in mismanagement issues, which was not the
case under old Act.”
7. The Approach of NCLAT
F
7.1 While NCLT dealt with every one of the allegations contained
in the main company petition and recorded its findings, NCLAT, curiously,
focused attention only on (i) the removal of CPM (ii) the affirmative
voting rights of the Directors nominated by the 2 Trusts in the decision
making process and (iii) the amended certificate of incorporation issued
G
by the RoC, deleting the word “Public” and making it a private company
once again.
7.2 The findings recorded by NCLAT are presented, to a great
extent, in the language of NCLAT itself, as follows:

H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 941
INVESTMENTS PVT. LTD. AND ORS.

(i) The word ‘unfairly prejudicial’ has not been used in A
Section 241. The Indian Law (Sections 241 & 242 of
the Companies Act, 2013) does not recognize the term
‘legitimate expectation’ to hold any act prejudicial or
oppressive. (paragraphs 101 and 102 of the impugned
order)
B
(ii) In the general meeting of the shareholders of ‘Tata Sons
Limited’ or the Board of Directors, the majority decision
is fully dependent upon the affirmative votes of nominated
Directors of ‘Tata Trusts’. The affirmative vote of the
Directors nominated by ‘Tata Trusts’ has an overriding
effect and renders the majority decision subservient to C
it. (paragraph 115 of the impugned order)
(iii) The Tribunal/Appellate Tribunal has no jurisdiction to
hold any of the Articles as illegal or arbitrary, the terms
and conditions being agreed upon by the shareholders.
However, if any action is taken even in accordance with D
law which is ‘prejudicial’ or ‘oppressive’ to any member
or members or ‘prejudicial’ to the Company or
‘prejudicial’ to the public interest, the Tribunal can notice
whether the facts would justify the winding up of the
Company and in such case, if the Tribunal holds that it E
would unfairly prejudice member or members or public
interest or interest of the Company, it may pass
appropriate orders in terms of Section 242. (paragraph
119 of the impugned order)
(iv) The email correspondence dated 18.07.2013, 28.02.2014, F
11.03.2015, 28.05.2015, 03.11.2015 etc. would show that
CPM was unaware and not in a position to understand
how decisions are taken by the Tata Trusts before the
decision of the Board of Directors of Tata Sons and that
CPM felt the need for development of a governance
framework. (paragraph 126 of the impugned order) G
(v) Emails dated 13th March, 2016; 30th April, 2016 and
10th May, 2016 between CPM and Mr. Nitin Nohria
show that CPM formulated a governance framework
after obtaining the feedback from Mr. Nitin Nohria to
H
942 SUPREME COURT REPORTS [2021] 12 S.C.R.

A clarify the role of the Trustees of ‘Tata Trusts’ in the
decision making process of ‘Tata Sons Limited’. It was
followed by e-mail dated 15th May, 2016 sent by CPM
to RNT forwarding a draft of the governance
framework. (paragraph 127 of the impugned order)
B (vi) The communications between the Respondents from
2013 to 2016 show that there was complete confusion
in the Board about the governance framework of the
Company (‘Tata Sons Ltd.’) as before deciding any
matter or for taking any resolution by the Board, decision
used to be taken by RNT for ‘Tata Trusts’, in which Mr.
C Nitin Nohria and Mr. N.A. Soonawala, were taking
active part. (paragraph 129 of the impugned order)
(vii) Prior to the Board’s meeting held on 24th October, 2016
before removing CPM, on the same date decision had
already been taken by RNT in presence of Mr. Nitin
D Nohria to remove CPM, who asked him to step down
from the post of the ‘Executive Chairman’ of the
Company (‘Tata Sons Limited’). (paragraph 130 of the
impugned order)
(viii) RNT was determined to remove CPM even prior to the
E meeting of the board and the majority shareholders of
Tata Trust knew that there was a requirement of
advance notice before the removal of CPM. Therefore,
they had taken opinion from eminent lawyers and a
former Judge of the Supreme Court. (paragraph 133 of
F the impugned order)
(ix) There is nothing on the record to suggest that the Board
of Directors or any of the trusts, namely— Sir Dorabji
Tata Trust or the Sir Ratan Tata Trust at any time
expressed displeasure about the performance of CPM.
G (paragraph 134 of the impugned order)
(x) From the opening sentence of ‘Press Statement’ dated
10th November, 2016, issued by Tata Sons it is clear
that sudden and hasty removal of CPM as Executive
Chairman of ‘Tata Sons Limited’ raised concerns in the
industrial group. (paragraph 137 of the impugned order)
H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 943
INVESTMENTS PVT. LTD. AND ORS.

(xi) The allegations as made in the ‘Press Statement’ dated A
10th November, 2016 appears to be an afterthought as
the aforesaid matter was not discussed in any of the
meetings of the Board of Directors. The allegations in
the ‘Press Statement’ as not supported by record cannot
be accepted. (paragraph 139 of the impugned order)
B
(xii) Correspondence between CPM, RNT, Mr. Nitin Nohria
and Mr. N.A. Soonawala show that all the time CPM
had been pointing out that some of the ‘Tata Companies’
were suffering losses and if appropriate steps were not
taken, it may aggravate in future. In spite of such
communications no decision for the revival or C
restructuring of Tata Companies was taken. (paragraph
140 of the impugned order)
(xiii) If there was a failure and loss caused to one or other
Tata Company which also affected the ‘Tata Sons
Limited’, the ‘Tata Trusts’ or the Board of Directors D
could not be absolved of its responsibility, particularly
when the nominee Directors of the Tata Trusts who have
affirmative vote to reverse the majority decision.
(paragraph 141 of the impugned order)
(xiv) If all major decisions are taken in advance by the ‘Tata E
Trusts’ and for taking every decision, matters are to be
placed before the ‘Tata Trusts’, the independence of
the Board of Directors of the Company becomes
irrelevant. (paragraph 143 of the impugned order)
(xv) The suggestions made by CPM for good governance F
by the Board and to take care of Tata Companies,
including ‘Tata Motors’, ‘Docomo’ etc., were not taken
in its letter and spirit by RNT or ‘Tata Trusts’ which
resulted in no confidence on CPM. (paragraph 144 of
the impugned order) G
(xvi) The record suggests that the removal of CPM had
nothing to do with any lack of performance. On the other
hand, the material on record shows that the Company
under the leadership of CPM performed well which was
praised by the ‘Nomination and Remuneration
H
944 SUPREME COURT REPORTS [2021] 12 S.C.R.

A Committee’ a Statutory Committee under Section 178,
on 28th June, 2016 i.e. just few months before he was
removed. (paragraph 146 of the impugned order)
(xvii) Nominee Director Mr. Vijay Singh on behalf of ‘Tata
Trusts’ was well aware that performance of CPM was
B satisfactory and there was need for a framework for
operationalizing the Articles. (paragraph 149 of the
impugned order)
(xviii) The annual performance review of the ‘Nomination and
Remuneration Committee’ was unanimously approved
C by the Board of Directors of ‘Tata Sons’ in its meeting
held on the next day i.e. on 29th June, 2016. (paragraph
150 of the impugned order)
(xix) Three Directors who also voted for removal of CPM,
including Mr. Amit Chandra, who spearheaded the
D removal proceedings and Mr. Ajay Piramal and Mr. Venu
Srinivasan, had been inducted into the Board of ‘Tata
Sons Ltd.’ only on 8th August, 2016 i.e. after the appraisal
report of ‘Nomination and Remuneration Committee’.
They attended just one Board meeting prior to the
meeting held on 24th October, 2016. (paragraph 151 of
E the impugned order)
(xx) Two of the Directors, Mr. Ranendra Sen and Mr. Vijay
Singh, a Trust Nominee Director, who voted for the
removal of CPM, were members of the ‘Nomination
and Remuneration Committee’ which just four months’
F prior to his removal on 28th June, 2016 praised the
performance of CPM as Executive Chairman. These
two Directors also voted against CPM just four months
thereafter which has not been explained by Mr.
Ranendra Sen and Mr. Vijay Singh. Further, what is
G accepted is that prior to the meeting held on 24th
October, 2016 between 2.00 p.m. to 3.00 p.m., in the
forenoon, the ‘Tata Trusts’ in a separate meeting decided
to remove CPM. Even before decision of ‘Tata Trusts’,
RNT in presence of Mr. Nitin Nohria called CPM and
asked him to resign. (paragraph 152 of the impugned
H order)
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 945
INVESTMENTS PVT. LTD. AND ORS.

(xxi) In view of what transpired, it is not open to the A
Respondents to state or allege that loss in different ‘Tata
Companies’ was due to mismanagement of CPM. If
that be so, why the nominated Directors who have
affirmative voting right over the majority decision of the
Board or in the Annual General Meeting of the
B
shareholders allowed the ‘Tata Companies’ to function
in a manner which caused loss, as accepted in the press
release dated 10th November, 2016. The consecutive
chain of events coming to fore from the correspondence
amply demonstrates that impairment of confidence with
reference to conduct of affairs of company was not C
attributable to probity qua CPM but to unfair abuse of
powers on the part of other Respondents. (paragraph
155 of the impugned order)
(xxii) Even in the absence of a right of minority members
(‘Shapoorji Pallonji Group’), because of the healthy D
atmosphere and clear understanding between two groups
i.e. ‘Tata Group’ and ‘Shapoorji Pallonji Group’ for the
last 40 years, except for few years in between thereof,
one of the persons of ‘Shapoorji Pallonji Group’ was
made as the Executive Chairman or Director, which
includes CPM and his father Mr. Pallonji Shapoorji E
Mistry. (paragraph 160 of the impugned order)
(xxiii) ‘Shapoorji Pallonji Group’, minority shareholders, all the
time had confidence on the decision making power of
the Board of Directors of the ‘Tata Sons Ltd.’ as amity
and goodwill prevailed inter se the two groups. F
(paragraph 161 of the impugned order)
(xxiv) Because of recent actions of ‘Tata Trusts’, its nominee
Directors, and RNT and Mr. Nitin Nohria, taken since
the year 2013, as noticed and discussed and sudden and
hasty removal of CPM on 24th October, 2016, without G
any basis, and without following the normal procedure
under Article 118, the minority group (‘Shapoorji Pallonji
Group’) (the Appellants), and others have raised no
confidence and sense of uncertainty. (paragraph 162 of
impugned order) H
946 SUPREME COURT REPORTS [2021] 12 S.C.R.

A (xxv) The prejudicial action, did not come to an end, after
24th October, 2016, when CPM was removed as
Executive Chairman and Director of the Company (‘Tata
Sons Limited’). It continued even thereafter with the
removal of CPM from the Directorship of other group
companies and the conversion of Tata Sons Limited
B
from being a public limited company into a private
company, after the decision of NCLT. (paragraph 165
of the impugned order)
(xxvi) Tata Sons Limited became a public company by virtue
of Section 43(1A) of the Companies Act, 1956 on the
C basis of average annual turnover, w.e.f. 01.02.1975. (para
165) In terms of Sub-section (2) of Section 43A Tata
Sons informed the Registrar and the Registrar deleted
the word “private” in the name of the Company upon
the Register. By virtue of Sub-section (4), such a company
D is to continue to be a public company until it becomes a
private company with the approval of the Central
Government and in accordance with the Act. (para 167)
The Companies Act, 2013 repealed part of the 1956 Act.
The new Act defines a “Private Company” and a “Public
Company” under Clauses (68) and (71) of Section 2.
E (para 169 to 172). Under the 2013 Act, there is no
provision similar to Section 43A(1A), for automatic
conversion of a company. Since there is no automatic
conversion, Tata Sons, having become a public company
long ago was required to alter its articles of Association
F by following the procedure prescribed by Section
14(1)(b) read with Section 14(2) and 14(3), for converting
the company as a private company.( paras 173 to 175).
The General Circular No.15 of 2013 dated 13.09.2013
and Notification dated 12.09.2013 issued by the central
Government cannot override Section 14 of the Act (para
G 177) and hence the action taken by Tata Sons hurriedly
to get the word “public” struck off in the certificate of
incorporation, after the order of NCLT is absolutely
illegal.

H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 947
INVESTMENTS PVT. LTD. AND ORS.

(xxvii) The aforesaid action on the part of the company and its A
Board of Directors to take action to hurriedly change
the Company (‘Tata sons Limited’) from ‘Public
Company’ to a ‘Private Company’ without following the
procedure under law (Section 14), with the help of the
Registrar of Companies just before the filing the appeal,
B
suggests that the nominated members of ‘Tata Trusts’
who have affirmative voting right over the majority
decision of the Board of Directors and other Directors/
members, acted in a manner ‘prejudicial’ to the members,
including minority members (‘Shapoorji Pallonji Group’)
and others as also ‘prejudicial’ to the Company (‘Tata C
Sons Limited’) (paragraph 181 of the impugned order)
(xxviii) The affirmative voting power of the nominated Directors
of the ‘Tata Trust’ over majority decision of the Board;
actions taken by Mr. Rata N. Tata (2nd Respondent),
Mr. Nitin Nohria (7 th Respondent) and Mr. N.A. D
Soonawala (14th Respondent) and others as discussed
above; the fact that the Company (‘Tata Sons Limited’)
has suffered loss because of ‘prejudicial’ decisions taken
by Board of Directors; the fact that a number of ‘Tata
Companies have incurred loss in spite of decision making
powers vested with the Board of Directors with E
affirmative power of nominated Directors of the ‘Tata
Trust’; the manner in which Mr. Cyrus Pallonji Mistry
(11th Respondent) was suddenly and hastily removed
without any reason and in absence of any discussion in
the meeting of the Board of Directors held on 24th F
October, 2016 and his subsequent removal as Director
of different ‘Tata Companies’ coupled with global effect
of such removal, as accepted by the Company in its
‘Press Statement’ form a consecutive chain of events
with cumulative effect justifying the Tribunal to hold that
the Appellants have made out a clear case of ‘prejudicial’ G
and ‘oppressive’ action by the contesting respondents,
including Mr. Ratan N. Tata (2nd Respondent), Mr. Nitin
Nohria (7th Respondent) and Mr. N.A. Soonawala (14th
Respondent) and other nominee Directors. (paragraph
183 of the impugned order) H
948 SUPREME COURT REPORTS [2021] 12 S.C.R.

A (xxix) The company’s affairs have been or are being conducted
in a manner ‘prejudicial’ and ‘oppressive’ to members
including Appellants, Mr. Cyrus Pallonji Mistry (11th
Respondent) as also ‘prejudicial’ to the interests of the
Company and its group Companies i.e., ‘Tata
Companies’ and winding up of the Company would
B
unfairly prejudice the members, but otherwise the facts,
as narrated above, would justify a winding up order on
the ground that it was just and equitable that the Company
should be wound up and thereby, it is a fit case to pass
order under Section 242 of the Companies Act, 2013.
C (xxx) The Resolution dated 24th October, 2016 passed by the
Board of Directors of Company removing Mr. Cyrus
Pallonji Mistry (11th Respondent) as the Executive
Chairman of the Company (‘Tata Sons’) is illegal; all
consequential decisions taken by ‘Tata Companies’ for
D removal of Mr. Cyrus Pallonji Mistry (11th Respondent)
as Director of such Companies are also illegal.
(paragraph 184 of the impugned order)
(xxxi) For better protection of interest of all stake holders as
also safeguarding the interest of minority group, in future
E at the time of appointment of the Executive Chairman,
Independent Director and Directors, the ‘Tata Group’
which is the majority group should consult the minority
group i.e., ‘Shapoorji Pallonji Group’ and any person on
whom both the parties have trust, be appointed as
Executive Chairman or Director as the case may be
F which will be in the interest of the Company and create
healthy atmosphere removing the mistrust between the
two groups, already developed and has caused global
effect as admitted in the ‘Press Statement’ of the
Company. (paragraph 185 of the impugned order)
G 8. Important difference between the approach of NCLT and
the approach of NCLAT
8.1 As pointed out at the beginning of chapter 7, NCLT dealt with
every one of the allegations of oppression and mismanagement and
recorded reasoned findings. But NCLAT, despite being a final court of
H facts, did not deal with the allegations one by one nor did the NCLAT
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 949
INVESTMENTS PVT. LTD. AND ORS.

render any opinion on the correctness or otherwise of the findings A
recorded by NCLT. Instead, the NCLAT summarised in one paragraph,
namely paragraph 183, its conclusion on some of the allegations, without
any kind of reasoning. This Paragraph 183 reads as follows:
“The facts, as noticed above, including the affirmative voting
power of the nominated Directors of the ‘Tata Trusts’ over B
majority decision of the Board; actions taken by Mr. Ratan
N. Tata (2nd Respondent), Mr. Nitin Nohria (7th Respondent)
and Mr. N.A.Soonawala (14th Respondent) and others as
discussed above; the fact that the Company (‘Tata Sons
Limited’) has suffered loss because of ‘prejudicial’ decisions
taken by Board of Directors; the fact that a number of ‘Tata C
Companies’ have incurred loss; in spite of decision making
power vested with the Board of Directors with affirmative
power of nominated Directors of the ‘Tata Trusts’; the action
in making change from ‘Public Company’ to ‘Private
Company’; the manner in which Mr. Cyrus Pallonji Mistry D
(11th Respondent) was suddenly and hastily removed without
any reason and in absence of any discussion in the meeting
shown in the Board of Directors held on 24th October, 2016
and his subsequent removal as Director(s) of different ‘Tata
Companies’, coupled with global effect of such removal, as
accepted by the Company in its ‘Press Statement’ form a E
consecutive chain of events with cumulative effect justifying
us to hold that the Appellants have made out a clear case of
‘prejudicial’ and ‘oppressive’ action by contesting
Respondents, including Mr. Ratan N. Tata (2nd Respondent),
Mr. Nitin Nohria (7th Respondent) and Mr. N.A.Soonawala F
(14th Respondent) and other, the nominee Directors.
8.2 The allegations relating to (i) over priced and bleeding Corus
acquisition (ii) doomed Nano car project (iii) undue favours to Siva and
Sterling (iv) loan by Kalimati to Siva (v) sale of flat to Mehli Mistry (vi)
the unjust enrichment of the companies controlled by Mehli Mistry (vii) G
the Aviation industry misadventures (viii) losses due to purchase of the
shares of Tata Motors etc., were not individually dealt with by NCLAT,
though NCLT had addressed each one of these issues and recorded
findings in favour of Tata Sons. Therefore, there is no escape from the
conclusion that NCLAT did not expressly overturn the findings of
facts recorded by NCLT, on these allegations. We are constrained to H
950 SUPREME COURT REPORTS [2021] 12 S.C.R.

A take note of this, even at the outset, in view of a contention raised by
Shri Shyam Divan, learned Senior Counsel for the SP group, that in an
appeal under Section 423 of the Companies Act, 2013, this court will not
normally interfere with a finding of fact reached by NCLAT, unless it is
found to be wholly perverse.
B 9. Contentions on behalf of Tata Sons, group companies
and Trustees
9.1 Assailing the judgment of NCLAT, Shri Harish Salve and Dr.
Abhishek Manu Singhvi, learned Senior counsel for Tata Sons contended
as follows:
C (i) The entire focus of NCLAT was only on the justification for the
removal of CPM from the post of Executive Chairman of Tata
Sons, despite the fact that the positive case of the complainant
companies as well as CPM was that they were not seeking
the reinstatement of CPM;
D (ii) In focusing entirely upon the removal of CPM from Executive
Chairmanship of Tata Sons, NCLAT lost track of the law that
such a removal cannot be termed as oppression or
mismanagement;
(iii) NCLAT went completely overboard by directing the
E reinstatement of CPM as the Executive Chairman of Tata Sons
and also annulling the appointment of the new Chairman N.
Chandrasekaran;
(iv) NCLAT went completely out of the way in directing the
reinstatement of CPM as a Director of even the operating
F companies, the management of affairs of which, were not even
the subject matter. The subject matter concerned only the
management of the affairs of Tata Sons and not its Group
Companies;
(v) NCLAT failed to see that the “just and equitable clause” is
G triggered only in two situations namely: (a) wherever there
was a functional deadlock; and (b) wherever there was a
corporate quasi partnership in which there was a breakdown
of trust and confidence. In the case on hand there was no
pre-existing partnership between Tata Group and the S.P.
Group. S.P. Group became shareholders only after 48 years of
H the incorporation of Tata Sons and they did not even hold any
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 951
INVESTMENTS PVT. LTD. AND ORS.

directorial position until June-1980. Therefore S.P. Group never A
had any right of management nor a right that could emanate
from a pre-existing relationship of trust and confidence, before
the incorporation of the company;
(vi) Tata sons was not a “Two Group” company with one of them
being a majority and the other, a minority. S.P. Group became B
shareholders long after the incorporation of the company and
they did not acquire any privilege, prerogative or right. S.P.
Group became shareholders, accepting the rights and
obligations inter se among shareholders, as spelt out by the
Articles of Association. S.P. Group also accepted without any
demur, all the amendments made to the Articles of Association, C
when Pallonji Mistry was on the Board and also when CPM
was on the Board;
(vii) The removal of CPM was on account of the loss of confidence
in CPM and the complete breakdown of trust between the
other members of the Board and CPM. To say that his removal D
required the stamp of approval of the Selection Committee, is
completely amiss;
(viii) NCLAT failed to appreciate in the right perspective, the effects
of the Amendment Act 53 of 2000 on a ‘deemed to be a public
company’ under Section 43A and the provisions of the 2013 E
Act, while dealing with the question whether Tata Sons would
be a private Company or a public Company. NCLAT, without
any justification, made uncharitable remarks against the
Registrar of Companies for issuing an amended certificate of
incorporation after the judgment of NCLT, though RoC was F
not a party. When RoC sought the expunction of those remarks
by filing an application, NCLAT entertained the same, only for
the purpose of improving upon the reasons already provided,
showing thereby the mindset with which NCLAT approached
the case;
G
(ix) NCLAT committed a serious error in whittling down Article 75
of the Articles of Association, though the said Article was not
found to be illegal;
(x) Curiously NCLAT did not find any actual misuse of the Articles
of Association, which envisaged a crucial role for the nominee
H
952 SUPREME COURT REPORTS [2021] 12 S.C.R.

A Directors of the two Trusts. CPM himself had proposed a
Governance framework which recognised pre-consultation with
the Trusts. Therefore, the findings of NCLAT as though the
pre-consultation as well as the affirmative voting right conferred
upon the Directors nominated by the Trust, undermined the
role of the Board of Directors of Tata Sons, are completely
B
perverse;
(xi) The direction issued by NCLAT to the majority (Tata Group) to
consult the S.P. Group, for all future appointments of Executive
Chairman or Director, is wholly unsustainable in law. This
direction tantamount to striking down Articles 104B and 118,
C even though the challenge to these Articles had already been
given up.
10. Contentions on behalf of S.P. Group:
10.1 Shri C. Aryama Sundaram, learned Senior counsel, appearing
D on behalf of the S.P. Group raised the following contentions, both in
defense of that portion of the judgment of NCLAT which had gone in
their favour and also for attacking NCLAT for not going further:
(i) Tata Sons could very well be treated as a two group company
where the relationship between the groups was in the nature of
E a quasi partnership, which created equitable obligations. The
relationship between the family of CPM and the Tata family,
spans over seven decades and was one of trust and mutual
confidence. S.P. Group had acted as the guardian of Tata Group’s
interest when the Trust had no affirmative voting rights;

F (ii) The existence of a quasi partnership can be presumed whenever
it is found (a) that an Association was formed or continued on
the basis of a relationship involving mutual trust and confidence;
(b) that there was an understanding that some of the members
would participate in the management of the company; or (c)
that there was a restriction upon the transfer of the member’s
G interest in the company. One or more of these elements were
found to exist in the relationship between Tata Group and S.P.
Group and hence it was in the nature of quasi partnership;
(iii) The Trustees misused the Articles of Association to undermine
the Board of Directors of Tata Sons and also caused erosion of
H their ability to exercise independent judgment and to act in the
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 953
INVESTMENTS PVT. LTD. AND ORS.

interest of the Company. RNT as well as Soonawala demanded A
pre-consultation and prior clearance of the agenda items to be
placed before the Board. There were instances (a) when the
Trust-Nominee Directors objected to matters being placed before
the Board without the approval of the Trust, (b) when RNT
edited the minutes of the Board meetings that he did not attend,
B
(c) when RNT questioned certain operational and business
decisions of Tata Motors, (d) when the Trustees overruled the
views of the Tata Group legal counsel in the DoCoMo disputes
and (e) when the Trustees interfered in business decisions such
as Welspun acquisition and rights issue of Tata Motors;
(iv) Tata sons was a public company in form and conduct, as they C
accepted public deposits even after 13.12.2000 till September-
2002 and hence the conversion of the company into a private
company by a hand written order of the ROC, effected at night
just before NCLAT was to hear the appeals, was completely
shocking. The conversion of the company into a private company D
was aimed at avoiding a higher standard of scrutiny statutorily
required for public companies. The conversion also adversely
affected the ability of Tata Sons to raise funds, thereby increasing
borrowing costs. Due to this conversion, Tata Sons became
obliged to refund money to insurance companies which held
substantial investments in the instruments issued by the company. E
Therefore the conversion of the company into a private company
lacked probity and prejudiced the proprietary rights of minority
shareholders;
(v) The removal of CPM was contrary to the provisions of Article
118, which required the setting up of a Selection Committee F
both for appointment as well as removal. In fact Article 121B
contemplates a 15 days’ notice, but the same was also not
complied. Therefore, the removal of CPM, carried out without
there being any agenda for the same and without there being
any deliberation or discussion, was wholly illegal. The manner G
in which three Directors were inducted into the Board without
being vetted by the Nomination and Remuneration Committee
and the manner in which the resolution for removal was passed
would show that it was pre-planned. It was quite strange that
CPM’s performance came to be appreciated by the Nomination
and Remuneration Committee in June-2016 and this Committee H
954 SUPREME COURT REPORTS [2021] 12 S.C.R.

A had two members, who later became parties to the resolution
removing him from Executive Chairmanship;
(vi) The removal of CPM from the Directorship of Tata Sons as
well as the Directorship of the other Group Companies showed
complete lack of probity, since veiled threats were sent to the
B Board of Directors of the other group companies for the
withdrawal of the Tata brand, if they failed to fall in line.
10.2 Carrying the baton from Shri Aryama Sundaram, it was
contended by Shri Shyam Divan, learned Senior counsel, as follows:
(i) With the coming into force of the Companies Act, 2013,
C law has moved from ‘corporate majority’ or ‘Corporate
democracy’ to ‘corporate governance’, which includes
the principles of fairness. This is seen from sections 135,
148, 151, 166 and 177.
(ii) Law now enjoins companies to be operated and managed
D within a statutory framework i.e. by a Board of Directors
and no one else, as per s.149 of the 2013 Act.
(iii) Directors of companies have a fiduciary role vis-à-vis
the company with the highest level of duty, which cannot
be outsourced or delegated and their allegiance should
E only be to the company alone.
(iv) Once a director is appointed, his duty is only to the
company and none else, irrespective of how he is
appointed.
(v) There was a series of acts of oppression, including the
F
breach of Articles, misuse of Articles and also a violation
of the essential understanding between the two groups.
This was found by the NCLAT.
(vi) There was a clear lack of probity and honesty in the
dealings of the majority. The concept of probity is much
G broader and wider than integrity.
(vii) There was a long good faith relationship between the
Tata group and SP group, developed over several
decades and this has to be viewed in the context of a

H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 955
INVESTMENTS PVT. LTD. AND ORS.

specific statutory framework that existed from 1964 upto A
2000.
(viii) In matters of this nature, the Court is obliged, in its
equitable jurisdiction, to take note of the status of the
company in question, which is at the top (apex) of the
pyramid, with several stakeholders including the minority B
shareholders of the company itself, the employees and
shareholders of the operating companies controlled by
the company etc.
(ix) NCLAT has recorded detailed findings on facts and there
is no perversity in those findings. Therefore there is C
actually no scope for interference by this court.
(x) The reliefs sought in the company petition, are consistent
with the provisions of the Companies Act, 2013 including
Section 163 (proportionate representation) and sub-
Sections (1), (5), (7) and (8) of Section 242 of the Act. D
10.3 Mr. Janak Dwarakadas, learned counsel appearing on behalf
of CPM, the original composer of this musical ensemble, raised the
following contentions:
(i) Lack of financial probity is not the only ground on which
the ‘just and equitable’ clause for winding up can be E
invoked. Infraction of a legal and/or proprietary right is
also a ground for invoking it.
(ii) Proprietary right includes the right to be governed in
accordance with the Articles of Association and the
provisions of the Act. Independence and autonomy of F
Board is guaranteed by law. Interference by majority
shareholders that encroaches upon the Board’s
autonomy and independence, is an infraction upon the
proprietary rights of minority shareholders.
(iii) Art. 104B, 121 and 121A have been misinterpreted, G
misconstrued and misapplied to mean that majority
shareholders have a right to seek pre-consultation or
pre-clearance before matters can be placed before the
Board of Tata Sons or Tata Operating Companies. The
right to nominate 1/3rd directors by Tata Trusts (A.104B),
H
956 SUPREME COURT REPORTS [2021] 12 S.C.R.

A the requirement of affirmative vote of a majority of
nominee directors (A.121) and Article 121A, do not alter
the fact that nominee directors have a fiduciary duty in
exercising these powers to act in the interests of the
company alone. Article 122(b) provided that Tata Sons
shall be board-managed. But the true legal scope and
B
meaning of these Articles were never understood.
(iv) The role and duties of nominee Directors should have
been well defined and kept within the confines of law.
(v) The Nomination and remuneration Committee, in its
C meeting held on June 28, 2016, expressed the need for
clarity on the functioning of the Board of Tata Sons in
relation to Tata Trusts as well as its role vis-a-vis the
group companies.
(vi) NCLAT has recorded a finding that 3 attempts were
D made by CPM to place before the Board of Tata Sons,
a governance structure and that this became the principal
cause for his removal. This finding of fact cannot be set
at naught by this court.
11 Contentions on behalf of the Tata Trusts
E Assailing the judgment of NCLAT, Shri Mohan Parasaran, learned
Senior counsel appearing for the Trusts, contended as follows:
(i) Impugned judgment did not deal with the detailed findings
of fact rendered by NCLT, nor the arguments advanced
on behalf of the Trustees of the Tata Trust.
F
(ii) Impugned judgment employed erroneous tests to
determine oppression under section 241 of the 2013 Act
(iii) Mere unwise or loss making business decisions etc.
cannot be construed as acts of mismanagement so as to
justify winding up on just and equitable grounds. For
G holding the majority guilty (a) there must be a sequential
chain of events leading up to the date of filing the petition;
(b) the conduct must be burdensome, harsh and wrongful
qua the minority; and (c) there must be an element of

H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 957
INVESTMENTS PVT. LTD. AND ORS.

lack of probity depriving the proprietary rights of the SP A
group as shareholders.
(iv) This is not a case of quasi-partnership
(v) Impugned judgment is replete with erroneous findings
of fact that influenced the conclusions drawn and reliefs
granted B

(vi) Impugned judgment misattributes the replacement of
CPM to RNT and grants reliefs that were not prayed
for.
(vii) Though the Trust-Nominee Director introduced the C
resolution for CPM’s removal, it was ultimately the
majority of the Board that voted in favor of the resolution.
(viii) Impugned judgment goes against the fundamentals of
corporate democracy by taking away basic rights of
shareholders D
(ix) By directing that all future appointments to directorial
positions in Tata Sons can be made only through mutual
“consultation” with the SP Group and that only a person
“on whom both the groups have trust” can be appointed,
NCLAT has undermined the role of majority. This could
E
create a stalemate and an impasse by giving minority
shareholders a veto power.
(x) This direction also renders mute, the right of the Tata
Trusts to nominate directors under Art.104B even though
its validity was not under challenge before NCLAT.
F
(xi) Impugned judgment’s interpretation of affirmative voting
rights u/ Art 121 is conceptually and legally wrong.
(xii) NCLAT took the affirmative right to mean unilateral
power to implement decisions (referencing para 155 of
the judgment). G
12. Contentions of Tata Consultancy Services (TCS)
Attacking one portion of the judgment of NCLAT which issued a
direction to TCS to reinstate CPM as a Director, Ms. Fereshte D. Sethna,
learned counsel appearing for TCS argued as follows:-
H
958 SUPREME COURT REPORTS [2021] 12 S.C.R.

A (i) NCLAT lacked jurisdiction to direct CPM’s
reinstatement, as TCS was not party to the original
proceedings or appellate proceedings. Neither the SP
Group, nor CPM had prayed for reinstatement of CPM
to the board of directors of TCS
B (ii) Due process was followed in the removal of CPM from
the board of TCS. CPM was granted opportunity to
make a representation against the proposed resolution
for his removal in compliance with section 169 of the
Companies Act. Unanimous approval was granted by
the board of directors of TCS at their meeting dated
C 17.11.2016 for convening an EGM for removal of CPM
from the board of directors. Circulation of representation
against his proposed removal on 05.12.2016 was made
by CPM to members. Requisite majority of shareholders
(93.11%) passed resolution at EGM dated 13.12.2016,
D for the removal of CPM. 57.46% of public institutional
shareholders were in favor of the resolution for his
removal. Further, 71.88% of public shareholders were
in favor of resolution for his removal.
(iii) Action against TCS not maintainable by the SP Group
E as they did not meet the requisite threshold under section
244 of the Companies Act, 2013. The SP Group held
only 0.24% in direct equity interests in TCS which stood
at 0.55% on 13.12.2016, and has since been diluted to
0.05% on 18.12.2019 – the date of the impugned order.

F (iv) There was no allegation of oppression and
mismanagement made out against TCS.
(v) TCS was denied the opportunity of hearing which was
contrary to the principles of natural justice.
(vi) NCLAT lacked jurisdiction to grant reinstatement as
G CPM’s tenure of office came to an end on 16.06.2017.
13. Contentions of others
13.1 Shri Tushar Mehta, learned Solicitor General, appearing on
behalf of the Registrar of Companies, made submissions to the limited
extent of justifying the action of the RoC in issuing an amended certificate
H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 959
INVESTMENTS PVT. LTD. AND ORS.

of incorporation. According to him, the Articles of Association of Tata A
Sons contained provisions which come within the parameters of the
definition of a ‘private company’ under section 2(68) of the Act. The
amendment merely recognized a pre-existing reality and the RoC
followed the extant provisions of the Act. But unfortunately, the NCLAT
passed remarks, though it claimed it did not, without even hearing the
B
RoC beforehand.
13.2 Shri Zal Andhyarjuna, learned counsel appearing for Shri
Noshir A. Soonawala, submitted that Soonawala has never been accused
of wrongdoing in his 44 years of association with the Tata Group and
even during CPM’s tenure as Director. He has not attended a single
meeting of the Board of Directors of Tata Sons since his retirement. He C
was requested to act as advisor to Tata Sons which received unanimous
approval of the Board in 2010. CPM would therefore, approach him
from time to time for advice on financial matters of Tata Sons. Soonawala
has, on his own initiative, sent only two notes to CPM and RNT which
were purely advisory in nature and cannot be construed as being D
“directions” or “instructions” from him. The Note dated 04.12.2015 was
an analysis of Tata Sons’ past financial results pointing out areas of
concern and the Memo dated 09.07.2015 concerned Tata Tele Services
Limited, an unlisted company having financial problems. Therefore, he
argued that NCLAT was wrong in attributing to him, interference with
the affairs of Tata Sons. E

14. Questions of law arising for consideration
14.1 Though the learned counsel for the parties have raised
innumerable contentions touching upon every aspect, micro or macro,
and which we have faithfully recorded in paragraphs 9 to 13 above, the F
jurisdiction of this Court under Section 423 of the Companies Act, 2013,
is primarily to answer questions of law arising out of the proceedings
before the Tribunal and Appellate Tribunal.
14.2 Therefore, from the rival contentions, the questions of law
that arise are formulated as follows:- G
(i) Whether the formation of opinion by the Appellate Tribunal
that the company’s affairs have been or are being conducted
in a manner prejudicial and oppressive to some members and
that the facts otherwise justify the winding up of the company
on just and equitable ground, is in tune with the well settled
H
960 SUPREME COURT REPORTS [2021] 12 S.C.R.

A principles and parameters, especially in the light of the fact
that the findings of NCLT on facts were not individually and
specifically overturned by the Appellate Tribunal ?
(ii) Whether the reliefs granted and the directions issued by
the Appellate Tribunal, including the reinstatement of CPM
B into the Board of Tata Sons and other Tata companies, are in
consonance with the pleadings made, the reliefs sought and
the powers available under Sub-section (2) of Section 242 ?
(iii) Whether the Appellate Tribunal could have, in law, muted
the power of the Company under Article 75 of the Articles of
C Association, to demand any member to transfer his ordinary
shares, by simply injuncting the company from exercising such
a right without setting aside the Article ?
(iv) Whether the characterisation by the Tribunal, of the
affirmative voting rights available under Article 121 to the
D Directors nominated by the Trusts in terms of Article 104B, as
oppressive and prejudicial, is justified especially after the
challenge to these Articles have been given up expressly and
whether the Tribunal could have granted a direction to RNT
and the Nominee Directors virtually nullifying the effect of
these Articles ?
E
(iv) whether the re-conversion of Tata Sons from a public
company into a private company, required the necessary
approval under section 14 of the Companies Act, 2013 or at
least an action under section 43A(4) of the Companies Act,
1956 during the period from 2000 (when Act 53 of 2000 came
F into force) to 2013 (when the 2013 Act was enacted) as held
by NCLAT ?
15. Legislative History of Oppression, Mismanagement and
Unfair Prejudice
15.1 Before we take up the questions of law formulated above
G
for consideration, we think it would be useful to look at the legislative
history of oppression, mismanagement and prejudice/ unfair prejudice,
both in England and India, as colonial vintage continues to haunt us
(fortunately or unfortunately), both in legislative drafting and in judicial
decision making even till date.
H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 961
INVESTMENTS PVT. LTD. AND ORS.

In England A
15.2 The history of legislative action to regulate incorporated
companies, in England, is just 176 years old. It begins with the Joint
Stock Companies Act, 1844. Until then, the government created
corporations under a Royal Charter or an Act of Parliament with the
grant of a monopoly over a specified territory. The best known example B
is the British East India Company, to which Queen Elizabeth I granted
the exclusive right to trade with all countries to the east of the Cape of
Good Hope. During this period, Corporations essentially used to act on
the government’s behalf, bringing in revenue from their exploits abroad.
15.3 A chartered company (similar to East India Company), known C
as the South Sea Company, was established in 1711 to trade in the Spanish
South American colonies. The South Sea Company’s monopoly rights
were supposedly backed by the Treaty of Utrecht, signed in 1713 as a
settlement following the War of Spanish Succession. Investors in the
UK were promised high returns of unimaginable proportions, which led
to the shares of the company being traded by avaricious investors at D
high premium. By 1717, the South Sea Company became so wealthy
despite having done no real business that it assumed the public debt of
the UK government. This was the first speculative bubble that the country
(or perhaps the world) saw, but by the end of 1720, the bubble had
“burst”, leading to bankruptcies and the passage of The Bubble Act, E
1720.
15.4 The UK Bubble Act, 1720 prohibited the establishment of
companies without a Royal Charter and it remained in force until its
repeal in 1825. By 1825, Industrial Revolution had gathered pace,
necessitating a legal change. The Bubble Companies Act 1825 lifted the F
restrictions, but it did not resolve the problem fully.
15.5 Therefore in 1843, the Parliamentary Committee on Joint
Stock Companies, chaired by William Gladstone made a report, which
led to the enactment of the Joint Stock Companies Act 1844. This Act
made it possible for ordinary people to incorporate companies through a G
simple registration procedure. However, it did not permit limited liability.
15.6 Then came the Limited Liability Act, 1855, which allowed
investors to limit their liability in the event of business failure, to the
amount they invested in the company. These two features - a simple
registration procedure and limited liability - were subsequently codified
H
962 SUPREME COURT REPORTS [2021] 12 S.C.R.

A in the first modern company law enactment, namely the Joint Stock
Companies Act 1856. The Joint Stock companies Act, 1856 made it
possible for any 7 individuals, subscribing to shares individually, to form
a limited liability company. This was subsequently consolidated with a
number of other statutes in the Companies Act 1862, which was described
by Francis Palmer as the Magna Carta of Co-operative enterprises.
B
15.7 The Companies Act, 1862 consolidated the laws relating to
the incorporation, regulation and winding up of trading companies and
other associations. Though this Act did not provide for any remedies to
the minority shareholders in respect of oppression and mismanagement,
Section 79 empowered the Court to wind up a company whenever the
C Court was of the opinion that it is just and equitable to wind up the
company. This Act also contained a provision conferring a limited right
upon a dissentient member, whenever a sale or transfer of the business
or property of the company took place in the course of winding up
proceedings.
D 15.8 However, when fraudulent practices in relation to the
formation and management of companies came to the fore, an
investigation was ordered by a Committee chaired by Lord Davey. The
Committee submitted a report along with a draft Bill in June, 1895. This
Bill became the Companies Act, 1900. This Act also did not contain any
E provision relating to oppression and mismanagement. So was the case
with the Companies (Consolidation) Act, 1908. The Act of 1908 was
examined by a committee presided over by Lord Wrenbury in 1918 and
again by a committee headed by Greene, K.G. in 1926, which led to the
Companies Act, 1929.

F 15.9 During the second world war, a Company Law Reforms
Committee chaired by Lord Cohen was appointed (in 1943) by the
President of the Board of Trade to consider and report what major
amendments are needed to the 1929 Act, particularly “to review the
requirements prescribed in regard to the formation and affairs of
companies and the safeguards afforded for investors and for the
G public interest”. This Committee’s report dealt specifically with 2
problems, namely (i) the hardship caused to the legal heirs of a deceased
shareholder of a private company in the matter of disposal of the shares,
due to the restriction on the transferability of shares and (ii) the abuse of
office by the Directors in siphoning off huge profits in the form of
H remuneration, to the detriment of the small shareholders. After analyzing
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 963
INVESTMENTS PVT. LTD. AND ORS.

these 2 issues in paragraphs 58 and 59 as illustrative cases, the Cohen A
Committee, recommended that “a step in the right direction would be
to enlarge the power of the Court to make a winding-up order by
providing that the power shall be exercisable notwithstanding the
existence of an alternative remedy”.
Paragraphs 58 to 60 of the Report reads as follows: B
58. Restrictions on transfer of shares. - It has been represented
to us that the provisions which are inserted in the articles of a
private company for the restriction of the transfer of the shares
have caused hardship especially where the legal
representatives of minority shareholders have to raise money C
to pay estate duties. The directors of the company, who are
usually the principal shareholders, sometimes exercise their
power to refuse to register transfers to outsiders, with the
result that executors, who must realise their testators’ shares
in order to pay estate duty, have to sell to the directors or
persons approved by them at prices much lower than the D
values at which the shares are assessed by the Board of Inland
Revenue in valuing the estate of the deceased for purpose of
estate duty. This difficulty is not in law peculiar to private
companies since there is no legal impediment to a public
company having in its articles a provision subjecting transfer E
of shares to the approval of the directors though Stock
Exchanges do not accept it where leave to deal is required.
This restriction is valued as a means of keeping a family
business under the control of the family and we see no
sufficient reason for its removal, particularly if our suggestion
in paragraph 6o is adopted. F

59. Excessive remuneration of directors. - Another abuse
which has been found to occur is that the directors absorb
an undue proportion of the profits of the company in
remuneration for their services so that little or nothing is left
for distribution among the shareholders by way of dividend. G
This may happen where, for example, two persons trading in
partnership form their business into a limited company and
one partner dies-, leaving his shares to his widow who takes
no active part in the business. At present the only remedy
open to the minority shareholder is to commence an action to H
964 SUPREME COURT REPORTS [2021] 12 S.C.R.

A restrain the company from paying the remuneration on the
ground that such payment is a fraud on the minority, since
the Court would not make a winding-up, order in view of the
alternative remedy.
60. Oppression of minorities.-We have carefully examined
B suggestions intended to strengthen the minority shareholders
of a private company in resisting oppression by the majority.
The difficulties to which we have referred in the two preceding
paragraphs are, in fact, only illustrations of a general problem.
It is impossible to frame a recommendation to cover every
case. We consider that a step in the right direction would be
C to enlarge the power of the Court to make a winding-up order
by providing that the power shall be exercisable
notwithstanding the existence of an alternative remedy. In
many cases, however, the winding-up of the company will not
benefit the minority shareholders, since the break-up value
D of the assets may be small, or the only available purchaser
may be that very majority whose- oppression has driven the
minority to seek redress. We, therefore, suggest that the Court
should have, in addition, the power to impose upon the parties
to a dispute whatever settlement the Court considers just and
equitable. This discretion must be unfettered, for it is impossible
E to lay down a general guide to the solution of what are
essentially individual cases. We do not think that the Court
can be expected in every case to find and impose a solution;
but our proposal will give the Court a jurisdiction which it at
present lacks, and thereby at least empower it to impose a
F solution in those cases where one exists.
15.10 Ultimately, in para 153 of the report, a recommendation
was made to amend the provision relating to winding up, by adding the
following:
There be a new section under which, on a shareholder’s
G petition, the Court, if satisfied that a minority of the
shareholders is being oppressed and that a winding-up order
would not do justice to the minority, should be empowered,
instead of making a winding-up order, to make such other
order, including an order for the purchase by the majority of
H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 965
INVESTMENTS PVT. LTD. AND ORS.

the shares of the minority at a price to be fixed by the Court, A
as to the Court may seem just
15.11 Lord Cohen committee report led to the enactment of the
Companies Act, 1948, in which a provision was incorporated in section
210. The heading given to the Section was, “Alternative Remedy to
Winding up in Cases of Oppression”. This provision reads as follows:- B
“210. Alternative remedy to winding up in cases of oppression
(1) Any member of a company who complains that the affairs
of the company are being conducted in a manner oppressive
to some part of the members (including himself) or, in a case
falling within subsection (3) of section one hundred and sixty- C
nine of this Act, the Board of Trade, may make an application
to the court by petition for an order under this section.
(2) If on any such petition the court is of opinion—
(a) that the company’s affairs are being conducted as D
aforesaid; and
(b) that to wind up the company would unfairly prejudice
that part of the members, but otherwise 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;
E
the court may, with a view to bringing to an end the matters
complained of, make such order as it thinks fit, whether for
regulating the conduct of the company’s affairs in future, or
for the purchase of the shares of any members of the company
by other members of the company or by the company and, in
F
the case of a purchase by the company, for the reduction
accordingly of the company’s capital, or otherwise.
(3) Where an order under this section makes any alteration
in or addition to any company’s memorandum or articles, then,
notwithstanding anything in any other provision of this Act
but subject to the provisions of the order, the company G
concerned shall not have power without the leave of the court
to make any further alteration in or addition to the
memorandum or articles inconsistent with the provisions of
the order; but, subject to the foregoing provisions of this
H
966 SUPREME COURT REPORTS [2021] 12 S.C.R.

A subsection, the alterations or additions made by the order
shall be of the same effect as if duly made by resolution of the
company and the provisions of this Act shall apply to the
memorandum or articles as so altered or added to accordingly.
(4) An office copy of any order under this section altering or
B adding to, or giving leave to alter or add to, a company’s
memorandum or articles shall, within fourteen days after the
making thereof, be delivered by the company to the registrar
of companies for registration; and if a company makes default
in complying with this subsection, the company and every
officer of the company who is in default shall be liable to a
C default fine.
(5) In relation to a petition under this section, section three
hundred and sixty-five of this Act shall apply as it applies in
relation to a winding-up petition, and proceedings under this
section shall, for the purposes of Part V of the Economy
D (Miscellaneous Provisions) Act, 1926, be deemed to be
proceedings under this Act in relation to the winding up of
companies.
15.12 But the word “oppressive” appearing in section 210 of the
1948 Act, was construed by the House of Lords in Scottish Cooperative
E Wholesale Society vs. Meyer1 to mean “burdensome, harsh and
wrongful”. The expression “wrongful” gave rise to some uncertainty
as to whether it required actual illegality or invasion of legal rights.
Moreover, the provision invited 2 criticisms namely (i) that the requirement
to establish grounds which justified winding up under the just and equitable
F clause was itself harsh and (ii) that section 210 would not apply to an
isolated act, but applied only to a course of conduct.
15.13 Therefore, the Jenkins Committee of 1962 recommended
use of the term “unfairly prejudicial”. Parliament adopted it in Section
75 of the Companies Act, 1980. Later, this section 75 of the 1980 Act
G became, with an amendment, Section 459 of the Companies Act, 1985.
Sections 459 to 461 of the Companies Act, 1985 were included in Part
XVII, under the caption “Protection of Company’s Members against
Unfair Prejudice”. Sections 459 to 461 read as follows:-

1
1959 A.C.324
H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 967
INVESTMENTS PVT. LTD. AND ORS.

459. Order on application of company member. A
(1) A member of a company may apply to the court by petition
for an order under this Part on the ground that the company’s
affairs are being or have been conducted in a manner which
is unfairly prejudicial to the interests of some part of the
members (including at least himself) or that any actual or B
proposed act or omission of the company (including an act
or omission on its behalf) is or would be so prejudicial.
(2) The provisions of this Part apply to a person who is not a
member of a company but to whom shares in the company
have been transferred or transmitted by operation of law, as C
those provisions apply to a member of the company; and
references to a member or members are to be construed
accordingly.
460 Order on application of Secretary of State
(1) If in the case of any company— D
(a) the Secretary of State has received a report under section
437, or exercised his powers under section 447 or 448 of this
Act or section 44(2) to (6) of the [1982 c. 50.] Insurance
Companies Act 1982 (inspection of company’s books and
papers), and E
(b) it appears to him that the company’s affairs are being or
have been conducted in a manner which is unfairly prejudicial
to the interests of some part of the members, or that any actual
or proposed act or omission of the company (including an
act or omission on its behalf) is or would be so prejudicial. F
he may himself (in addition to or instead of presenting a
petition under section 440 for the winding up of the company)
apply to the court by petition for an order under this Part.
(2) In this section (and, so far as applicable for its purposes,
in the section next following) “company” means any body G
corporate which is liable to be wound up under this Act.
461 Provisions as to petitions and orders under this Part
(1) If the court is satisfied that a petition under this Part is
well founded, it may make such order as it thinks fit for giving
relief in respect of the matters complained of. H
968 SUPREME COURT REPORTS [2021] 12 S.C.R.

A (2) Without prejudice to the generality of subsection (1), the
court’s order may—
(a) regulate the conduct of the company’s affairs in the future,
(b) require the company to refrain from doing or continuing
an act complained of by the petitioner or to do an act which
B the petitioner has complained it has omitted to do,
(c) authorise civil proceedings to be brought in the name and
on behalf of the company by such person or persons and on
such terms as the court may direct,

C (d) provide for the purchase of the shares of any members of
the company by other members or by the company itself and,
in the case of a purchase by the company itself, the reduction
of the company’s capital accordingly.
(3) If an order under this Part requires the company not to
D make any, or any specified, alteration in the memorandum or
articles, the company does not then have power without leave
of the court to make any such alteration in breach of that
requirement.
(4) Any alteration in the company’s memorandum or articles
made by virtue of an order under this Part is of the same
E
effect as if duly made by resolution of the company, and the
provisions of this Act apply to the memorandum or articles as
so altered accordingly.
(5) An office copy of an order under this Part altering, or
giving leave to alter, a company’s memorandum or articles
F
shall, within 14 days from the making of the order or such
longer period as the court may allow, be delivered by the
company to the registrar of companies for registration ; and
if a company makes default in complying with this subsection,
the company and every officer of it who is in default is liable
G to a fine and, for continued contravention, to a daily default
fine.
(6) Section 663 (winding-up rules) applies in relation to a
petition under this Part as in relation to a winding-up petition.

H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 969
INVESTMENTS PVT. LTD. AND ORS.

The words in bold letters in the above extract in section 459, were A
later substituted by the words “unfairly prejudicial to the
interests of its members generally or of some part of its
members” by a 1989 amendment which came into effect in 1991.
15.14 The Companies Act, 1985 was repealed by the Companies
Act, 2006, which had the dubious distinction of being the longest Act in B
British parliamentary history, with 1300 sections and 16 schedules. (until
it was overtaken by the Corporation Tax Act, 2009). Part 30 of the Act
contains 3 provisions in sections 994 to 996 (apart from others), grouped
under the heading “Protection of Members against Unfair Prejudice”.
Paragraph 1265 of the Explanatory Notes to the 2006 Act, confirms that
Sections 994-998 restate sections 459, 460 and 461 of the 1985 Act. C

15.15 Sections 994 to 996 of the Companies Act, 2006 read as
follows:-
“994 Petition by company member
(1) A member of a company may apply to the court by D
petition for an order under this Part on the ground—
(a) that the company’s affairs are being or have been
conducted in a manner that is unfairly prejudicial to the
interests of members generally or of some part of its members
(including at least himself), or E
(b) that an actual or proposed act or omission of the
company (including an act or omission on its behalf) is or
would be so prejudicial.
(2) The provisions of this Part apply to a person who
F
is not a member of a company but to whom shares in the
company have been transferred or transmitted by operation
of law as they apply to a member of a company.
(3) In this section, and so far as applicable for the
purposes of this section in the other provisions of this Part,
“company” means— G

(a) a company within the meaning of this Act, or
(b) a company that is not such a company but is a
statutory water company within the meaning of the Statutory
Water Companies Act 1991 (c. 58). H
970 SUPREME COURT REPORTS [2021] 12 S.C.R.

A 995 Petition by Secretary of State
(1) This section applies to a company in respect of
which—
(a) the Secretary of State has received a report under
section 437 of the Companies Act 1985 (c. 6) (inspector’s
B report);
(b) the Secretary of State has exercised his powers
under section 447 or 448 of that Act (powers to require
documents and information or to enter and search premises);

C (c) the Secretary of State or the Financial Services
Authority has exercised his or its powers under Part 11 of the
Financial Services and Markets Act 2000 (c. 8) (information
gathering and investigations); or
(d) the Secretary of State has received a report from
D an investigator appointed by him or the Financial Services
Authority under that Part.
(2) If it appears to the Secretary of State that in the
case of such a company—
(a) the company’s affairs are being or have been
E conducted in a manner that is unfairly prejudicial to the
interests of members generally or of some part of its members,
or
(b) an actual or proposed act or omission of the
company (including an act or omission on its behalf) is or
F would be so prejudicial, he may apply to the court by petition
for an order under this Part.
(3) The Secretary of State may do this in addition to,
or instead of, presenting a petition for the winding up of the
company.
G (4) In this section, and so far as applicable for the
purposes of this section in the other provisions of this Part,
“company” means any body corporate that is liable to be
wound up under the Insolvency Act 1986 (c. 45) or the
Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405
H (N.I. 19)).
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 971
INVESTMENTS PVT. LTD. AND ORS.

996 Powers of the court under this Part A
(1) If the court is satisfied that a petition under this
Part is well founded, it may make such order as it thinks fit
for giving relief in respect of the matters complained of.
(2) Without prejudice to the generality of subsection
(1), the court’s order may— B

(a) regulate the conduct of the company’s affairs in
the future;
(b) require the company— (i) to refrain from doing or
continuing an act complained of, or (ii) to do an act that the C
petitioner has complained it has omitted to do;
(c) authorise civil proceedings to be brought in the
name and on behalf of the company by such person or persons
and on such terms as the court may direct;
(d) require the company not to make any, or any D
specified, alterations in its articles without the leave of the
court;
(e) provide for the purchase of the shares of any
members of the company by other members or by the company
itself and, in the case of a purchase by the company itself, the E
reduction of the company’s capital accordingly.
Legislative history in India
15.16 In India, the earliest legislation made for the ‘Regulation of
Registered Joint Stock Companies’ was Act No. XLIII of 1850. This
Act provided for the registration of every un-incorporated company of F
partners, associated under a deed containing a provision that the shares
in the stock or business of the said company, are transferable without
the consent of all the partners. It will be fascinating for those interested
in history, to know that under this 1850 Act, the Supreme Courts of
Judicature at Calcutta, Madras and Bombay were conferred not G
only with the power of registration of such companies but also with a
power to enforce the performance by the directors of any of their duties
under the Act or the deed of partnership. These courts also had a
consequential power to punish a person for contempt, if there was any
disobedience of the order of the court. The concepts such as minority,
majority, oppression, mismanagement etc., were alien to this Act of 1850. H
972 SUPREME COURT REPORTS [2021] 12 S.C.R.

A 15.17 Then came Act No.XIX of 1857 which provided for the
incorporation and regulation of joint stock companies and other
associations either with or without limited liability of the members thereof.
The primary object of the Act was to enable the members of the joint
stock companies and other associations to limit their liability for the debts
and engagements relating to those companies and associations. It was
B
under this Act that for the first time the prescription that 7 or more
persons associated for any lawful purpose may form themselves into an
incorporated company with or without limited liability by subscribing their
names to a Memorandum of Association, was introduced. By this very
same Act the prohibition for 20 or more persons to carry on any
C partnership in trade or business having gain as its object, unless they are
registered as a company, was also introduced. But even in this Act the
concepts such as oppression and mismanagement etc., were not dealt
with (perhaps due to the fact that East India Company alone was granted
such a privilege).
D 15.18 Thereafter, a full-fledged enactment known as The Indian
Companies’ Act, 1866 was passed with a view to consolidate and amend
the laws relating to the incorporation, regulation and winding up of trading
companies and other associations. Even this Act, did not provide for
any remedy in the case of oppression and mismanagement, though
provisions were made for winding up including voluntary winding up.
E
15.19 The above Act No. X of 1866 was repealed by The Indian
Companies Act No. VI of 1882. This Act also did not contain provisions
for an individual or group of shareholders/members to seek redressal
against oppression, mismanagement or any unfair prejudicial treatment.

F 15.20 Then came The Indian Companies Act, 1913 (Act No.VII
of 1913) which repealed the 1882 Act and the amendments made thereof.
Interestingly, this 1913 Act also repealed one particular provision in the
Indian Arbitration Act, 1899. Though in the original enactment of 1913,
there was no provision relating to oppression and mismanagement, the
Amendment Act 52 of 1951 inserted Section 153C to The Indian
G Companies Act, 1913. This Section 153C reads as follows :-
“153C. Power of court to act when company acts in a
prejudicial manner or oppresses any part of its members.-(1)
Without prejudice to any other action that may be taken,
whether in pursuance of this Act or any other law for the time
H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 973
INVESTMENTS PVT. LTD. AND ORS.

being in force, any member of a company who complains that A
the affairs of the company are being conducted-
(a) In a manner prejudicial to the interest of the
company, or
(b) In a manner oppressive to some part of the members
(including himself) may make an application to the B
court for an order under the section.
(2) An application under sub-section (I) may also be made by
the Central Government if it is satisfied that the affairs of the
company are being conducted as aforesaid.
C
(3) No application under sub-section (I) shall be made by
any member, unless-
(a) In the case of a company having a share capital, the
member complaining-
(i) has obtained the consent in writing of not less than\ D
one hundred in number of the members of the
company or not less than one-tenth in number of
the members, whichever is less or
(ii) holds not less than one-tenth of the issued share
capital of the company upon which all calls and E
other sums due have been paid; and
(b) In the case of a company not having a share capital
the member complaining has obtained the consent in
writing of not less than one-fifth in number of the members,
and where there are several persons having the same F
interest in any such application and the condition specified
in clause (a) or clause (b) of this sub-section is satisfied
with reference to one or more of such persons, any one or
more of them may, with the permission of the court, make
the application on behalf of, or for the benefit of, all
persons so interested, and the provisions of rule 8 of Order G
I of the First Schedule to the Code of Civil Procedure, 1908
(Act V of 1908), shall apply to any such application as it
applies to any suit within the meaning of that rule.

H
974 SUPREME COURT REPORTS [2021] 12 S.C.R.

A (4) If on any such application the court is of opinion-
(a) that the company’s affairs are being conducted as
aforesaid, and
(b) that to wind up the company would unfairly and
materially prejudice the interests of the company or any
B part of its members, but otherwise the facts would justify
the making of a winding up order on the ground that it is
just and equitable that the company should be wound up,
the court may, with a view to bringing to an end the matters
complained of, make such order in relation thereto as it thinks
C fit.
(5) Without prejudice to the generality of the powers vested
in a court under sub-section (4), any order made under that
sub-section may provide for-

D (a) the regulation of the conduct of the company’s affairs
in future;
(b) the purchase of the shares or interests of any members
of the company by other members thereof or by the
company;
E (c) in the case of a purchase of shares or interest by the
company being a company having a share capital, for the
reduction accordingly of the company’s capital or
otherwise;
(d) the termination of any agreement, howsoever, arrived
F at, between the company and its manager, managing agent,
managing director or any of its other directors;
(e) the termination or revision of any agreement entered
into between the company and any person other than any
of the persons referred to in clause(d), provided that no
G such agreement shall be termination or revised except after
due notice to the party concerned and in the case of revision
of any such agreement, after obtaining the consent of the
party concerned thereto;

H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 975
INVESTMENTS PVT. LTD. AND ORS.

(f) the setting aside of any transfer, delivery of goods, A
payment, execution or other act relating to property made
or done by or against the company within three months
before the date of the application under sub-section (I),
which would, if made or done by or against an individual,
be deemed in his insolvency to be a fraudulent preference.
B
(6) Where an order under this section makes any alteration
in, or addition to, the memorandum or articles of any company,
then notwithstanding anything contained in any other
provision of this Act, but subject to the provisions of the order,
the company concerned shall not have power without the leave
of the court to make any further alteration in, or addition to, C
the memorandum or articles inconsistent with the provisions
of the order, but subject to the foregoing provisions of this
sub-section the alterations or additions made by the order
shall have the same effect as is duly made by a resolution of
the company, and the provisions of this Act shall apply to the D
memorandum or articles as so altered or added to accordingly.
(7) A certified copy of every order under this section altering
or adding to, or giving leave to alter or add to, the
memorandum or articles of any company shall, within fifteen
days after the making thereof, be delivered by the company E
to the registrar for registration, and if a company makes
default in complying with the provisions of this sub-section,
the company and every officer of the company who is in
default shall be punishable with fine which may extend to
five thousand rupees.
F
(8) It shall be lawful for the court upon the application of
any petitioner or of any respondent to a petition under this
section and upon such terms as to the court appears just and
equitable, to make an such interim order as it thinks fit for
regulating the conduct of the affairs of the company pending
the making of a final order in relation to the application. G
(9) Where any manager, managing agent, managing director
or any other director or any other person who has not been
impleaded as a respondent to any application under this
section applies to be made a party thereto, the court shall, if
it is satisfied that his presence before the court is necessary H
976 SUPREME COURT REPORTS [2021] 12 S.C.R.

A in order to enable the court effectually and completely to
adjudicate upon and settle all the questions involved in the
application, direct that the name of any such person be added
to the application.
(10) In any case in which the court makes an order terminating
B any agreement between the company and its manager,
managing agent or managing director or any of its other
directors, as the case may be, the court may, if it appears to it
that the manager, managing agent, managing director or other
director, as the case may be, has misapplied or retained or
become liable or accountable for any money or property of
C the company or has been guilty of any misfeasance or breach
of trust in relation to the company, compel him to repay or
restore the money or property or any part thereof respectively
with interest at such rate as the court thinks just, or to
contribute such sums to the assets of the company by way of
D compensation in respect of the misapplication, retainer,
misfeasance or breach of trust as the court thinks just, and
the provisions of sections 235 and 236 of this Act shall apply
as they apply to a company in the course of being wound up.
Explanation.- For the purposes of this section, any material
E change after the 21st day of July, 1951, in the control of a
company, or in the case of a company having a managing
agent in the composition of the managing agent which is a
firm or in the control of the managing agent which is a
company, may be deemed by the court to be a fact which would
justify the making of a winding-up order on the ground that
F it would be just and equitable that the company should be
wound up:
Provided that the court is satisfied that by reason of the
change the interests of the company or any part of its members
are or are likely to be unfairly and materially prejudiced”
G
15.21 After the country attained independence, a Company Law
Committee was appointed by the Government of India for the revision
of the Companies Act with particular reference to Indian trade and
industry. The Committee submitted its report in March-1952. After
circulating the Report to all State Governments, Chambers of Commerce,
H Trade Associations and other bodies and after examining the inputs
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 977
INVESTMENTS PVT. LTD. AND ORS.

received, the Companies Act, 1956 (Act no.1 of 1956) was passed. This A
Act included a full Chapter in Chapter VI of Part VI, containing elaborate
provisions for the prevention of oppression and mismanagement. This
Chapter was divided into two parts, with Part A dealing with the powers
of the Court/Tribunal and Part B dealing with the powers of the Central
Government. Sections 397, 398 and 402 of the Act are of significance
B
and, hence, they are extracted as follows:
“397. Application to Court for relief in cases of oppression.-
(1) Any members of a company who complain that the affairs
of the company are being conducted in a manner oppressive
to any member or members (including any one or more of
themselves) may apply to the Court for an order under this C
section, provided such members have a right so to apply in
virtue of section 399.
(2) If, on any application under sub-section (1), the Court
is of opinion -
D
(a) that the company’s affairs are being conducted in a
manner oppressive to any member or members; and
(b) that to wind up the company would unfairly prejudice
such member or members, but that otherwise the facts
would justify the making of a winding up order on the E
ground that it was just and equitable that the company
should be wound up;
the Court may, with a view to bringing to an end the matters
complained of, make such order as it thinks fit.
398. Application to Court for relief in cases of F
mismanagement.-(1) Any members of a company who
complain-
(a) that the affairs of the company are being conducted in
a manner prejudicial to the interests of the company; or
(b) that a material change (not being a change brought G
about by, or in the interests of, any creditors including
debenture holders, or any class of shareholders, of the
company) has taken place in the management or control
of the company, whether by an alteration in its board of
Directors, or of its managing agent or secretaries and H
978 SUPREME COURT REPORTS [2021] 12 S.C.R.

A treasurers, or in the constitution or control of the firm or
body corporate acting as its managing agent or secretaries
and treasurers, 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 likely that the affairs of the company will be
B
conducted in a manner prejudicial to the interests of the
company;
may apply to the Court for an order under this section,
provided such members have a right so to apply in virtue of
section 399.
C
(2) If, on any application under sub-section (1), the Court is
of opinion that the affairs of the company are being
conducted as aforesaid or that by reason of any material
change as aforesaid in the management or control of the
company, it is likely that the affairs of the company will be
D conducted as aforesaid, the Court may, with a view to bringing
to an end or preventing the matters complained of or
apprehended, make such order as it thinks fit.
402 - Powers of Court on application under section 397 or
398. - Without prejudice to the generality of the powers of
E the Court under section 397 or 398, any order under either
section may provide for-
(a) the regulation of the conduct of the company’s affairs
in future;

F (b) the purchase of the shares or interests of any members
of the company by other members thereof or by the
company;
(c) in the case of a purchase of its shares by the company
as aforesaid, the consequent reduction of its share capital;
G (d) the termination, setting aside or modification of any
agreement, howsoever arrived at, between the company
on the one hand, and any of the following persons, on the
other, namely:-
(i) the managing director,
H (ii) any other director,
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 979
INVESTMENTS PVT. LTD. AND ORS.

(iii) the managing agent, A
(iv) the secretaries and treasurers, and
(v) the manager.
upon such terms and conditions as may, in the opinion of the
Court, be just and equitable in all the circumstances of the B
case.
(e) the termination, setting aside or modification of any
agreement between the company and any person not referred
to in clause (d), provided that no such agreement shall be
terminated, set aside or modified except after due notice to C
the party concerned and provided further that no such
agreement shall be modified except after obtaining the consent
of the party concerned;
(f) the setting aside of any transfer, delivery of goods, payment,
execution or other act relating to property made or done by D
or against the company within three months before the date
of the application under section 397 or 398, which would, if
made or done by or against an individual, be deemed in his
insolvency to be a fraudulent preference;
(g) any other matter for which in the opinion of the Court it is
E
just and equitable that provision should be made.”
15.22 After the economy of the country opened up and the national
and international economic environment changed, the Government
decided to replace the 1956 Act with a new one. Accordingly, the
Companies Bill, 2009 was introduced in the Lok Sabha. But this bill was
F
withdrawn and the Companies Bill, 2011 was introduced. This eventually
became the Companies Act 2013. Among the many changes brought
about by this Companies Act 2013, those relating to protection of minority
shareholders is what is relevant for our purpose. In fact, paragraph 5(ix)
of the Statement of Objects and Reasons for the Companies Act, 2013
deals with the issue of protection of minority shareholders. It reads as G
follows:
“5. (ix) Protection for Minority Shareholders:
(a) Exit option to shareholders in case of dissent to change
in object for which public issue was made.
H
980 SUPREME COURT REPORTS [2021] 12 S.C.R.

A (b) Specific disclosure regarding effect of merger on
creditors, key managerial personnel, promoters and non-
promoter shareholders is being provided. The Tribunal is
being empowered to provide for exit offer to dissenting
shareholders in case of compromise or arrangement.
B (c) The Board may have a director representing small
shareholders who may be elected in such manner as may
be prescribed by rules.”
15.23 Chapter XVI of the 2013 Act containing Sections 241 to
246 deals exclusively with “Prevention of Oppression and
C Mismanagement.” Sections 241 and 242 are of relevance for our purpose
and hence it is extracted as follows:
“241. 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
D conducted in a manner prejudicial to 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
(b) the material change, not being a change brought
E about by, or in the interests of, any creditors, including
debenture holders or any class of shareholders of the
company, has taken place in the management or control
of the company, whether by an alteration in the Board
of Directors, or manager, or in the ownership of the
F 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 likely that the affairs
of the company will be conducted in a manner
prejudicial to its interests or its members or any class
of members,
G
may apply to the Tribunal, provided such member has a
right to apply under section 244, for an order under this
Chapter.
(2) The Central Government, if it is of the opinion that
the affairs of the company are being conducted in a manner
H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 981
INVESTMENTS PVT. LTD. AND ORS.

prejudicial to public interest, it may itself apply to the A
Tribunal for an order under this Chapter:
242. Powers of Tribunal.— (1) If, on any application made
under section 241, the Tribunal is of the opinion—
(a) that the company‘s affairs have been or are being
conducted in a manner prejudicial or oppressive to any B
member or members or prejudicial to public interest or in
a manner prejudicial to the interests of the company; and
(b) that to wind up the company would unfairly prejudice
such member or members, but that otherwise the facts
would justify the making of a winding-up order on the C
ground that it was just and equitable that the company
should be wound up,
the Tribunal may, with a view to bringing to an end the matters
complained of, make such order as it thinks fit.
D
(2) Without prejudice to the generality of the powers under
sub-section (1), an order under that subsection may provide
for—
(a) the regulation of conduct of affairs of the company in
future;
E
(b) the purchase of shares or interests of any members of
the company by other members thereof or by the company;
(c) in the case of a purchase of its shares by the company
as aforesaid, the consequent reduction of its share capital;
(d) restrictions on the transfer or allotment of the shares F
of the company;
(e) the termination, setting aside or modification, of any
agreement, howsoever arrived at, between the company
and the managing director, any other director or manager,
upon such terms and conditions as may, in the opinion of G
the Tribunal, be just and equitable in the circumstances of
the case;
(f) the termination, setting aside or modification of any
agreement between the company and any person other than
those referred to in clause (e): Provided that no such H
982 SUPREME COURT REPORTS [2021] 12 S.C.R.

A agreement shall be terminated, set aside or modified except
after due notice and after obtaining the consent of the
party concerned;
(g) the setting aside of any transfer, delivery of goods,
payment, execution or other act relating to property made
B or done by or against the company within three months
before the date of the application under this section, which
would, if made or done by or against an individual, be
deemed in his insolvency to be a fraudulent preference;
(h) removal of the managing director, manager or any of
C the directors of the company;
(i) recovery of undue gains made by any managing director,
manager or director during the period of his appointment
as such and the manner of utilisation of the recovery
including transfer to Investor Education and Protection
D Fund or repayment to identifiable victims;
(j) the manner in which the managing director or manager
of the company may be appointed subsequent to an order
removing the existing managing director or manager of
the company made under clause (h);
E (k) appointment of such number of persons as directors,
who may be required by the Tribunal to report to the
Tribunal on such matters as the Tribunal may direct;
(l) imposition of costs as may be deemed fit by the Tribunal;
(m) any other matter for which, in the opinion of the
F
Tribunal, it is just and equitable that provision should be
made.
(3) A certified copy of the order of the Tribunal under sub-
section (1) shall be filed by the company with the Registrar
within thirty days of the order of the Tribunal.
G
(4) The Tribunal may, on the application of any party to
the proceeding, make any interim order which it thinks fit for
regulating the conduct of the company‘s affairs upon such
terms and conditions as appear to it to be just and equitable.

H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 983
INVESTMENTS PVT. LTD. AND ORS.

(5) Where an order of the Tribunal under sub-section (1) A
makes any alteration in the memorandum or articles of a
company, then, notwithstanding any other provision of this
Act, the company shall not have power, except to the extent, if
any, permitted in the order, to make, without the leave of the
Tribunal, any alteration whatsoever which is inconsistent with
B
the order, either in the memorandum or in the articles.
(6) Subject to the provisions of sub-section (1), the
alterations made by the order in the memorandum or articles
of a company shall, in all respects, have the same effect as if
they had been duly made by the company in accordance with
the provisions of this Act and the said provisions shall apply C
accordingly to the memorandum or articles so altered.
(7) A certified copy of every order altering, or giving leave
to alter, a company‘s memorandum or articles, shall within
thirty days after the marking thereof, be filed by the company
with the Registrar who shall register the same. D

(8) If a company contravenes the provisions of sub-section
(5), the company shall be punishable with fine which shall
not be less than one lakh rupees but which may extend to
twenty-five lakh rupees and every officer of the company who
is in default shall be punishable with imprisonment for a term E
which may extend to six months or with fine which shall not
be less than twenty-five thousand rupees but which may extend
to one lakh rupees, or with both.”
15.24 Thus the English legislative history of the provisions
relating to oppression, mismanagement and prejudice, show 3 F
milestones, namely (i) the introduction in the year 1862, of the ‘just
and equitable clause’ for winding up and the conferment of a limited
right on the dissentient member, whenever a transfer or sale took
place in the course of winding up proceedings, (ii) the provision of
an alternative remedy to winding up, in case of oppression of G
minority, in the year 1948 and (iii) the shift from oppression to the
‘unfair prejudice’ quotient in 1980/1985. The journey, in other
words, was from “winding up on just and equitable cause” to
“oppression” to “unfair prejudice”.

H
984 SUPREME COURT REPORTS [2021] 12 S.C.R.

A 15.25 But in so far as India is concerned, what was incorporated
in section 210 of the English Companies Act, 1948, inspired the insertion
of section 153-C of the Indian Companies Act, 1913, by way of an
amendment in 1951. Then came sections 397 and 398 of the 1956 Act,
with certain modifications. An overhaul of these provisions resulted in
B Sections 241 and 242 of the 2013 Indian Act, on the model of (and not
exact reproduction of) sections 459 to 461 of the English Companies
Act, 1985 and sections 994 to 996 of the English Act of 2006.
15.26 The change of language and the consequential change of
parameters for an inquiry relating to oppression and mismanagement
C
from 1951 to 1956 and from 1956 to 2013 and thereafter can be best
understood, if the anatomy of the statutory provisions are dissected and
presented in a table :-

D

E

F

G

H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 985
INVESTMENTS PVT. LTD. AND ORS.

15.27 From the table given above, it could be seen that the changes A
brought about in India in course of time, were material. These changes
can be summarised as follows:
(i) While the conduct of the company’s affairs in a manner that
warrant interference, should be “present and continuing”, under the
1913 Act and 1956 Act, as seen from the usage of the words “are B
being”, the conduct could even be “past or present and continuous”
under the 2013 Act as seen from the usage of the words “have been or
are being” (But the conduct cannot be of a distant past);
(ii) Prejudice to public interest and prejudice to the interests of
C
any member or members were not among the parameters prescribed in
the 1913 Act, but under the 1956 Act prejudice to public interest was
included both under the provision relating to oppression and also under
the provision relating to mismanagement. Prejudice to the interest of the
company was included only in the provision relating to mismanagement.
D
But under the 2013 Act conduct prejudicial to any member or prejudicial
to public interest or prejudicial to the interest of the company are all
added along with oppression;
(iii) Under the 1913 Act, the Court should be satisfied that winding
up under the just and equitable clause will not only unfairly prejudice but E
“also materially prejudice” the interests of the company or any part
of its members. But in the 1956 Act and 2013 Act, the words “and
materially” do not follow the word “unfairly”. Moreover, under the
1956 Act and 2013 Act all that is required to be seen is whether the
winding up will unfairly prejudice “such member or members” indicating F
thereby that the focus was on complaining/affected members.
15.28 Having thus seen the shift in the Indian legislative policy
under Act 52 of 1951 (amending the 1913 Act) and then under the 1956
Act as amended by Act 53 of 1963 and thereafter under the 2013 Act,
let us also see how the shift in the legislative policy happened in the G
United Kingdom. A table similar to the one given in para 15.26, is presented
below insofar as the English Law is concerned:

H
986 SUPREME COURT REPORTS [2021] 12 S.C.R.

A

B

C

D

15.29 There are a few notable features of the shift that happened
E in England. They are (i) from a “conduct oppressive to some part of
the members” the focus has shifted to “conduct unfairly prejudicial
to the interests of the members generally or of some part of its
members”: (ii) conduct prejudicial to public interest or prejudicial to the
company’s interest, does not form part of the scheme of English Law;
(iii) any actual or proposed act or omission, can also be challenged under
F
English Law on the ground that it would turn out to be prejudicial; (iv)
the question of the Court forming an opinion that the facts would otherwise
require an order for winding up on just and equitable ground but that the
same will unfairly prejudice the complaining members, does not arise
under the English Law any more.
G
15.30 But despite the huge shift in England, there appears to be a
common thread running in all the enactments, both in India and England.
In all the 3 Indian enactments, namely the 1913 Act, 1956 Act and the
2013 Act, the Court is ordained, generally to pass such orders “with a
view to bringing to an end the matters complained of”. This sentence
H is found in Section 153C(4) of the 1913 Act. It is found in Section 397(2)
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 987
INVESTMENTS PVT. LTD. AND ORS.

as well as 398(2) of the 1956 Act and it is also found in Section 242 (1) A
of the 2013 Act. This is also the common thread that runs through the
statutory prescriptions contained in the English Acts of 1948, 1985 and
2006. Therefore, at the stage of granting relief in an application under
these provisions, the final question that the Court should ask itself is as
to whether the order to be passed will bring to an end the matters
B
complained of. Having thus seen the development of law, let us now
take up the questions of law one after another.
16. Question No. 1
16.1 The first question of law arising for consideration is whether
the formation of opinion by the Appellate Tribunal that the company’s C
affairs have been or are being conducted in a manner prejudicial and
oppressive to some members and that the facts otherwise justify the
winding up of the company on just and equitable ground, is in tune with
the well settled principles and parameters, especially in the light of the
fact that the findings of NCLT on facts were not individually and
specifically overturned by the Appellate Tribunal ? D

16.2 An analysis of the provisions of Section 241(1)(a) read with
clauses (a) and (b) of Sub-section (1) of Section 242 shows that a relief
under these provisions can be granted only if the Tribunal is of the
opinion –
E
“(1) that the company’s affairs have been or are being conducted
in a manner –
(a) Prejudicial to any member or members or
(b) Prejudicial to public interest or
F
(c) Prejudicial to the interests of the company or
(d) Oppressive to any member or members
and
(2) that though the facts would justify the making of a winding up
order on the basis of just and equitable clause, such a winding up G
would unfairly prejudice such member or members.
16.3 Keeping in mind the above statutory prescription, if we go
back to the pleadings, it will be seen that the complainant companies
forming part of the S.P. Group pitched their claim in their original petition
on the ground: H
988 SUPREME COURT REPORTS [2021] 12 S.C.R.

A (i) that the affairs of Tata Sons are being carried as though it was
the proprietary concern of RNT; and
(ii) that though the oppressive conduct of the respondents was
such that it would be just and equitable to wind up Tata Sons
under Section 241, but such winding up would unfairly prejudice
B the interests of the complainants.
16.4 The specific allegations on which the complainant companies
(of the S.P. Group) sought relief are as follows:-
(i) The abuse of a few Articles of Association and the control
exercised by the Tata Trust and its nominee Directors over the
C Board of Directors of Tata Sons;
(ii) The removal of CPM as Executive Chairman;
(iii) Transactions with Mr. C. Sivasankaran of Sterling Infotech
and the transactions in which Tata Teleservices got entangled;
D (iv) Acquisition of Corus Group Inc of U.K.;
(v) Doomed Nano Car project;
(vi) The grant of inter-corporate bridge loan to sterling
computers;
E (vii) The dealings with NTT DoCoMo which eventually led to
an arbitration award for a huge sum of money;
(viii) The sale of a flat to Mehli Mistry and the grant of huge
personal favours to the companies owned and controlled by Mehli
Mistry.
F 16.5 Each and every one of the allegations forming the basis of
the complaint, was dealt with by NCLT and categorical findings based
on evidence was recorded by NCLT. The findings recorded by NCLT
allegation-wise, are indicated in paragraph 6.1 above.
16.6 None of the above findings, except the one relating to the
G removal of CPM was specifically and individually overturned by NCLAT.
In addition NCLAT focused on the conversion of Tata Sons from a
public company to a private company.
16.7 For easy appreciation, we present in the following table, the
allegations made in the complaint, the findings recorded by NCLT with
H an indication whether NCLAT dealt with the same or not:
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 989
INVESTMENTS PVT. LTD. AND ORS.

Whether A
NCLAT
Allegation Findings of NCLT dealt with
specifically
Siva Group Co. – 1. On 03.10.2013, Siva wrote No specific
1. Non-payment of a letter to CPM seeking an finding. B
due amount by Siva exit from TTSL in lieu of the
Group (Sterling) as financial strain it was facing.
per arbitral award On 08.10.2013, RNT wrote to
in TTSL- NTT CPM requesting him to meet
DoCoMo deal (para Siva to discuss the
218-234) pre dicament, in lieu of C
2. Acquisition of lat ter’s prev ious
shares in TTSL by contributions in the history
Siva and Temasek of TTSL. However, this was
3. Info leak three year s befor e the
pert aining to Docomo issue, which cropped
initiation of action up in 2016. (Para 222, 233) D
against Siva 2. The loan given by one of
4. Acquisition of the Tata Group Companies
Dishnet DSL (Kalimati) to Siva Company
(DDSL) from Siva was paid back and
Group undertaking given by the
company was released. Siva E
himself provided personal
guarantee for the loan taken
from Standard Chartered
Bank. Moreover, no Tata
Group company paid any
money for acquisit ion of F
TTSL shares by Siva Group.
(Para 228)
3. Ultimately, Siva had to pay
its group pro-rata share of
the Docomo award. Siva, on
19.09.2016, then sought
G
damages from Tata Sons for
the alleged mismanagement
of TTSL, for the ensuing
losses incurr ed by it.
However, this did not prove
any special relationship with
H
990 SUPREME COURT REPORTS [2021] 12 S.C.R.

A RNT. (Para 221, 230,
233,234)
4. Acquisition price of TTSL
by both Siva and Temasek
had unanimous approval of
the shareholders. (Para 230)
B 5. Transaction was not done
not behind the back of CPM
and connected parties. (Para
230)
6. The reason for the
difference in the acquisition
C prices between Temasek
(Rs.26/ share) and Siv a
Group (Rs.17/share) was
owing to more shareholding
rights with Temasek. (Para
230)
D 7. CPM made more profits
from the acqui sition of
shares of TTSL than Siva
Group. (the latter had sold its
shares to NTT-Docomo in
2008). Co mplainant
E companies also acquired
shares of Tata Teleservices
Ltd. at Rs. 15/ per share.
(Para 230)
8. NTT-DoCoMo also
acquired shares from brother
F and father of CPM. CPM was
also a beneficiary like Siva
but this was not disclosed by
the complainant companies.
The rate at which the
petitioners acquired the
G shares of TTSL is less than
the rate at which Siv a
acquired them and the gain
made by the petitioners by
selling sha res of NTT
DoCoMo was more than the
H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 991
INVESTMENTS PVT. LTD. AND ORS.

gain made by the Siva Group. A
(Para 230)
9. The acquisition happened
in 2006 and it is sought to
raise after 10 years, during
which period CPM was part
of that board and also the B
Executive Chairman for a
period.
10. No proof on record to show
leakage of info
11. It was Mr. Nitin Nohria
(Trust Nominee director) and C
not CPM, who proposed to
initiate legal action against
Siva. (Para 231)
12. With respect to Tata
Capital giving a loan to Mr.
Siva, due diligence carried D
out on the same, and no role
in the grant of this loan can
be attributed to RNT. (Para
234)
13. The acquis ition of
Dishnet DSL (DDSL) from E
Siva group took place in
2004. CPM has not argued
that he was unaware of this
acquisition. Nor has it been
argued that RNT made any
illicit gain out of it. In fact, it F
was commercial decision of
TTSL. This issue was
brought to the notice of CPM
way back in October, 2013,
but he never complained
earlier. (Para 235) G
Neither TTSL nor Kalimati
nor Tata Capital were
ar r ayed a s par ty to the
proceeding.

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992 SUPREME COURT REPORTS [2021] 12 S.C.R.

A Air Asia India Ltd. Air Asia not made a party.At No specific
& V i s t a r a : - the time when resolution for finding.
Diversion of funds Joint Venture was placed on
through a Global 06.12.2012, CPM was active
terrorist. in discussions and was a
consenting par ty to t he
B same . The said Joint
Venture was incorporated on
28.03.2013 and CPM did not
raise any issue till his
removal in 2016. (Para 242-
244)
C CPM contends that the deal
was struck with Mr. Hamid
Reza Malakotipour who was
classified as a Global
ter rorist by t he United
Nat ions. However, t he
D all egation of indirectly
financing terrorism through
the involvement of such third
par ties, is se rious and
demeaning. (Para 241)
After claiming that he has no
E say in the AirAsia
transactions, CPM claims to
have protected the interest
of the company by limiting
its exposure and ensuring no
fallback liability. These two
F claims conflict with each
other. (Para 242)
With respect to the Joint
Venture with Singapore
Airlines to set up Vistara, all
Air Asia decision are fait
G accompli upon him, and thus,
he is estopped from denying
knowledge regarding these
transactions. (Para 244)
It would be preposterous to
allege that RNT funded a
H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 993
INVESTMENTS PVT. LTD. AND ORS.

terrorist through hawala A
with diversion of AirAsia
India funds. (Para 245)
Mehli Mistry:- The contract for dredging at No specific
1. A warding of Trombay was awarded in finding.
dre dging and 1993 and renewed for various
B
Shipping contracts tenures (5 times) from 2002
(without tenders) to – 2014. CPM held
Mehli’s Companies directorship of Tata Power
by Tata Power. from 1996-2006 & 2011-
2. Purchase of 2016, but never raised any
agricultural land by objection. (Para 258)
C
RNT at Alibaug in 2004 barging cum dredging
1993 where Aqua contract – with regard to the
Farms (in w hich award of contract by Tata
Mr. Mehli was a Power to MPCL, there is
par t ner) was a nothing on material to prove
confirming party to that this caused loss to TPC.
the sale deed. (Para 259) D
3. Sale of 2006 Shi pping Contr act
B a k h t a w a r awarded by Tata Power to a
Apa rtment at consortium (comprising of
Colaba to MPCPL MPSPL and Mercator Lines
(which belongs to Ltd.) – Letter written by Mr.
Forbes Gokak Ltd.) Mehli to Tata Power dated E
04. 05.201 3 pertained to
issue of coal storage, which
does not pr ove any
expropriation or bullying by
him. Since, the company of
Mr. Mehli was the contractor, F
he only wrote to Tata Power
to ensure proper
coo rdina tion a nd joint
decision making to sustain
a smooth supply chain to
Trombay Power house. (Para G
263)

This (Alibaug) was a regular
transfer that took place in
1993. Pr ev ious ly, Aqua
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994 SUPREME COURT REPORTS [2021] 12 S.C.R.

A Farms had made payments
to the original landowner for
purchase, but the sale deed
did not fructify. Aqua Farms
was made a confirming party,
as RNT reimbursed Aqua
B Farms for the original
payment that it had made to
the original land owners.
Simply put, the moment RNT
reimbursed Aqua Farms, the
vendors of the land would
C execute the sale deed in
favour of RNT. This was a
mere sale t ransac tion
between two parties, which
cannot be used to argue that
contracts were bestowed to
D Mr. Mehli(Para 253)

No unjust enrichment of
RNT at the cost of Company
– Forbes Gokak Ltd. not
ar rayed as a par ty –
E Allegation raised in 2016 of
the events which can be
traced back to 2002 – This
was not a company related
affair, as RNT retired from
the company and has not
F been in management since
2012 – Not a case falling
under 241. (Para 252)
Corus acquisition The allegation that Tata No specific
Steel acquired Corus at an finding.
inflated price is without
G basis. (Para 301)
The price quoted by Tata
Steel was GBP 608 Pence
per shar e, w hile their
competitors’ final bid was
GBP 603 Pence per share.
H (Para 301)
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 995
INVESTMENTS PVT. LTD. AND ORS.

Acquisition of Corus was a A
collective decision by Tata
Steel. CPM (Director at Tata
Stee l) appr oved ev ery
resolution of Tata Steel, for
entering into auction and for
conf irming the f inal B
acquisiti on sha re pr ice.
Acquisition was undertaken
following due governance
process under the
supervision of the Board,
wit hout any dissent of C
shareholders of Tata Steel.
(Para 300)
To salvage the company from
the losses incurred from the
Cor us acquisit ion, TSL
entered into a merger with D
ThyssenKrupp. There is no
material to prove that RNT
had any role in preventing
the same. (Para 303)
Tata Motors - Nano It is well established that No specific
Project :- RNT was not in the finding. E
management of either Tata
Motors or the company after
retirement. There is not a
single instance where the
advice of RNT was directly
implemente d without F
cons iderat ion by the
respective Board. (Para 267)
Tata Motors and Jayem Auto
incorporat ed a Joint
Venture. This happened
under the stewardship of G
CPM. (Para 275)
CPM never objected over any
visit, corr espondence or
investment by RNT in Jayem
Auto. (Para 272)
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996 SUPREME COURT REPORTS [2021] 12 S.C.R.

A Merely because Tata Motors
Finance (TMF) had a loss of
Rs. 392 Crores (towards Nano
out of Rs.2000 Crores) for
financing Nano, it cannot be
use d to make a case of
B mismanagement against
RNT. (Para 280)
With regard to personal visits
of RNT to the Jayem Auto
factory and about the
enquiries sought apropos to
C the projects, no personal
benefit to RNT or harm to
Tata Motors has been proved.
(Para 281-282)
No ev idence of the UPSI
causing prejudice to the
D interest of Tata Motors has
been placed by CPM, upon
whom the burden of proof was.
(Para 284)
Seeking information does
not amount to conducting
E affairs of the company. (Para
285)
The correspondences of RNT
to CPM regarding the supply
of cars to Ola/ Uber, were
done to t r y to get into
F business with either of the
two. (Para 290-293)
Wellspun Sin ce the acquisition of No specific
Acquisition by Tata Welspun was not put up to finding.
Power the Board of Tata Sons for
prior approval and it came up
G only after Tata Power had
signed the paper s for
acquisition, making Tata
Sons a f ait accompli, the
nominee directors had to
indulge in consultations and
H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 997
INVESTMENTS PVT. LTD. AND ORS.

the same did not tantamount A
to interfer ence by the
Trusts.(Para 384, 385, 543)
The oppres sive CPM’s father was a director No specific
nature of Articles at the time when finding.
104B, 121, 121A amendments were made to
and 75 B
the Articles of Association
on 13/09/2000. (Para 371)
Article 118 was amended on
06/12/2012 when CPM was
chairman. (Para 372)
CPM was also a party to the
resolution passed on 09/
C
04/2014, amending the
ar t icles so as t o confer
affirmative rights in favour
of the Trust-Nomina ted
directors. (Para 373)
Article 75 was always in D
existence and neither CPM
nor his fat her nor the
complainant companies
ev er made a complaint.
(Para 393)
E
The provision in the The two Trusts, if they really No specific
Articles of wished, could have had the finding.
Association Board of Directors entirely
entitling the two with their nominees. But
trusts to have 1/3 they allowed the Articles of
of the directors Association only to have the F
with affirmative minimum requirement and
vote, is prejudicial hence the same cannot be
to the interests of termed as oppressive of the
the members and minority. (Para 419)
the interests of the
company G

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998 SUPREME COURT REPORTS [2021] 12 S.C.R.

A 16.8 NCLAT, being an Appellate Tribunal, conferred with the
power under sub-Section (4) of Section 421 to confirm, modify or set
aside the order of NCLT, can be taken to be a final court of fact. An
appeal from the Order of the NCLAT to this Court under Section 423 is
only on a question of law. Considering the nature of the jurisdiction
conferred upon NCLAT, it is clear that the findings of the NCLT, not
B
specifically modified or set aside by NCLAT should be taken to have
reached finality, unless the parties aggrieved by such non-interference
by NCLAT have approached this Court, raising this as an issue. Though
SP group has also filed an appeal in C.A. No. 1802 of 2020, the grievance
aired therein, as seen from para 3 of the memorandum of appeal, is
C limited to the failure of NCLAT to grant certain reliefs. The failure of
NCLAT to specifically overturn the findings of fact recorded by NCLT,
is not assailed in the SP group’s appeal. Therefore, we have no hesitation
in holding that the allegations relating to
(i) transactions with Siva and Sterling Group of Companies;
D (ii) Air Asia;
(iii) Transactions with Mehli Mistry;
(iv) the losses suffered by Tata Motors in Nano car project; and
(v) the acquisition of Corus
E
reached finality.
16.9 The findings recorded by NCLAT for the grant of reliefs,
revolved primarily around the removal of CPM, the affirmative voting
rights, interference by nominee Directors and the conversion of Tata
Sons into a private company. In other words, these are the 4 areas in
F
which NCLAT can be taken to have undertaken a scrutiny and reversed
the findings of NCLT. Therefore, for answering the first question of law,
we need to focus mainly on these issues on which NCLAT expressly
overruled NCLT.
16.10 Out of these 4 specific issues on which NCLAT overruled
G NCLT, 3 issues will also be covered in our discussion on questions of
law 4 and 5.. Therefore, we shall take up in this chapter, the question (i)
whether the removal of CPM could have been the basis for the allegation
that the company’s affairs have been or are being conducted in a manner
oppressive or prejudicial to the interests of some of the members and (ii)
H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 999
INVESTMENTS PVT. LTD. AND ORS.

whether the findings recorded by NCLAT about the existence of just A
and equitable clause is in accordance with the well established principles
of law.
Removal of CPM
16.11 CPM was first removed only from the post of Executive
Chairman of Tata Sons, but not from the Directorship, by the resolution B
of the Board dated 24.10.2016. This acted as the trigger point for CPM,
to launch an offensive. On the very next day namely 25.10.2016, CPM
wrote a mail alleging total lack of corporate governance and failure on
the part of the directors to discharge their fiduciary duties. He also called
all the Trust nominee directors as postmen. Though the mail was labelled C
as ‘confidential’, a copy of the mail landed up with the media creating a
“sensation”. NCLT recorded a finding that CPM who owes a duty to
explain this leakage of confidential mail, could not provide a satisfactory
answer and that therefore, by virtue of section 106 of the Evidence Act,
the leakage has to be traced to CPM. NCLAT did not overrule this
finding. D

16.12 The mail compelled Tata sons to issue a Press Statement
on 10.11.2016. This was followed by the removal of CPM from the
Directorship of Tata Industries Limited, Tata Consultancy Services
Limited and Tata Teleservices Limited, all of which happened during the
period from December 12 to December 14, 2016. Seeing clearly the E
course of destiny (which was actually set in motion by none other than
himself), CPM resigned from other operating companies of Tatas such
as The Indian Hotels Company Limited, Tata Steel Limited, Tata Motors
Limited, Tata Chemicals Limited and Tata Power Limited, on 19.12.2016,
on the eve of the Extraordinary General Meetings of those companies, F
convened for considering resolutions for his removal. On the very next
day namely, 20.12.2016 the complainant companies, of which CPM is
the pivot, filed a petition C.P.No.82 of 2016 before NCLT, Mumbai,
under Sections 241 and 242 read with Section 244 of the Companies
Act, 2013.
G
16.13 Around this time, as if by coincidence, the Principal Officer
of Tata Sons received a letter dated 29.11.2016 from the Deputy
Commissioner of Income Tax (Exemptions) seeking certain information
under Section 133(6) of the Income Tax Act, 1961 in the case of Tata
Education Trust. Tata Sons, through a reply dated 09.12.2016 furnished
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1000 SUPREME COURT REPORTS [2021] 12 S.C.R.

A necessary information along with the requested documents. The Deputy
Commissioner of Income Tax also called for some additional information
by subsequent letters, and the information so called for, was also
furnished.
16.14 Claiming that a mail dated 20.12.2016 issued by the Deputy
B Commissioner of Income Tax seeking further information under Section
133(6) was copy-marked to him, CPM sent a reply to the Income Tax
department confirming (i) that the Directors appointed by Tata Trust
controlled the decision making processes by virtue of the affirmative
voting rights; (ii) that RNT and Soonawala have on many occasions
sought prior information and consultation; (iii) that the conduct of the
C Trustees posed several regulatory risks; and (iv) that the office of RNT,
in his capacity as Chairman Emeritus was funded by Tata Sons, including
the cost of his overseas travel by private jet. To this letter to the Deputy
Commissioner of Income Tax was enclosed certain files purportedly
containing the information sought.
D 16.15 Upon coming to know of CPM’s letter to the Deputy
Commissioner of Income Tax, Tata Sons lodged a protest through a
letter dated 26.12.2016. It was followed by a legal notice issued by Tata
Sons to CPM on 27.12.2016 pointing out that he was guilty of breach of
confidentiality and that he had passed on confidential and sensitive
E information contained in 4 box files, without any authority. CPM sent a
legal reply dated 05.01.2017 claiming that he had a statutory obligation
to cooperate with Income Tax authorities. As if to display his courage
of conviction, CPM sent another letter dated 12.01.2017 to the Deputy
Commissioner of Income Tax sending one more file and assuring the
authorities that he would continue to check the records and submit any
F additional data/information as and when available.
16.16 In the light of whatever transpired as narrated above, a
“Special Notice and Requisition” was moved on 03.01.2017 convening
an EGM of Tata Sons for considering the removal of CPM as Director
of Tata sons. It must be remembered at this stage that by the Resolution
G of the Board of Tata Sons dated 24.10.2016, CPM was merely removed
from the post of Executive Chairman, but he continued to be a member
of the Board as a Non Executive Director even after 24.10.2016. It
must also be remembered that it was during his continuance as the
member of the Board that CPM exchanged correspondence/legal notice
H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 1001
INVESTMENTS PVT. LTD. AND ORS.

with Tata Sons and also passed on information along with certain files, A
to the Income Tax authorities claiming to be a very “law abiding citizen”.
16.17 Since the EGM of Tata sons was scheduled to be held on
06.02.2017, for considering the resolution for CPM’s removal from the
Directorship, the Companies (S.P. Group) which filed the complaint before
the NCLT moved an interim application before NCLT for a stay of the B
EGM. NCLT declined stay and the appeal against the refusal to grant
stay was also dismissed by NCLAT. Therefore, the EGM proceeded as
scheduled on 06.02.2017 and CPM was removed from the Directorship
of Tata Sons. In his place Mr. N. Chandrasekharan, was appointed as
Executive Chairman.
C
16.18 In the Company Petition as it was originally filed on
20.12.2016, the complainant companies had sought a set of 21 reliefs,
one of which was for a direction to the respondents (the company and
its directors) not to remove CPM (who was cited as R-11 in the original
petition) from the directorship of Tata Sons. This was in prayer clause
(F) of Paragraph 153 of the main company petition. This prayer was in D
direct contrast to the reliefs sought in prayer clauses (A) and (B). Prayer
clause (A) was for superseding the existing Board of Directors and
appointment of an Administrator. Prayer in clause (B) was for
appointment of a retired Supreme Court Judge as Non Executive
Chairman and for appointment of a new set of independent Directors. E
16.19 After the dismissal of the interim application moved for
stalling the EGM scheduled to be held on 06.02.2017 and after the passing
of the resolution for the removal of CPM in the EGM held on 06.02.2017,
the complainant companies moved an application for amendment of the
original petition so as to include two additional prayers namely (i) F
reinstatement of the representative of the complainant companies on
the Board of Tata Sons; and (ii) amendment of the Articles of Association
to provide for proportional representation.
16.20. However, eventually the prayers made in clauses (A), (B)
and (C) were not pressed. Prayers in clauses (F), (Q) & (R) were also G
not pressed on the ground that they had become infructuous. In Paragraph
3.4 above we have extracted the reliefs as originally sought in the main
company petition and in the table in Paragraph 4.11 we have indicated
the prayers additionally made and the reliefs either given up or sought to
be modified.
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1002 SUPREME COURT REPORTS [2021] 12 S.C.R.

A 16.21 In fact the real reason why the complainant companies
thought fit, quite tactfully, not to press for the reinstatement of CPM is
that the mere termination of Directorship cannot be projected as something
that would trigger the just and equitable clause for winding up or to grant
relief under Sections 241 and 242. A useful reference can be made in
this regard to the decision of this Court in Hanuman Prasad Bagri &
B
Ors. vs. Bagress Cereals Pvt. Ltd.2.
16.22 It must be remembered : (i) that a provision for inclusion of
a representative of small shareholders in the Board of Directors, is of a
recent origin under Section 151 of the Companies Act, 2013 and it is
applicable only to a listed company; (ii) that Tata sons is not a listed
C Company; (iii) that the Articles of Association of Tata sons, to which
the complainant companies, CPM and his father had subscribed, do not
provide for any representation; (iv) that despite there being no statutory
or contractual obligation, Tata Sons inducted CPM’s father as a director
on the board in the year 1980 and continued him for a period of almost
D 25 years; (v) that CPM himself was inducted, again without reference
to any statutory or contractual obligation, as a Director on the Board in
August, 2006; and (vi) that within 6 years of such induction, CPM was
identified as a successor to RNT and was appointed as Executive Deputy
Chairman and elevated to the position of Executive Chairman.
E 16.23 It is an irony that the very same person who represents
shareholders owning just 18.37% of the total paid up share capital and
yet identified as the successor to the empire, has chosen to accuse the
very same Board, of conduct, oppressive and unfairly prejudicial to the
interests of the minorities. In support of such allegation, the complainant
companies have pointed out certain business decisions taken during the
F period of more than 10 years immediately preceding the date of removal
of CPM. That failed business decisions and the removal of a person
from Directorship can never be projected as acts oppressive or prejudicial
to the interests of the minorities, is too well settled. In fact it may be
concede today by Tata sons that one important decision that the Board
G took on 16.03.2012 certainly turned out to be a wrong decision of a life
time.
16.24 Therefore, the fact that the removal of CPM was only from
the Executive Chairmanship and not the Directorship of the company as
on the date of filing of the petition and the fact that in law, even the
H 2
(2001) 4 SCC 420
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 1003
INVESTMENTS PVT. LTD. AND ORS.

removal from Directorship can never be held to be an oppressive or A
prejudicial conduct, was sufficient to throw the petition under section
241 out, especially since NCLAT chose not to interfere with the findings
of fact on certain business decisions.
16.25 The subsequent conduct on the part of CPM in leaking his
mail dated 25-10-2016 to the Press and sending replies to the Income B
Tax Authorities enclosing 4 box files, even while continuing as a Director,
justified his removal even from the Directorship of Tata Sons and other
group companies. A person who tries to set his own house on fire for not
getting what he perceives as legitimately due to him, does not deserve to
continue as part of any decision making body (not just the Board of a
company). It is perhaps this realisation that made the complainant C
companies give up their original prayer for restraining the company from
removing CPM and singing a different tune seeking proportionate
representation on the Board.
16.26 For assailing the decision to remove CPM from the
Chairmanship of Tata Sons, it is contended (i) that Tata Group performed
D
exceedingly well under his stewardship; (ii) that the Nomination and
Remuneration Committee for the Financial Year 2015-16 endorsed his
performance and even recommended a pay hike and performance linked
bonus; and (iii) that the Board unanimously approved these
recommendations on 29.6.2016 just four months before his unceremonious
removal. E
16.27 First of all, the above contention is in direct conflict with the
entire foundation on which the whole case of the complainant companies
was erected. If CPM and the members of the Nomination and
Remuneration Committee as well as the entire Board were on the same
page till 29.6.2016 that the company was doing well under the stewardship F
of CPM, then there can be no allegation that the company’s affairs
were conducted in a manner oppressive or prejudicial to the interest of
anyone, namely the company or the minority, at least until 29.6.2016. On
the contrary if the company’s affairs have been conducted in a manner
oppressive or prejudicial, even before 29.6.2016, the other members of
the Board and CPM could not have formed themselves into a mutual G
admiration society to laud CPM’s performance and CPM acknowledging
that the company was doing well when he was in the driver’s seat.
16.28 An important aspect to be noticed is that in a petition under
Section 241, the Tribunal cannot ask the question whether the removal
of a Director was legally valid and/or justified or not. The question to be H
1004 SUPREME COURT REPORTS [2021] 12 S.C.R.

A asked is whether such a removal tantamount to a conduct oppressive or
prejudicial to some members. Even in cases where the Tribunal finds
that the removal of a Director was not in accordance with law or was
not justified on facts, the Tribunal cannot grant a relief under Section
242 unless the removal was oppressive or prejudicial.
B 16.29 There may be cases where the removal of a Director might
have been carried out perfectly in accordance with law and yet may be
part of a larger design to oppress or prejudice the interests of some
members. It is only in such cases that the Tribunal can grant a relief
under Section 242. The Company Tribunal is not a labour Court or an
administrative Tribunal to focus entirely on the manner of removal of a
C person from Directorship. Therefore, the accolades received by CPM
from the Nomination and Remuneration Committee or the Board of
Directors on 29.6.2016, cannot advance his case.
16.30 A contention was raised that CPM’s removal was a pre-
meditated act, carried out at the behest of Tata Trusts and RNT and that
D the removal was not only contrary to Article 118, but also contrary to
Article 105(a) read with the second proviso to Section 179(1) and Article
122(b).
16.31 As we have pointed out above, the validity of and justification
for the removal of a person can never be the primary focus of a Tribunal
E under Section 242 unless the same is in furtherance of a conduct
oppressive or prejudicial to some of the members. In fact the post of
Executive Chairman is not statutorily recognised or regulated, though
the post of a Director is. At the cost of repetition it should be pointed out
that CPM was removed only from the post of (or designation as)
F Executive Chairman and not from the post of Director till the Company
Petition was filed. But CPM himself invited trouble, by declaring an all
out war, which led to his removal from Directorship.
16.32 It is true that as per the evidence available on record he
was requested before the Board meeting, to step down from the post of
G Executive Chairman. That does not tantamount to the act being pre-
meditated. The induction of new members on 8.8.2016 into the Board
and the Board securing a legal opinion prior to the Board meeting, cannot
make the act a pre-meditated one. There is a thin line of demarcation
between a well-conceived plan and a pre-meditated one and the line can
many times be blurred.
H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 1005
INVESTMENTS PVT. LTD. AND ORS.

16.33 Article 118 around which arguments were advanced reads A
as follows:
“118. APPOINTMENT OF CHAIRMAN
For the purpose of selecting a new Chairman of the Board of
Directors and so long as the Tata Trusts own and hold in the
aggregate at least 40% of the paid up Ordinary Share Capital B
of the Company for the time being, a Selection Committee
shall be constituted in accordance with the provisions of this
Article to recommend the appointment of a person as the
Chairman of the Board of Directors and the Board may appoint
the person so recommended as the Chairman of the Board of C
Directors, subject to Article 121 which requires the affirmative
vote of all Directors appointed pursuant to Article 104B.
The same process shall be followed for the removal of the
incumbent Chairman.
The Selection Committee shall comprise – (a) Three (3) persons D
nominated jointly by the Sir Dorabji Tata Trust and the Sir
Ratan Tata Trust who may or may not be Directors of the
Company, (b) one (1) person nominated by and from amongst
the Board of Directors of the Company and (c) one (1)
independent outside person selected by the Board for this E
purpose.
The Chairman of the Committee will be selected by the Sir
Dorabji Tata Trust and the Sir Ratan Tata Trust from amongst
the nominees nominated by the Trusts.
The quorum for a meeting of the Selection Committee shall be F
the presence of a majority of members nominated jointly by
the Sir Dorabji Tata Trust and the Sir Ratan Tata Trust.
Explanation: The words “nominated jointly’ used in this
Article shall mean that the Sir Dorabji Tata Trust and the Sir
Ratan Tata Trust shall together decide the nominees. In the G
case of any difference, the decision of the majority of the
Trustees in the aggregate of the Sir Dorabji Tata Trust and
the Sir Ratan Tata Trust shall prevail.”
16.34 The sentence in Article 118 reading “the same process
shall be followed for the removal of incumbent Chairman” actually H
1006 SUPREME COURT REPORTS [2021] 12 S.C.R.

A goes along with the last limb of the portion immediately preceding this
line. It deals with the appointment of a person as Chairman, pursuant to
the recommendation of a Selection Committee, subject to Article 121
which requires the affirmative vote of the Directors appointed in
terms of Article 104B.
B 16.35 It is absurd to interpret Article 118 to mean that Selection
Committee is to be constituted for the removal of an incumbent Chairman.
The necessity for taking recourse to the affirmative voting right under
Article 121 is what is meant by the expression “the same process”
appearing in the second part of Article 118.
C 16.36 The argument pitched upon Article 105(a) is also completely
unfounded. Article 105(a) deals with the power of the Board to appoint
a Managing Director, Joint/Deputy Managing Director or Whole Time
Director. The provision relating to Executive Chairman is not to be found
in Article 105(a) but in Article 105(b) which reads as follows:

D “The Board shall have the power to designate the Chairman
of the Board as the Executive Chairman and pay him such
remuneration as, in their opinion, they deem fit”.
Therefore, the argument on the basis of Article 105(a) is ill-
founded.
E 16.37 The contention that the removal was in violation of the
second proviso to Section 179(1) read with Article 122(b) is also ill-
conceived. The second proviso to Section 179(1) prohibits the Board
from exercising any power that could be exercised by the company only
in a General Meeting. Article 122(a) is only a reiteration of the principle
F behind the second proviso to Section 179(1). Article 122(b) says that the
Board may exercise all such powers as are not required to be exercised
by the company in General Meeting. The designation of a person as
Executive Chairman, is not one of the functions to be performed in a
general meeting, either under the Act or under the Articles of association.
16.38 It is also contended that no advance notice of his removal
G
was given to CPM and no agenda item was placed in advance in terms
of Article 121B, which reads as follows:
“121B. Any Director of the Company will be entitled to give
at least fifteen days notice to the Company or to the Board
that any matter or resolution be placed for deliberation by
H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 1007
INVESTMENTS PVT. LTD. AND ORS.

the Board and if such notice is received it shall be mandatory A
for the Board to take up such matter or resolution for
consideration and vote, at the Board meeting next held after
the period of such notice, before considering any other matter
or resolution.”
16.39 We do not know how Article 121B is sought to be invoked. B
It deals with a situation where a Director wants to bring up any matter
or resolution before the Board. It has no relevance to the agenda that
the Board wants to take up. Even according to the complainant
companies, the Directors of a Company have a fiduciary relationship. It
is a relationship in which one party places special trust, confidence and
reliance on another. It is claimed by the appellants (Tata Group) that the C
removal of CPM was as a result of lack of confidence and trust in him.
By his own subsequent conduct, CPM unfortunately enhanced the
firepower of the management of Tata Sons, with regard to their claim
relating to lack of confidence and trust.
16.40 The decision in Central Bank of India Ltd. vs. Hartford D
Fire Insurance Co. Ltd.3 is relied upon by the S.P. Group to contend
that the power of removal of a Director is subservient to the agreed
duration of office. But the decision in Central Bank of India arose out
of the termination of a fire insurance policy. It had nothing to do with the
removal of a Director. But a decision of the King’s Bench in Nelson E
vs. James Nelson4 was relied upon in the said case to assail the
termination of the insurance policy. After pointing out that Nelson was a
case where the termination assailed was that of the services of the
Managing Director and that the contract of his appointment did not provide
for his termination except on the condition of his ceasing to be a Director,
this Court rejected the citation in Central Bank of India on the ground F
that it had no relevance to the termination of a policy of insurance.
16.41 The decision in M.I. Builders Pvt. Limited vs. Radhey
Shyam Sahu & Others5, to the effect that an important issue cannot
be decided under the residuary agenda item “any other item”, will not
also go to the rescue of the complainant companies, since the matter in G
M.I. Builders concerned the permission granted by the Municipal
Corporation to a builder to construct an underground shopping complex
3
AIR 1965 SC 1288
4
1914-2K.B. 770
5
(1999) 6 SCC 464 H
1008 SUPREME COURT REPORTS [2021] 12 S.C.R.

A in a park. The Court found the decision taken by the Mahapalika to be in
clear breach of Sections 91 and 119 of the U.P. Municipal Corporation
Act, 1959. Therefore, the said decision has no application.
16.42 In any event the removal of a person from the post of
Executive Chairman cannot be termed as oppressive or prejudicial. The
B original cause of action for the complainant companies to approach NCLT
was the removal of CPM from the post of Executive Chairman. Though
the complainant companies padded up their actual grievance with various
historical facts to make a deceptive appearance, the causa proxima for
the complaint was the removal of CPM from the office of Executive
Chairman. His removal from Directorship happened subsequent to the
C filing of the original complaint and that too for valid and justifiable reasons
and hence NCLAT could not have laboured so much on the removal of
CPM, for granting relief under Sections 241 and 242.
Invocation of just and equitable clause

D 16.43 Interestingly, NCLAT has recorded a finding, though not
based upon any factual foundation, that the facts otherwise justify the
making of a winding up order on just and equitable ground. But as held
by the Privy Council in Loch v. John Blackwood6, “there must lie a
justifiable lack of confidence in the conduct and management of
the company’s affairs, at the foundation of applications for winding
E up.” More importantly, “the lack of confidence must spring not from
dissatisfaction at being out-voted on the business affairs or on what
is called the domestic policy of the company”. But, “wherever the
lack of confidence is rested on a lack of probity in the conduct of
the company’s affairs, then the former is justified by the latter.”
F 16.44 A passage from the opinion of Lord President of the Court
of Session (Lord Clyde) in Baird v. Lees 7, quoted in Loch (supra),
reads as follows:-
“A shareholder puts his money into a company on certain
conditions. The first of them is that the business in which he
G invests shall be limited to certain definite objects. The second
is that it shall be carried on by certain persons elected in a
specified way. And the third is that the business shall be
conducted in accordance with certain principles of commercial
6
[1924] AC 783
7
H (1924) SC 83 Scottish Supreme Court
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 1009
INVESTMENTS PVT. LTD. AND ORS.

administration defined in the statute, which provide some A
guarantee of commercial probity and efficiency. If
shareholders find that these conditions or some of them are
deliberately and consistently violated and set aside by the
action of a member and official of the company who wields
an overwhelming voting power, and if the result of that is
B
that, for the extrication of their rights as shareholders, they
are deprived of the ordinary facilities which compliance with
the Companies Acts would provide them with, then there does
arise, in my opinion, a situation in which it may be just and
equitable for the Court to wind up the company.”
16.45 If the above tests are applied, the case on hand will not fall C
anywhere near the just and equitable standard, for the simple reason
that it was the very same complaining minority whose representative
was not merely given a berth on the Board but was also projected as the
successor to the Office of Chairman.
16.46 In Ebrahimi v. Westbourne Galleries Ltd.8, decided by D
House of Lords, one of the Directors who was voted out of office by the
other two Directors (father-son duo) petitioned for an order under Section
210 of the English Companies Act, 1948. The very relief sought by the
ousted director was for a direction to the other two persons to purchase
his shares in the Company or to sell their shares to him on such terms as E
the Court should think fit. Alternatively, he prayed for winding up. The
Court of the first instance held that a case for winding up had been
made out, as the majority was guilty of abuse of power and a breach of
good faith which the partners owed to each other not to exclude one of
them from all participation in the business. The court of Appeal reversed
it by applying the tests of (i) bonafide exercise of power in the interest F
of the company; and (ii) whether a reasonable man could think that the
removal was in the interest of the Company. While reversing the decision
of the Court of Appeal, the House of Lords held, that “the formula
‘bonafide interest of the company’ should not become little more
than an alibi for a refusal to consider the merits of the case.” Holding G
that, “equity always does enable the Court to subject the exercise of
legal rights to equitable considerations namely considerations that
is of a personal character”, the House of Lords added some caution in
the following words:-
8
[1972] 2 WLR 1289
H
1010 SUPREME COURT REPORTS [2021] 12 S.C.R.

A “The superimposition of equitable considerations requires
something more, which typically may include one, or probably
more, of the following elements: (i) an association formed or
continued on the basis of a personal relationship, involving
mutual confidence – this element will often be found where a
pre-existing partnership has been converted into a limited
B
company; (ii) an agreement, or understanding, that all, or
some (for there may be “sleeping” members), of the
shareholders shall participate in the conduct of the business;
(iii) restriction upon the transfer of the members’ interest in
the company – so that if confidence is lost, or one member is
C removed from management, he cannot take out his stake and
go elsewhere.”
16.47 But it must be remembered that the origin of just and
equitable clause is to be traced to the Law of Partnership which has
developed, according to the House of Lords, “the conceptions of probity,
D good faith and mutual confidence”. Having said that, Ebrahimi pointed
out that the reference to quasi partnerships or “in-substance partnerships”
is also confusing for the reason that though the parties may have been
partners in their ‘Purvashrama’, they had become co-members of a
company accepting new obligations in law. Therefore, “a company,
however small, however domestic, is a company and not a
E partnership or even a quasi partnership”.
16.48 That, “for superimposing an equitable fetter on the exercise
of the rights conferred by the Articles of Association, there must be
something in the history of the company or the relationship between the
shareholders”, is fairly well settled9.
F
16.49 In Lau v. Chu10, the House of Lords indicated, “that a just
and equitable winding up may be ordered where the company’s members
have fallen out in two related but distinct situations, which may or may
not overlap”. The first of these is labelled as, “functional dead lock”,
where the inability of members to cooperate in the management of the
G company’s affairs leads to an inability of the company to function at
Board or shareholder level. The House of Lords pointed out that
functional dead lock of a paralysing kind was first clearly recognised as

9
Re Saul D. Harrison and Sons Plc. 1994 BCC 475
10
H [2020] 1 WLR 4656
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 1011
INVESTMENTS PVT. LTD. AND ORS.

a ground for just and equitable winding up In Re Sailing Ship Kentmere A
Co.11. The second of these is where a company is a corporate quasi
partnership and an irretrievable breakdown in trust and confidence
between the participating members has taken place. In the first type of
these cases, where there is a complete functional dead lock, winding up
may be ordered regardless whether the company is a quasi partnership
B
or not. But in the second type of cases, a breakdown of trust and
confidence is enough even if there is not a complete functional dead
lock.
16.50 Therefore, for invoking the just and equitable standard, the
underlying principle is that the Court should be satisfied either that the
partners cannot carry on together or that one of them cannot certainly C
carry on with the other12.
16.51 In the case in hand there was never and there could never
have been a relationship in the nature of quasi partnership between the
Tata Group and S.P. Group. S.P. Group boarded the train half-way through
the journey of Tata Sons. Functional dead lock is not even pleaded nor D
proved.
16.52 Coming to the Indian cases, this court held in Rajahmundry
Electric Supply Corpn. Ltd. v. Nageshwara Rao 13 that for the
invocation of just and equitable clause, there must be a justifiable lack of
confidence on the conduct of the directors, as held. A mere lack of
confidence between the majority shareholders and minority shareholders E
would not be sufficient, as pointed out in S.P. Jain v. Kalinga Tubes
Ltd. 14
16.53 It was contended repeatedly that lack of probity in the
conduct of the directors is a sufficient cause to invoke just and equitable
clause. Drawing our attention to the landmark decision in Needle F
Industries (India) Ltd. and Ors. v. Needle Industries Newey (India)
Ltd. and ors.15, it was contended that even the profitability of the company
has no bearing if just and equitable standard is fulfilled and that the test
is not whether an act is lawful or not but whether it is oppressive or not.

11
G
[1897] WN 58
12
The advantage that the English courts have is that irretrievable breakdown of relation-
ship is recognised as a ground for seperation both in a matrimonial relationship and in
commercial relationship, while it is not so in India.
13
(1955) 2 SCR 1066
14
AIR 1965 SC 1535
15
(1981) 3 SCC 333 H
1012 SUPREME COURT REPORTS [2021] 12 S.C.R.

A 16.54 But all these arguments lose sight of the nature of the
company that Tata Sons is. As we have indicated elsewhere, Tata
Sons is a principal investment holding Company, of which the majority
shareholding is with philanthropic Trusts. The majority shareholders are
not individuals or corporate entities having deep pockets into which the
dividends find their way if the Company does well and declares dividends.
B
The dividends that the Trusts get are to find their way eventually to the
fulfilment of charitable purposes. Therefore, NCLAT should have raised
the most fundamental question whether it would be equitable to wind up
the Company and thereby starve to death those charitable Trusts,
especially on the basis of un-charitable allegations of oppressive and
C prejudicial conduct. Therefore, the finding of NCLAT that the facts
otherwise justify the winding up of the Company under the just and
equitable clause, is completely flawed.
17. Question of Law No.2
17.1 The second question of law arising for consideration is as to
D whether the reliefs granted and directions issued by NCLAT including
the reinstatement of CPM into the Board of Tata Sons and other Tata
Companies are in consonance with (i) the pleadings made, (ii) the reliefs
sought and (iii) the powers available under Sub-Section (2) of Section
242.
E 17.2 As we have indicated in Para 3.4 above, the complainant
companies originally sought a set of 21 reliefs listed in para 153 (A) to
(U). Subsequently, the complainant companies sought the addition of
two more prayers, through an application for amendment filed on
10.2.2017. The additional reliefs sought to be included were for: (i)
F reinstatement of a representative of the complainant companies on the
Board of Tata Sons and (ii) Amendment of the Articles of Association
so as to provide for proportional representation on the Board.
17.3 Thereafter the complainant companies sought a few more
prayers through an application for amendment dated 31.10.2017.
However, by a Memo dated 12.01.2018 the complainant companies gave
G
up certain prayers, sought a modification of some other prayers and
recorded that they were not pressing certain reliefs. At the cost of
repetition, we have to present in a tabular form, the reliefs originally
sought and the metamorphosis that they underwent through applications
for amendment or Memo. It is as follows:
H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 1013
INVESTMENTS PVT. LTD. AND ORS.

Reliefs as originally sought Reliefs that are added, given
A
in t he main Compa ny up or restricted through
Peititon Additional affidavit dated 31-
10-2017, Application for
amendment dated 31-10-
2017 and Memo dat ed
12.1.2018 B
(A) Supersede the existing Under Affidavit (31-10-2017)
Board of Directors of Respondent conversion of Tata Sons from being
No. 1 and ap p oint an a Public Limited Company into a
administrator to look after the Private Limited Company is bad
day-to-day affairs of Respondent
No. 1 with such powers as may Unde r Ap plic ation (31-1 0- C
be ne ces sary to tak e suc h 2017)
decisions and actions, in the (M-1): Set aside the resolution
facts and circumstances of the passed by the shareholders of
present case, till such time as a respondent No.1 on September
new Board of Directo rs of 21, 2017 insofar as it seeks to
Respondent No. 1 is constituted; am end the Articles of D
(B) I n the altern ative to Associations and Memorandum
prayer (A) above, appoint a retired of Association of Respondent
Supreme Court Judge as the No.1 f or conve rsion of
non-executive Chairman of the Respondent No.1 into a private
Board of Directors of Respondent company.
No. 1 and appoint such number (M-2): Strike off/Delete Article
of new independent directors of E
75 as the same is a tool in the
pro fes sional com pe tence, hand s of the ma jor ity
reputation and standing to the share holder s to opp re ss the
Board of Directors of Respondent minority; and;
No. 1 such that these newly
appointed directors constitute (M-3): Pending the final hearing
the m ajority of the Board of disposal of the Company Petition,
Directors of Respondent No. 1; the effect and operation of the
F
resolution dated September 21,
(C) restrain the so-called 2017 be stayed.
“Inter im Ch air ma n” i.e
Respondent No. 2 from attending (F-1): Direct Respondent No.1
any meeting of the Board of and/or Respondent No. 2 to 10
Directors of Respondent No. 1, and 1 2 to 2 2 to re ins tate a
or sub-committee thereof and/or representative of the Petitioners G
inter fer ing in the af fairs of on the Board of Respondent No.1
Respondent No. 1;
(G-1): Direct that the Articles of
(D) restrain Respondent No. Association of Respondent No.1
14 from interfering in the affairs be amend ed to p rovid e fo r
of Respondent No. 1; proportionate representation of
H
1014 SUPREME COURT REPORTS [2021] 12 S.C.R.

A (E) direct Respondent No. 1 shareholders on the Board of
not to issue any securities which Directors of Respondent No.1
results in dilution of the present
paid-up equity capital held by the Under Memo (12-01-2018)
Petitioners in Respondent No. 1; Praye r M , which so ught the
striking of Articles 86, 104(B), 118,
(F) direct Respondent No. 1
121 and 121A, and striking of a
B and/or Respondent Nos. 2 to 10
portion of Article 124, is restricted
and 12 to 22 not to remove
as under:
Respondent No. 11 as a director
from the Board of Respondent i. The ne cessity of an
No.1; aff irm ative v ote o f the
(G) restrain Respondent No. majority o f d ir ectors
1 and/or Respondent Nos. 2 to 10 nominated by the Trusts,
C which are m ajor ity of
and 12 to 22 from making any
chang e s to the Artic les of shareholders, be deleted;
Association of Respondent No. 1 ii. The Petitioners be entitled
unless such changes have been to p ro portionate
made w ith the le av e of this representation on Board of
Hon’ble Tribunal; Directors of Respondent
D No.1;
(H) order and investigation
into the role of the Trustees of iii. The Petitioners be entitled
the Tata Trusts in the operations to rep resentation on all
of Respondent No. 1 and/or Tata committees formed by the
Group companies as also in the Board of D irectors of
function ing o f the Boa rd of Respondent No.1; and
E Directors of Respondent No. 1
and /or Tata Group companies, iv The Articles of Association
and prohibit the Trustees from be amended accordingly.
inter fer ing in the af fairs of Prayers A, B and C were not
Respondent No. 1 and/or Tata pressed.
Group companies;
Praye rs F, Q and R, being
F (I ) appoint an independent infructuous were not pressed
auditor to conduct a forensic audit
and independent investigation
into transactions and dealings of
Respondent No. 1 with particular
regard to:
(i) all transactions between
G Mr. C. Sivasankaran and his
business entities on the one
hand, and the Respondent No.
1 and various Tata Group
companies under the control
of Respondent No. 1 or of
H which Respondent No. 1 is the
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 1015
INVESTMENTS PVT. LTD. AND ORS.

promoter on the other hand, to A
determine and crystallize the
breach of trust, violation of
fiduciary duties and failure to
discharge the duty of care, and
fix accountability therefor; and
B
(ii) all transactions involving
Mr. M ehli Mis try a nd his
ass ociated entities with
Respondent No. 1 and/or Tata
Group companies whereby any
unjust enrichment has been C
generated in favour of any
these parties;
and submit a report to this
Hon’ble Tribunal such that
this Hon’ble Tribunal can pass
such further orders as may be
necessary so as to recover from
D
concerned persons the loss
that has been caused inter alia
to the Petitioners and such
finding s of the aud it and
inves tig ation s hou ld b e
referred by the Hon’ble Tribunal E
to the Ser io us Fr au d
Inves tig ation Offi ce of the
Ministry of Corporate Affairs,
Government of India;
(J) App oint an insp ector
(und er app licab le la w) to
F
investigate into the breach of the
SEBI ( Prohi bition of I nsider
Trading) Regulations, 2015, with
particular regard to the breach by
Resp ond e nt No . 2 and
Resp ond e nt N o. 14 , of the
obligation not to procure, demand G
or acquire unp ub lished price
sensitive information and submit
a report to this Hon’ble Tribunal
such that this Hon’ble Tribunal
can pass such further orders as
may be necessary and/or refer the
H
1016 SUPREME COURT REPORTS [2021] 12 S.C.R.

A findings of such investigation to
the Serious Fraud Investigation
Office of the Ministry of Corporate
Affairs, Government of India.
(K) direct Respondent No.2 to
pay Respondent No. 1 the amount
B of unjust enrichment that has
accrued to Respondent No. 2 on
account of surrender of the sub-
tenancy of the Bakhtawar flat,
along with interest at such rate
as this Hon’ble Tribunal may deem
fit, from the date on which the
C Respondent No. 2 was unjustly
enriched;
(L) appoint a forensic auditor
to re-investigate the transactions
executed by AirAsia India with
entities in India and Singapore to
D ascertain whether any proceeds
have been diverted to any secret
bank account of Mr. Venkatraman
and to submit a report to this
Hon’ble Tribunal; such that this
Hon’ble Tribunal can pass such
furth er or d er s as m ay b e
E necessary so as to recover from
Mr. Venkatraman the loss that has
been caused inter alia to the
Petitioners; and such findings of
the audit should be referred by the
Hon’ble Tribunal to the Serious
Fraud Investigation Office of the
F
Ministry of Corporate Affairs,
Government of India;
(M) strik e of Artic les
numbered 86, 104(B), 118, 121 and
121A in their entirety and in so
far as Article 124 of the Articles of
G Association of Respondent No. 1
is concerned, the following portion
of the s aid Arti cle, which is
offend ing and / or re pu g nant,
sho uld b e del eted: “… Any
committee empowered to decide
on matters which otherwise the
H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 1017
INVESTMENTS PVT. LTD. AND ORS.

Board is authorised to decide shall A
have as its member at least one
director appointment pursuant to
Articl e 1 04 B. The Prov isions
relating to quorum and the manner
in which matters will be decided
contained I Articles 115 and 121
B
respectively shall apply mutatis
mutandis to the proceedings of the
committee. “ from the Articles of
Association of Respondent No. 1;
and substitute these articles with
such articles as the nature and
circumstances of this case may C
require;
(N) direct the Respondents
(excluding Respondent Nos. 4, 10
&11) to bring back into Respondent
No. 1 , the fund s u sed by
Respondent No. 1 for acquiring
D
shares of Tata Motors;
(O) restrain Respondent No.
1 from initiating any new line of
business or acquiring any new
bus ine ss in e xis ti ng lines of
business without leave of this
Hon’ble Tribunal and that too only E
after the matter is discussed and
decided upon by the Board of
Directors of Respondent No. 1
without applying Article 121 of the
Articles of Association;
(P) restrain the trustees of F
the Trusts from interfering in the
affairs of Respondent No. 1 and
in the various companies that
form part of the Tata Group;
(Q) res tr ain the ex isting
Selection Committee from acting G
any further and/or discharging any
functions and a new Selection
Committee be appointed.
(R) direct that no candidate
selec te d by the Selectio n
Committee constituted pursuant H
1018 SUPREME COURT REPORTS [2021] 12 S.C.R.

A to Article 118 of the Articles of
Association of Respondent No. 1
to be appointed without leave of
this Hon’ble Tribunal;
(S) direct Respondent No. 1
not to demand and/or procure any
B unp ub lished p r ic e sensitive
infor m ation fr om any lis ted
operating companies within the
Tata Group;
(T) g rant inte rim an d ad -
interim reliefs in terms of Prayers
C (A) to (S) above; and
(U) pass such further orders
that this Hon’ble Tribunal may, in
the i nte res t of ju stice, d eem
necessary for bringing an end to
the acts o f opp r essio n and
mismanagement in the running of
D
Respondent No. 1.

17.4 Therefore, after all the confusion created by affidavits,
application for amendment and the memo mentioned above, the reliefs
that remained to be considered by NCLT were as follows:

E (1) restrain Respondent No. 14 (N.A. Soonawala) from
interfering in the affairs of Respondent No. 1; (Relief
clause D)
(2) direct Respondent No. 1 (Tata Sons) not to issue
any securities which will result in dilution of the paid-
F up equity capital; (Relief clause E)
(3) restrain the Respondents from making any changes
to the Articles of Association of Respondent No. 1
without the leave of the Tribunal; (Relief clause G)
(4) order an investigation into the role of the Trustees
G of the Tata Trusts in the operations of Respondent
No. 1, the Tata Group companies as also in the
functioning of the Board of Directors of Respondent
No. 1 and Tata Group companies, and prohibit the
Trustees from interfering in the affairs of Respondent
No. 1 and Tata Group companies; (Relief clause H)
H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 1019
INVESTMENTS PVT. LTD. AND ORS.

(5) appoint an independent auditor to conduct a forensic A
audit and independent investigation into transactions
and dealings of Respondent No. 1 with particular
regard to:
(i) Mr. C. Sivasankaran and his
business entities; and B
(ii) Mr. Mehli Mistry and his associated
entities;
and submit a report to this Hon’ble Tribunal and
investigation should be referred by the Hon’ble
Tribunal to the Serious Fraud Investigation Office C
of the Ministry of Corporate Affairs, Government
of India; (Relief clause I)
(6) Appoint an inspector (under applicable law) to
investigate into the breach of the SEBI (Prohibition
of Insider Trading) Regulations, 2015. (Relief clause D
J)
(7) direct Respondent No.2 to pay Respondent No. 1
the amount of unjust enrichment that has accrued
to Respondent No. 2 on account of surrender of the
sub-tenancy of the Bakhtawar flat; (Relief clause E
K)
(8) appoint a forensic auditor to re-investigate the
transactions executed by Air Asia India with entities
in India and Singapore; (Relief clause L)
F
(9) Read down and amend Articles 86, 104B, 118, 121
and 121A as well as Article 124 so that:
i. The necessity of an affirmative vote
of the majority of directors nominated
by the Trusts, which are majority of
shareholders, be deleted; G

ii. The Petitioners be entitled to
proportionate representation on Board
of Directors of Respondent No.1;

H
1020 SUPREME COURT REPORTS [2021] 12 S.C.R.

A iii. The Petitioners be entitled to
representation on all committees
formed by the Board of Directors of
Respondent No.1; ((Relief clause M
restricted through memo dated 12-01-
2018)
B
(10) Set aside the resolution passed on 31-09-2017 for
amendment of the Articles and declare the conversion
of Tata Sons into a private company as illegal (Additional
Relief sought to be included as clause M-1 through
Application for amendment)
C
(11) To delete Article 75 (Additional Relief sought to be
included as clause M-2 through Application for
amendment)
(12) To reinstate a representative of the petitioners on the
D Board (Additional Relief sought to be included as clause
F-1 through Application for amendment)
17.5 Out of the aforesaid reliefs that came to stay till the end,
NCLAT granted only certain reliefs, which in simple terms, were as
follows:-
E (i) Setting aside the removal of CPM and directing
his reinstatement both as Executive Chairman
of Tata Sons and as Director of other Tata
Companies for the rest of the tenure.
(ii) Restraining RNT and the nominees of Tata
F Trust from taking any advance decision.
(iii) Restraining Tata Sons from exercising its power
under Article 75 against the complainant
companies and other minority members, except
in exceptional circumstances and in the interest
G of the Company and that too after recording
reasons and informing the affected parties.
(iv) Setting aside the decision of the Registrar of
Companies recognising Tata Sons conversion
into a Private Company.
H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 1021
INVESTMENTS PVT. LTD. AND ORS.

17.6 Thus NCLAT granted to the complainant companies (and A
indirectly to CPM) four reliefs namely:
(i) reinstatement of CPM;
(ii) declaring Tata Sons as a Public Limited
Company;
B
(iii) restraining the nominee Directors and RNT
from taking any decision in advance and
(iv) restraining the invocation of Article 75 except
in exceptional circumstances.
We shall now see whether NCLAT could have granted any of C
these reliefs.
Reinstatement of CPM
17.7 Removal and reinstatement are two different things. We have
dealt with the issue of removal of CPM, while answering question of
D
law No.1, in the context of whether it was part of a scheme of oppressive
and prejudicial conduct. Now we shall deal with the issue of reinstatement
in the context of the contours of section 242(2) and the nature of the
orders that could be passed.
17.8 As we have seen already, the original motive of the
complainant companies, was to restrain Tata Sons from removing CPM E
as Director. Subsequently, there was a climb down and the complainant
companies sought what they termed as “reinstatement” of a
representative of the complainant companies. Thereafter, it was
modulated into a cry for proportionate representation on the Board.
17.9 In this background it was repeatedly argued both before the F
NCLAT and before this Court that the objective of the litigation was not
to have CPM reinstated, but only to set things right in the State of
Denmark (of which CPM himself was the Premier for 4 years). But
interestingly, NCLAT understood what the complainant companies and
CPM actually wanted, though they attempted to camouflage their G
intentions with legal niceties. Therefore, despite there being no prayer
for reinstatement of CPM either as a Director or as an Executive
Chairman of Tata Sons, NCLAT directed the restoration of CPM as
Executive Chairman of Tata Sons and as Director of Tata Companies
for the rest of the tenure.
H
1022 SUPREME COURT REPORTS [2021] 12 S.C.R.

A 17.10 While granting much more than what the complainant
companies and CPM themselves thought as legally feasible, NCLAT
failed to notice one important thing. The appointment of CPM as Executive
Deputy Chairman of Tata Sons, was to be for a period of 5 years from
01.04.2012 to 31.03.2017, subject to the approval of the shareholders. In
the Meeting of the shareholders held on 01.08.2012, the appointment of
B
CPM as Executive Deputy Chairman was approved and the General
Body left it to the Board to re-designate CPM as Chairman. Accordingly,
the Board re-designated CPM as Executive Chairman, with effect from
29.12.2012, by a resolution passed on 18.12.2012.
17.11 The judgment of the NCLAT was passed on 18.12.2019, by
C which time, a period of nearly 7 years had passed from the date of
CPM’s appointment as Executive Chairman. Therefore, we fail to
understand : (i) as to how NCLAT could have granted a relief not
apparently sought for (though wished for); and (ii) what NCLAT meant
by reinstatement “for the rest of the tenure”. That the question of
D reinstatement will not arise after the tenure of office had run its course,
is a settled position. In this regard, we may refer to the decisions in Raj
Kumar Dey vs. Tarapada Dey16 and Mohd. Gazi vs. State of Madhya
Pradesh17. While so, it is incomprehensible that the NCLAT directed
reinstatement, and that too, of a Director of a company, after the expiry
of his term of office. Needless to say that such a remedy would not
E have been granted even by a labour court/service Tribunal in matters
coming within their jurisdiction.
17.12 In fact NCLAT has gone to the extent of reinstating CPM
not only on the Board of Tata Sons, but also on the Board of Tata group
companies, without they being parties, without there being any complaint
F against those companies under section 241 and without there being any
prayer against them. These companies have followed the procedure
prescribed by Statute and the Articles and they have validly passed
resolutions for his removal. For instance, TCS granted an opportunity to
CPM and held a general meeting in which 93.11% of the shareholders,
G including public institutions who hold 57.46% of shares supported the
resolution. In any case CPM’s tenure itself was to come to an end on
16.06.2017 but NCLAT passed the impugned order reinstating him “for
the rest of the tenure”. In respect of other companies which had convened
16
(1987) 4 SCC 398
17
H (2000) 4 SCC 342
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 1023
INVESTMENTS PVT. LTD. AND ORS.

the EGM for considering the resolution for his removal, CPM submitted A
resignations. But now by virtue of the impugned order, CPM will have to
be reinstated even on the Board of companies from which he has resigned.
This is why even the complainant companies have found it extremely
difficult to support the order.
17.13 As an aside, we should record here, the words of gratitude B
(if any) expressed by CPM himself in the meeting of the Board of Tata
Sons on 18.12.2012, immediately after the resolution appointing him as
Executive Chairman was carried through unanimously. This is what CPM
said in the Board Meeting dated 18.12.2012:-
“Mr. Mistry responded by saying that – “the past one year C
has been a great learning experience under the direct
guidance of Mr. Ratan Tata. The TATA Group is founded on
strict values. We will face all the ups and down, whatever
may lie in our path. We are ready to face all the challenges
that will come our way. The Board recognises the stellar
contribution of Mr. Ratan Tata and wishes, to designate him D
Chairman Emeritus. We shall continue to seek his guidance
on significant matters.”
17.14 It is interesting to note that at the time of his appointment in
December 2012, what CPM saw and acknowledged, was a “great
learning experience he had under the direct guidance of RNT”, but E
at the time of departure in October 2016, what he saw was only a conduct
for over 10 years, that was oppressive and prejudicial to the interests of
the company and of the minority. NCLAT failed to take note of this,
while granting reliefs neither sought for nor feasible in law.
17.15 NCLAT appears to have granted the relief of reinstatement F
gratis without any foundation in pleadings, without any prayer and without
any basis in law. By doing so, the NCLAT has forced upon the appellant
an Executive Chairman, who now is unable to support his own
reinstatement.
17.16 The NCLAT has found the dismissal to be illegal and not a G
nullity. In law, a dismissal even if found to be wrongful and malafide is
an effective dismissal and may give rise to a claim in damages. In Dr.
S.B. Dutt vs. University of Delhi18 this Court held: -

18
1959 SCR 1236
H
1024 SUPREME COURT REPORTS [2021] 12 S.C.R.

A “The award held that the appellant had been dismissed
wrongfully and malafide. Now, it is not consequential to such
a finding that the dismissal was of no effect, for a wrongful
and malafide dismissal is nonetheless an effective dismissal
though it may give rise to a claim in damages. The award, no
doubt, also said that the dismissal of the appellant was
B
ultravires but as will be seen later, it did not thereby hold the
act of dismissal to be a nullity and, therefore, of no effect.”
17.17 It is significant that Sections 241 and 242 of the Companies
Act, 2013 do not specifically confer the power of reinstatement, nor we
would add that there is any scope for holding that such a power to reinstate
C can be implied or inferred from any of the powers specifically conferred.
17.18 The following words at the end of sub-section (1) of 242
“the Tribunal may, with a view to bringing to an end the matters complained
of, make such order as it thinks fit” cannot be interpreted as conferring
on the Tribunal any implied power of directing reinstatement of a director
D or other officer of the company who has been removed from such office.
These words can only be interpreted to mean as conferring the power to
make such order as the Tribunal thinks fit, where the power to make
such an order is not specifically conferred but is found necessary to
remove any doubts and give effect to an order for which the power is
E specifically conferred. For instance, sub-section (2) of Section 242 confers
the power to make an order directing several actions. The words by
which sub-section (1) of Section 242 ends, supra can be held to mean
the power to make such orders to bring an end, matters for which
directions are given under sub-section (2) of Section 242.

F 17.19 The architecture of Sections 241 and 242 does not permit
the Tribunal to read into the Sections, a power to make an order (for
reinstatement) which is barred by law vide Section 14 of the Specific
Relief Act, 1963 with or without the amendment in 2018. Tribunal cannot
make an order enforcing a contract which is dependent on personal
qualifications such as those mentioned in Section 149(6) of the Companies
G Act, 2013. Moreover, it has been held in the case of Vaish Degree
College (supra) that the general rule is that a contract of personal services
is not specifically enforceable unless a person who is removed from
service is (a) a public servant who has been dismissed from service in
contravention of provisions of Article 311 of the Constitution of India;
H (b) dismissed under Industrial Law seeking reinstatement by Labour or
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 1025
INVESTMENTS PVT. LTD. AND ORS.

Industrial Tribunal; and (c) terminated in breach of a mandatory obligation A
imposed by statute by a statutory body. The Court observed:-
“17. On a consideration of the authorities mentioned above,
it is, therefore, clear that a contract of personal service cannot
ordinarily be specifically enforced and a court normally would
not give a declaration that the contract subsists and the B
employee, even after having been removed from service can
be deemed to be in service against the will and consent of the
employer. This rule, however, is subject to three well recognised
exceptions — (i) where a public servant is sought to be
removed from service in contravention of the provisions of
Article 311 of the Constitution of India; (ii) where a worker is
C
sought to be reinstated on being dismissed under the Industrial
Law; and (iii) where a statutory body acts in breach or
violation of the mandatory provisions of the statute.”
17.20 The position in law that a contract of personal services
cannot be enforced by Court is a long standing principle of law and
cannot be displaced by the existence of any implied power, though none D
is shown in the present case. This is described as the Principle of
Legality19:-
“As statutes are not enacted in a vacuum, it is assumed that
long standing principles of constitutional law and
administrative law are not displaced by use of merely general
E
words. This is styled as the principle of legality. In the words
of SIR JOHN ROMILLY: “The general words of the Act are
not to be so construed as to alter the previous policy of the
law, unless no sense or meaning can be applied to those words
consistently with the intention of preserving the previous policy
untouched.” Since every new law involves some change the F
above statement of LORD ROMILLY must be applied with
caution and should be normally confined to cases where ‘the
abrogation of a long standing rule of law is in question’.
There are many presumptions which an interpreter is entitled
to raise which are not readily displaced merely by use of
general words, e.g., an intention to bind the Crown or an G
intention to exclude the supervisory jurisdiction of superior
courts will not be inferred merely by use of general words. It
is an application of the same principle that unless there be
clearest provision to the contrary, Parliament is presumed not
19
Principles of Statutory Interpretation 14 th Edition by Justice G.P. Singh at Page 541
H
1026 SUPREME COURT REPORTS [2021] 12 S.C.R.

A to legislate contrary to rule of law which enforces ‘minimum
standard of fairness both substantive and procedural’. Thus
a statutory power though conferred in wide terms has certain
implied limitations; provisions excluding challenge to an order
have no application when the order is a nullity and a provision
excluding an appeal against an order of a criminal court does
B not bar an appeal against an order which the court had no
power to make. For the same reason, unless the statute
expressly or by necessary implication provides otherwise an
administrative decision does not take effect before it is
communicated to the person concerned.”

C 17.21 It is interesting to note that one of the grounds of challenge
to the order of NCLAT, raised by SP group in their appeal C.A.No. 1802
of 2020 is that the Tribunal ought not to have granted the relief of
reinstatement. In paragraph 4 of the Memorandum of Grounds of Civil
Appeal C.A. No. 1802 of 2020, the complainant companies (SP group)
have given a tabulation of the reliefs granted by the Tribunal and the
D reliefs that the Tribunal ought to have given instead. Para 4 of the memo
of grounds of appeal along with a portion of the Table there under reads
as follows:
“4. Having correctly arrived at these findings, it is submitted
that the Ld. NCLAT ought to have granted the reliefs sought.
For ease of reference, the reliefs granted by the Ld. NCLAT
E under the various heads of oppression as against certain key
reliefs sought by the Appellants, which the Ld. NCLAT has
not granted and which the appellants are aggrieved by, are
summarized in the tabular form below:-

F

G

H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 1027
INVESTMENTS PVT. LTD. AND ORS.

17.22 Thus the relief of reinstatement granted by the Tribunal, A
was too big a pill even for the complainant companies (and perhaps
CPM) to swallow.
Relief relating to Article 75
17.23 The larger questions revolving around the attack to Article
75, particularly the question whether the very presence of such an article B
could be construed as oppressive and prejudicial to some members, will
be dealt with in the next chapter concerning question of law No.3. But
we shall consider here, the limited question whether the Tribunal could
have granted a relief, that has the effect of sending Article 75 into
comatose. C
17.24 Actually, the relief in respect of Article 75, technically
speaking, could not have been granted by NCLAT. The reason is that in
the Company Petition as it was originally filed, there was no prayer
challenging Article 75. It was only through an application for amendment
dated 31.10.2017 that the complainant companies sought to incorporate D
a prayer as Clause M-2 for striking off/ deleting Article 75 on the ground
that it is a tool in the hands of majority shareholders to oppress the
minority. In the said application for amendment filed on 31.10.2017, the
complainant companies sought to include five additional prayers, three
of them as Clauses M-1, M-2 and M-3, one of them as Clause F-1 and
the last as Clause G-1. The prayer for striking off/deleting Article 75 E
was sought to be included in Clause M-2 of Para 153 of the main petition.
17.25 But what happened thereafter is quite interesting. Through
a Memo dated 12.1.2018, the complainant companies sought to “not
press” the prayers in Clauses (A), (B), (C), (F), (Q) and (R). In addition
they sought to restrict the prayer in Clause M, as we have indicated in F
the table above. There was no indication in the Memo filed on 12.1.2018
as to whether the prayers included as M-1, M-2 and M-3 inserted under
the application for Amendment dated 31.10.2017 are to be retained, despite
their prayer for restricting the claim made in Clause M.
17.26 It is true that the rigors of CPC and the Evidence Act are G
not be applicable to Tribunals/Quasi-Judicial Authorities. These rigours
do not even apply to Courts dealing with constitutional matters (refer
the Explanation under Section 141 CPC).
17.27 Such a concession was incorporated in all Statutes by which
quasi judicial Tribunals are created, solely with a view to avoid delay in H
1028 SUPREME COURT REPORTS [2021] 12 S.C.R.

A the dispensation of justice. But instead of eliminating delay, it has
eliminated discipline in pleadings and procedure.
17.28 If it is a Civil Court, the Memo dated 12.1.2018 will be
taken to have superseded whatever had been done till then. In such a
case, there would have been complete lack of clarity whether the prayer
B included in Clause M-2 survived despite the Memo restricting prayer
made in the Clause-M.
17.29 Even if we take it that the memo dated 12-01-2018 restricted
the prayer in clause M alone and not clause M-2, NCLAT could not
have muted Article 75 by holding that it cannot be invoked except in
C exceptional circumstances. This is for the reason that after all, Article
75 just provides for an exit option to the unwilling partner. Even
traditionally, the law in England and in India is to pave the way for a safe
and honourable exit, when 2 persons in commercial relationship cannot
co-exist.

D 17.30 In this context, it will be useful to take note of the nature of
the directions that could be issued by a Tribunal, in matters of this nature,
as indicated in Clauses (a) to (m) of Sub-section (2) of Section 242.
Sub-section (2) of Section 242 has been extracted by us elsewhere and
it shows that what is listed in Clauses (a), (b), (c), (e), (f) and (g) of Sub-
section (2) of Section 242 are just the same as or similar to Clauses (a)
E to (f) of Section 402 of the 1956 Act. Clauses (d), (h), (i), (j), (k) and (l)
of Sub-section (2) of Section 242 are new additions under the 2013 Act.
17.31 Fundamentally, the object for the achievement of which,
the Tribunal is entitled to pass an Order under Section 242(1) of the
2013 Act, remains just the same, as in the 1956 Act. The words “the
F Tribunal may, with a view to bringing to an end the matters
complained of, make such order as it thinks fit”, found in the last
limb of Sub-section (2) of Section 397 of the 1956 Act, is also repeated
in the last limb of Sub-section (1) of Section 242 of the 2013 Act. These
words also found a place in the last limb of Sub-section (4) of Section
G 153C of the 1913 Act.
17.32 Even Section 210 of the English Companies Act of 1948
used the very same words namely “the Court may, with a view to
bringing to an end the matters complained of, make such order as it
thinks fit”. Though the English Law made a paradigm shift from
‘oppressive conduct’ to ‘unfairly prejudicial conduct’ under the Companies
H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 1029
INVESTMENTS PVT. LTD. AND ORS.

Act, 1985, the object to be kept in mind by the Court while passing an A
order under Section 461 of the English Companies Act, 1985 continued
to be almost similar. Section 461(1) enabled the Court to make “such
order as it thinks fit for giving relief in respect of the matters
complained of”. Section 996 of the English Companies Act, 2006
retained the very same wordings.
B
17.33 Therefore, despite the law relating to oppression and
mismanagement undergoing several changes, the object that a Tribunal
should keep in mind while passing an order in an application complaining
of oppression and mismanagement, has remained the same for decades.
This object is that the Tribunal, by its order, should bring to an end the
matters complained of. C

17.34 In other words the purpose of an order both under the English
Law and under the Indian Law, irrespective of whether the regime is
one of “oppressive conduct” or “unfairly prejudicial conduct” or a
mere “prejudicial conduct”, is to bring to an end the matters complained
of by providing a solution. The object cannot be to provide a remedy D
worse than the disease. The object should be to put an end to the matters
complained of and not to put an end to the company itself, forsaking the
interests of other stakeholders. It is relevant to point out that once upon
a time, the provisions for relief against oppression and mismanagement
were construed as weapons in the armoury of the shareholders, which E
when brandished in terrorem, were more potent than when actually used
to strike with. While such a position is certainly not desirable, they cannot
today be taken to the other extreme where the tail can wag the dog.
17.35 The Tribunal should always keep in mind the purpose for
which remedies are made available under these provisions, before granting F
relief or issuing directions. It is on the touchstone of the objective behind
these provisions that the correctness of the four reliefs granted by the
Tribunal should be tested. If so done, it will be clear that NCLAT could
not have granted the reliefs of (i) reinstatement of CPM (ii) restriction
on the right to invoke Article 75 (iii) restraining RNT and the Nominee
Directors from taking decisions in advance and (iv) setting aside the G
conversion of Tata Sons into a private company.
18. Question 3
18.1 The third question of law to be considered is as to whether
NCLAT could have, in law, muted the power of the company under
H
1030 SUPREME COURT REPORTS [2021] 12 S.C.R.

A Article 75 of the Articles of Association, to demand any member to
transfer his shares, by injuncting the company from exercising the rights
under the Article, even while refusing to set aside the Article.
18.2 Article 75 of the Articles of Association reads as follows:-
“ 75. Company’s Power of Transfer
B
The Company may at any time by Special Resolution resolve
that any holder of Ordinary shares do transfer his Ordinary
shares. Such member would thereupon be deemed to have
served the Company with a sale-notice in respect of his
Ordinary shares in accordance with Article 58 hereof, and
C all the ancillary and consequential provisions of these Articles
shall apply with respect to the completion of the sale of the
said shares. Notice in writing of such resolution shall be given
to the member affected thereby. For the purpose of this Article
any person entitled to transfer an Ordinary share under Article
D 69 hereof shall be deemed the holder of such share.”
18.3 At the outset it should be pointed out that the complainant
companies did not make a grievance out of Article 75 on the ground that
it had been misused in the past and that such misuse tantamount to
conduct oppressive or prejudicial to the interests of some of the members.
E The sine qua non for invoking Section 241 is that the affairs of the
Company should have been conducted or are being conducted in a
manner oppressive or prejudicial to some of the members. No single
instance even of invocation of Article 75, leave alone misuse, is averred
in the main company petition or in the application for amendment.
Therefore, NCLAT could not have and should not have made Article 75
F completely ineffective by passing an order of restraint.
18.4 As a matter of fact, NCLAT has agreed, on first principles,
that it has no jurisdiction to declare any of the Articles of Association
illegal. After having set a benchmark correctly, NCLAT neutralised Article
75 merely on the basis of likelihood of misuse. Section 241(1)(a) provides
G for a remedy, only in respect of past and present conduct or past and
present continuous conduct. NCLAT has stretched Section 241(1)(a) to
cover the likelihood of a future bad conduct, which is impermissible in
law.
18.5 That Articles of Association of a company constitute a contract
H among shareholders, is the bedrock of Company Law. In fact, Article 75
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 1031
INVESTMENTS PVT. LTD. AND ORS.

was not an invention of the recent origin in Tata Sons. It has been there A
for nearly a century in one form or the other. As we have pointed out
elsewhere, the Company was incorporated in the year 1917 and S.P.
Group acquired shares nearly after 50 years in the year 1965. Even at
that time Article 75 was in existence in a different form. After 1965,
Article 75 underwent several rounds of amendments, to which the S.P.
B
Group, CPM’s father and CPM were parties. CPM himself was a party
to an amendment made to Article 75 on 13.09.2000. The Article in its
present form was made only on 13.09.2000 and the amendment was
unanimously carried through in the presence of and with the consent of
CPM.
18.6 A person who willingly became a shareholder and thereby C
subscribed to the Articles of Association and who was a willing and
consenting party to the amendments carried out to those Articles, cannot
later on turn around and challenge those Articles. The same would
tantamount to requesting the Court to rewrite a contract to which he
became a party with eyes wide open. D
18.7 It is not as though CPM or his father who was also a Director
for nearly 25 years, were not aware of or blind to the existence of Article
75. In fact, in the application for amendment filed by the complainant
companies on 31.10.2017, seeking to incorporate a challenge to Article
75, the complainant companies stated as follows:- E
“…In as much as no occasion had arisen in exercise of the
said Article, the petitioners i.e., Respondent Nos. 1 and 2 had
taken a conscious decision not to challenge the same.
Respondent Nos. 1 and 2 now foresee a real and immediate
threat of this Article being misused” F
The above pleading on the part of the complainant companies
was sufficient to throw the challenge to Article 75 out, as it did not
correlate to an actual conduct but the possibility of a future conduct.
Section 241 is not intended to discipline a Management in respect of a
possible future conduct. G
18.8 It is no doubt true that the Tribunal has the power under
Section 242 to set aside any amendment to the Articles that takes away
recognised proprietary rights of shareholders. But this is on the premise
that the bringing up of amendment itself was a conduct that was oppressive
or prejudicial.
H
1032 SUPREME COURT REPORTS [2021] 12 S.C.R.

A 18.9 It was contended that Article 75 was repugnant to Sections
235 and 236 of the Companies Act, 2013. We do not know how these
provisions would apply. Section 235 deals with a scheme or contract
involving transfer of shares in a Company called the transferor company,
to another called the transferee company. Similarly, Section 236 deals
B with a case where an acquirer acquired or a person acting in concert
with such acquirer becomes the registered holder of 90% of the equity
share capital of the Company, by virtue of amalgamation, share exchange,
conversion of securities etc. These provisions have no relevance to the
case on hand.
C
18.10 Even the contention revolving around Section 58(2) is wholly
unsustainable, as Section 58(2) deals with securities or other interests of
any member of a Public Company.
18.11 Therefore, the order of NCLAT tinkering with the power
D available under Article 75 of the Articles of Association is wholly
unsustainable. It is needless to point out that if the relief granted by
NCLAT itself is contrary to law, the prayer of the S.P. Group in their
Appeal C.A. No.1802 of 2020 asking for more, is nothing but a request
for aggravating the illegality.
E
19. Question 4
19.1 The fourth question of law to be considered is whether the
characterisation by the Tribunal, of the affirmative voting rights available
under Article 121 to the Directors nominated by the Trusts in terms of
F Article 104B, as oppressive and prejudicial, is justified especially after
the challenge to these Articles have been given up expressly and whether
the Tribunal could have granted a direction to RNT and the Nominee
directors virtually nullifying the effect of these Articles.

G 19.2 In the Company Petition as it was originally filed, the
complainant companies sought a prayer in Paragraph 153(M) to strike
down Articles 86, 104B, 118, 121 and 121A in entirety and to strike off
one portion of Article 124. These Articles (other than Article 118, which
is extracted elsewhere) read as follows:-
H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 1033
INVESTMENTS PVT. LTD. AND ORS.

“86. Quorum at General Meetings A
No quorum at a general meeting of the holders of the Ordinary
Shares of the Company shall be constituted unless the members
who are personally present are not less than five in number
including at least one authorised representative jointly
B
nominated by the Sir Dorabji Tata Trust and the Sir Ratan
Tata Trust so long as the Tata Trusts hold in aggregate at
least 40% of the paid-up Ordinary share capital, for the time
being, of the Company.
Explanation: the words “jointly nominated” used in this C
Article shall mean that the Sir Dorabji Tata Trust and the Sir
Ratan Tata Trust shall together nominate the authorized
representative. In the case of any difference, the decision of
the majority of the Trustees in the aggregate of the Sir Dorabji
Tata Trust and the Sir Ratan Tata Trust shall prevail.” D

104. General Provisions
A. Number of Directors
............
E
B. Nomination of Directors
So long as the Tata Trusts own and hold in the aggregate at
least 40% of the paid up Ordinary share capital, for the time
being, of the company, the Sir Dorabji Tata Trust and Sir
F
Ratan Tata Trust, acting jointly, shall have the right to
nominate one third of the prevailing number of Directors on
the Board and in like manner to remove any such person so
appointed and in place of the person so removed, appoint
another person as Director. G
The Directors so nominated by the Sir Dorabji Tata Trust and
Sir Ratan Tata Trust shall be appointed as Directors of the
Company.

H
1034 SUPREME COURT REPORTS [2021] 12 S.C.R.

A Explanation: the words ‘acting jointly’ used in this Article
shall mean that the Sir Dorabji Tata Trust and Sir Ratan Tata
Trust shall together nominate such Directos. In the case of
any difference, the decision of the majority of the Trustees in
the aggregate of the Sir Dorabji Tata Trust and Sir Ratan
B Tata Trust shall prevail.
121. Matters How Decided.
Matters before any meeting of the Board which are required
to be decided by a majority of the directors shall require *the
C affirmative vote of a majority of the Directors appointed
pursuant to Article 104B present at the meeting and in the
case of an equality of vote’s the Chairman shall have a casting
vote.”
**121A. The following matters shall be resolved upon by the
D Board of Directors:
(a) a five-year strategic plan that should include an assessment
of the proposed strategic path of the Company, business and
investment opportunities, proposed business and investment
initiatives and a comparative analysis of similarly situated
E
holding companies, and any alterations to such strategic Plan.
(b) an annual business plan structured to form part of the
strategic plan, that should include proposed investments,
incurring of debts, debt to equity ratio, debt service coverage
F ratio, projected cash flow of the Company and any alterations
to such annual business plan”
(c) The incurring or renewal of any debt or other borrowing
by the Company, which debt or borrowing causes the
cumulative outstanding debt of the Company, to exceed twice
G its net worth or which debt/borrowing is incurred/renewed at
a time when the cumulative outstanding debt of the Company
has already exceeded twice its net worth, if not already
approved as part of the annual business plan;

H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 1035
INVESTMENTS PVT. LTD. AND ORS.

(d) any proposed investment by the Company in securities, A
shares, stocks, bonds, debentures, financial instruments, of
any sort or immovable property of a value exceeding Rs. 100
Crores if not already approved as part of the annual business
plan;
B
(e) Any increase in the authorized, subscribed, issued or paid
up capital of the Company and any issue or allotment of
shares by the Company (whether on a rights basis or
otherwise) ;
(f) Any sale or pledge, mortgage or other encumbrance or C
creation of any right or interest by the Company of or over its
shareholding in any Tata Company or of or over any part
thereof, if not already approved as part of the annual business
plan;
(g) any matter affecting the shareholding of the Tata Trusts D
in the company or the rights conferred upon the Tata Trusts
by the Articles of the Company or the shareholding of the
Company in any Tata Company if not already approved as
part of the annual business plan;
E
(h) Exercise of the voting rights of the Company at the general
meetings of any Tata Company, including the appointment of
a representative of the Company under Section 113(1)(a) of
the Companies Act, 2013 in respect of a general meeting of
any Tata Company and, in any matter concerning the raising
F
of capital, incurring of debt and divesting or acquisition of
any undertaking or business of such Tata Company,
instructions to such representative on how to exercise the
Company’s voting rights.
Explanation: the term “Tata Company” used in this article G
shall, as the context requires, mean each or any of the 4
following companies”

H
1036 SUPREME COURT REPORTS [2021] 12 S.C.R.

A Tata Consultancy Services ltd., Tata Steel Limited, Tata Motors
Limited, Tata Capital Ltd., Tata Chemicals Ltd., Tata Power
Company Ltd., Tata Global Beverages Ltd., The Indian Hotels
Company Ltd., Trent Limited, Tata Teleservices (Maharashtra)
Limited, Tata Industries Limited, Tata Teleservices Limited, Tata
B Communications Limited, Titan Company Limited and Infiniti
Retail Limited and any other Company in which the Company
(or its subsidiaries) holds twenty percent or more of the paid
up share capital and whose name is notified in writing to the
Company by the Directors nominated under Article 104B”.
C 19.3 But through a Memo dated 12.01.2018, the complainant
companies restricted the relief prayed in Paragraph 153(M) to the extent
as follows:-
(i) the necessity of affirmative voting of the majority of the
Directors nominated by the Trusts, which are majority of
D shareholders be deleted;
(ii) the petitioners be entitled to proportionate representation
on the Board of Directors of Respondent No.1;
(iii) the petitioners be entitled to a representation on all
committees formed by the Board of Directors of Respondent No.1;
E
and
(iv) the Articles of Association be amended accordingly.
19.4 Therefore, what was actually sought by the complainant
companies was the deletion of the Article that necessitated the affirmative
F voting right of the majority of the Directors nominated by the two Trusts.
There was no prayer for restraining RNT and the nominee Directors of
the Trusts from taking any decision in advance.
19.5 In fact, even the complainant companies are not happy about
the relief so granted by NCLAT. In the Table given in Paragraph 4 of
G their Memorandum of Appeal in C.A.No.1802 of 2020, the complainant
companies themselves seek a modification of the relief so granted. This
Table found below Paragraph 4 of the Memorandum of Grounds of
appeal in C.A.No.1802 of 2020 reads as follows:-

H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 1037
INVESTMENTS PVT. LTD. AND ORS.

A

B

C

D

E

F

G

H
1038 SUPREME COURT REPORTS [2021] 12 S.C.R.

A 19.6 But for the fact that the complainant companies have also
come up with an appeal, we would have simply set aside the order of
restraint passed by NCLAT against RNT and nominee Directors, on the
ground that there was no such prayer. Now that S.P. Group has come
up with an appeal seeking an amplification or modulation of the relief so
granted, we shall deal with the challenge to the affirmative voting rights.
B
Affirmative voting rights
19.7 Under Article 104B, Sir Dorabjee Tata Trust and Sir Ratan
Tata Trust, acting jointly, shall have a right to nominate 1/3rd of the
prevailing number of Directors on the Board, so long as the Trusts own
C and hold, in the aggregate, at least 40% of the paid up share capital.
Article 121 provides that the matters which require to be decided by a
majority of the Directors, shall require the affirmative vote of the majority
of Directors appointed under Article 104B.
19.8 Article 121A contains the list of matters to be resolved by
D the Board of Directors. One of the items included therein is “any matter
affecting the share holding of the Tata Trusts in the Company…”
19.9 As seen from the Table under Paragraph 4 of the
Memorandum of appeal filed by the S.P. Group in C.A.No.1802 of 2020,
they are not seeking, even now, the scrapping of the affirmative voting
E rights. Interestingly, S.P. Group, through their Memo dated 12.01.2018
wanted the deletion of the Article providing for affirmative voting right.
But as per the Table under Paragraph 4 of the Memo of their appeal in
C.A.No.1802 of 2020, the complainant companies have now reconciled
themselves to the unavoidability of affirmative voting rights but all that
they want is that the applicability of affirmative voting right should be
F restricted to the matters covered by Article 121A. In addition, the
complainant companies want a similar affirmative right to be conferred
on the nominee Directors of the S.P. Group.
19.10 The swing that the S.P. Group has taken in their position
relating to affirmative voting rights is quite funny. To begin with, they
G sought a prayer for striking off Article 121 in its entirety. Later they
restricted their relief, by the Memo dated 12.01.2018, to the deletion of
“the necessity of affirmative voting rights”. But now they are fine with
the existence of affirmative voting rights for the majority in respect of
matters covered by Article 121A, but want a similar right in favour of
the nominee directors of the S.P. Group.
H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 1039
INVESTMENTS PVT. LTD. AND ORS.

19.11 The frequent change of position that S.P. Group has taken A
and the relief that they now seek, raises a doubt whether it is actually a
fight on principles. If affirmative voting rights are bad in principle, we do
not know how they may become good, if conferred on S.P. Group also.
19.12 Drawing our attention to Sections 135, 149, 151, 161 166
and 177 of the Companies Act, 2013, it was argued on behalf of SP B
group that there is a sea change in the law, after the advent of the 2013
Act and that today a paradigm shift has taken place from ‘corporate
majority/democracy’ to ‘corporate governance’ and that every action of
the Board has to pass the test of fairness. It is further contended that
Directors have a fiduciary responsibility with the highest level of duty
and that the same cannot be outsourced. According to the SP group, the C
Directors, once appointed, owe their allegiance only to the company and
not to their nominators.
19.13 At first blush, these arguments, almost bordering on romantic
idealism, appear very attractive. But on a deeper scrutiny, they are bound
to get grounded. If we have a look at the history of evolution of corporate D
enterprises, it can be seen that there are 3 time periods through which
development of corporate entities have passed. In the first period, large
corporate houses were established by individuals with their own funds
and those individuals and their families controlled both ownership and
management of these enterprises. In the second time period, when E
professionalism became the ‘Taraka mantra’, families which promoted
enterprises, retained ownership, but appointed professional managers to
run the show. Thus ownership got divested from management. In the
third time period, social participation increased by leaps and bounds
through public issues and listing. This increased the social accountability
and social responsibility of corporate entities. Every time a historical F
shift/change took place, the legal regime had to undergo a change, albeit
at snail’s pace.
19.14 As a matter of fact, the Companies Act, 1956 suffered 24
amendments. Major amendments were made first in 1988 and then in
2002, respectively on the basis of the recommendations of the Sachar G
Committee and the Report of the Eradi Committee. On August 4, 2004,
the Ministry of Company Affairs, published a Concept Paper on Company
Law on its website, after which, the Government constituted an Expert
Committee under the Chairmanship of Dr. J.J. Irani20. The mandate of
20
Incidentally J.J. Irani was the Chairman of Tata Sons for sometime. H
1040 SUPREME COURT REPORTS [2021] 12 S.C.R.

A the Committee was to make recommendations on certain issues, one of
which was “protecting the interests of stakeholders and investors,
including small investors”. This committee’s report crystallised into
Companies Bill, 2009, which later became Companies Bill, 2011 and
then Companies Act, 2013.
B 19.14 It is true that the 2013 Act brought a lot of drastic changes.
Some of the salient features of the 2013 Act are:
(i) Every company is required to have at least one Director
who has stayed in India for a total period of not less than 182
days in the previous calendar year.
C (ii) Every listed Public Company is required to have at least
one-third of the total number of Directors as independent
Directors.
(iii) Some Public Companies are required to have at least
two independent Directors.
D
(iv) Every independent Director should give a declaration
at the first Board meeting that he meets the criteria of
independence.
(v) Certain types of Public Companies are required to
appoint at least one woman Director.
E
(vi) Every listed company may appoint a small shareholders’
Director, to be elected by the small shareholders.
(vii) The report of the Board of Directors should include a
Director’s Responsibility Statement, covering certain aspects
F relating to accounting standards, accounting policies and
maintenance of accounting records.
(viii) Directors of a company are obliged to perform certain
duties, such as duty to act in good faith, duty to exercise
reasonable care, skill diligence and independent Judgment etc.
G (ix) A detailed Code of conduct for independent Directors
is stipulated in Schedule IV. This includes guidelines for
professional conduct, roles and functions and duties.
(x) The resignation or removal of independent Directors
should be in accordance with the procedure prescribed.
H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 1041
INVESTMENTS PVT. LTD. AND ORS.

(xi) Independent Directors are required to hold at least one A
meeting in a year without the attendance of non-independent
Directors and members of management and they are entitled
in this meeting to review the performance of non-independent
Directors and the Board as a whole. They can even review
the performance of the Chairperson of the Company and assess
B
the quality, quantity and timeliness of flow of information
between the management and the Board.
(xii) The Board of Directors of certain companies are required
to have certain Committees such as (1) Audit Committee; (2)
Nomination and Remuneration Committee and (3) Stakeholders
Relationship Committee. C

(xiii) A separate section on Corporate Governance is to be
included in the Annual Reports of certain companies, with a
detailed compliance Report on Corporate Governance.
(xiv) After the advent of the Companies Act, 2013, SEBI D
Regulations were also amended, inserting Clause 49 in the
Listing Agreement, to enforce compliance with Corporate
Governance standards.
19.15 But it must be remembered that the shift under the
Companies Act, 2013 is focused on listed and unlisted public companies. E
The requirement under Section 149(4) to have at least one-third of the
total number of Directors as independent Directors applies only to every
listed public company. The requirement under Section 151 to have one
Director elected by small shareholders is also applicable only to listed
companies. The requirement to constitute an Audit Committee in terms
of Section 177(1), a Nomination and Remuneration Committee and the F
Stakeholders Relationship Committee in terms of Section 178(1) are
also only on listed public companies.
19.16 Insofar as Tata Sons is concerned, the Articles of Association
of the Company continue to contain the prescribed restrictions which
make it a private company within the definition of the expression under G
Section 2(68). Therefore, the provisions discussed above do not apply to
Tata Sons. Yet Tata Sons has a Board packed with many people who
are ranked outsiders. If the idea was to run Tata Sons purely as a family
business, RNT need not have stepped down from the Chairmanship.
Today nobody wants to step down from any office, except if afflicted by
H
1042 SUPREME COURT REPORTS [2021] 12 S.C.R.

A brain stroke or sun stroke. As we have seen from the pleadings, the Tata
Group was founded by Jamsetji Nusserwanji Tata (1839-1904). It was
first established as a private trading firm in 1868 and was later
incorporated as a private company on 8.11.1917 under Section 2(13) of
the Companies Act, 1913. Later two Trusts were created, one in the
year 1919 under the name Sir Ratan Tata Trust and another in 1952
B
under the name Sir Dorabji Tata Trust. It was only in 1965 that S.P.
Group acquired 48 preference shares and 40 equity shares, from a
member of Tata Sons named Mrs. Rodabeh Sawhney. Shri Pallonji Mistry,
the father of CPM was inducted as a Non-Executive Director on
25.06.1980, though the Articles of Association did not confer any right
C of Directorship upon the S.P Group. He stepped down from this position
in December, 2004. Thereafter, CPM was appointed as Non-Executive
Director on 10.08.2006. Ever since the establishment of the Tata Group
in 1868, there have only been six persons who became the Chairmen of
the Group. While five of them namely Jamshedji Tata, Sir Dorab Tata,
Nowroji Saklatwala, JRD Tata and Ratan Tata belonged to the same
D
family, the sixth person namely CPM was inducted as Executive
Chairman by Resolution dated 18.12.2012 with effect from 29.12.2012.
Before the said appointment, CPM was identified by a Selection
Committee which comprised of the nominees of the two Tata Trusts.
This Selection Committee identified CPM as a successor to RNT as
E Chairman and appointed him first as Executive Deputy Chairman for a
period of five years form 1.04.2012 till 31.03.2017, subject to the approval
of the General Body. The General meeting of the shareholders, held on
1.8.2012 approved the appointment of CPM as Executive Deputy
Chairman and also left it to the Board to re-designate him as Chairman.
This is how the Board, in its meeting dated 18.12.2012 re-designated
F
CPM as Executive Chairman.
19.17 If the argument relating to corporate governance is carefully
scrutinized in the context of the fact: (i) that a large industrial house
whose origin and creation was familial, was willing to handover the mantle
of heading the entire empire to a person like CPM (a rank outsider to the
G family); and (ii) that the identification of CPM as the successor to RNT
was done by the very same nominees of the two Tata Trusts (who is
now accused of interference), then it will be clear that Tata Group was
guided by the principle of Corporate Governance (even without a statutory
compulsion) and not by tight-fisted control of the management of the
H affairs of the Group.
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 1043
INVESTMENTS PVT. LTD. AND ORS.

19.18 The provisions of sections 135, 149, 151, 166 and 177 around A
which the argument relating to corporate governance is fantasised, cannot
advance the case of the SP group. Section 135 deals with corporate
social responsibility, which in any case is more pronounced in this company
due to the fact that charitable trusts hold majority of the shares. Section
149 deals with the requirement to have Directors, section 151 provides
B
for appointment of a Director elected by small shareholders, section 166
enumerates the duties of directors and section 177 and 178 speak of
some committees. Some of these provisions such as sections 151, 177
and 178 apply only to listed public companies. Yet, Tata Sons have complied
with sections 177 and 178 by constituting necessary committees.
19.19 It was contended that a Director of a Company is to act in C
good faith in order to promote the objects of the Company for the benefit
of all the stakeholders and that he is in a fiduciary capacity vis-a-vis the
company. The affirmative voting rights, according to S.P.Group, disabled
the nominee Directors from acting independently in the best interests of
the company and its stakeholders and that once appointed, the loyalty of D
the nominee Directors should be to the Company and not solely to the
Trusts which nominated him. It was further contended that under Articles
121, 121A and 122, Tata Sons was to be a Board managed Company
and that the protective rights conferred under Article 121 were intended
to take care of the interests of the Tata Trust, in case they became a
minority. E

19.20 According to the S.P. Group, the pre-consultation/pre-
clearance requirement disabled the Directors from effectively discharging
their fiduciary duties under Section 166, violated the Secretarial Standards
required to be adhered to under Section 118(10) and rendered nugatory,
the scheme of Section 149 which requires 1/3rd of the members of the F
Board to be independent Directors.
19.21 But all the above contentions are completely devoid of any
substance, for they tend to overlook one basic fact namely that Tata
Sons is not a company engaged either in any manufacturing activity or in
any trading activity. As per the pleadings, on which there is no dispute, G
Tata Sons is a Principal Investment Holding Company and is a promoter
of Tata Companies. Tata Sons holds a controlling interest in all the
operating companies of the Tata Group. Other than being the Principal
Investment Holding Company, Tata Sons, by itself is not engaged in any
direct business activity. H
1044 SUPREME COURT REPORTS [2021] 12 S.C.R.

A 19.22 As we have indicated in the beginning, around 66% of the
equity share capital of Tata Sons is held by philanthropic Trusts, including
Sir Dorabji Tata Trust and Sir Rata Tata Trust. It is claimed that these
charitable Trusts support education, health, livelihood generation and Art
& Culture.
B 19.23 If we take these two important factors into consideration
namely: (i) that Tata Sons is only a Principal Investment Holding Company;
and (ii) that the majority shareholders of Tata Sons are only philanthropic
charitable Trusts, it will be clear that the Directors nominated by the
Trusts are not like any other Directors who get appointed in a General
Meeting of the Company in terms of Section 152(2) of the Act. In fact it
C is a paradox to claim that by virtue of Sub-sections (2) and (3) of Section
166, every Director of a Company is duty bound to act in good faith in
order to promote the objects of the company for the benefits of its
members and in the best interests of all the stakeholders as well as
environment and a duty to exercise independent judgment, and yet
D mandate the appointment of independent Directors under Section 149(4).
If all Directors are required under Section 166(3) to exercise independent
Judgment, we do not know why there is a separate provision in Section
149(4) for every listed Public Company to have at least 1/3rd of the total
number of Directors as independent Directors. We do not also know
whether the prescription in Section 149(4) is a tacit acknowledgment
E that all the Directors appointed in a General meeting under Section 152(2)
may not be independent in practice, though they may be required to be
so in theory.
19.24 A person nominated by a charitable Trust, to be a Director
in a company in which the Trust holds shares, also holds a fiduciary
F relationship with the Trust and fiduciary duty towards the nameless,
faceless beneficiaries of those Trusts. As we have pointed out elsewhere,
the history of evolution of the corporate world shows that it has moved
from the (i) familial to (ii) contractual and managerial to (iii) a regime of
social accountability and responsibility. This is why Section 166(2) also
G talks about the duty of a Director to protect environment, in addition to
his duties to (i) promote the objects of the company for the benefit of its
members as a whole; and (ii) act in the best interests of the company, its
employees, the shareholders and the community. It is common knowledge
that some of the industries which take good care of its shareholders and
employees also run polluting industries. Therefore there is always a
H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 1045
INVESTMENTS PVT. LTD. AND ORS.

conflict, a tug of war between competing interests and statutes cannot A
resolve these conflicts effectively.
19.25 Affirmative voting rights for the nominees of institutions
which hold majority of shares in companies have always been accepted
as a global norm. As a matter of fact the affirmative voting rights
conferred by Article 121 of the Articles of Association, confers only a B
limited right upon the Directors appointed by the Trusts under Article
104B. Article 121 speaks only about the manner in which matters before
any meeting of the Board shall be decided. If it is a General Meeting of
Tata Sons, the representatives of the two Trusts will actually have a
greater say as the Trusts have 66% of shares in Tata Sons. Therefore, if
we apply Section 152(2) strictly, the Trusts which own 66% of the paid C
up capital of Tata Sons will be entitled to pack the Board with their own
men as Directors. But under Article 104B, only a minimum guarantee is
provided to the two Trusts, by ensuring that the Trusts will have at least
1/3rd of the Directors, as nominated by them so long as they hold 40% in
the aggregate of the paid up share capital. D
19.26 Section 43 of the Companies Act (which is equivalent of
Section 86 of the 1956 Act), recognises two types of share capital of a
company limited by shares. They are (i) equity share capital; and (ii)
preference share capital. Again equity share capital can be of two kinds
namely, (i) those with voting rights; and (ii) those with differential rights E
as to dividend, voting or otherwise in accordance with such rules as may
be prescribed.
19.27 Section 47(1)(b) of the 2013 Act (equivalent to Section
87(1)(b) of the 1956 Act), declares that the rights of a member of a
company limited by shares, shall be in proportion to his share in the paid F
up equity share capital of the company. This right is subject to the
provisions of Section 43, Section 50(2) and Section 188(1) of the 2013
Act. The restrictions under Sections 43, 50(2) and 188(1) respectively
are, (i) shares with differential voting rights; (ii) disentitlement to voting
rights, of a member who has not paid the unpaid share capital; and (iii)
the disentitlement of a member to vote on a resolution for the approval G
of any contract entered into by the company with a related party.
19.28 Under Section 10(1) of the Companies Act, 2013, the
Articles of Association bind the company and the members thereof to
the same extent as if they respectively had been signed by the company
H
1046 SUPREME COURT REPORTS [2021] 12 S.C.R.

A and by each member. However, this is subject to the provisions of the
Act.
19.29 Article 94 of the Articles of Association of Tata Sons is in
tune with Section 47(1)(b), as it says that upon a poll, the voting rights of
every member, whether present in person or by proxy shall be in
B proportion to his share of the paid up capital of the company. Therefore,
a shareholder or a group of shareholders who constitute majority, can
always seek to be in the driving seat by reserving affirmative voting
rights. So long as these special rights are incorporated in the Articles of
Association and so long as they are not in contravention of any of the
provisions of the Act, the same cannot be attacked on these grounds.
C
19.30 Coming to the argument revolving around the duty of a
Director, it is necessary that we balance the duty of a Director, under
Section 166(2) to act in the best interests of the company, its employees,
the shareholders, the community and the protection of environment, with
the duties of a Director nominated by an Institution including a public
D charitable trust. They have fiduciary duty towards 2 companies, one of
which is the shareholder which nominated them and the other, is the
company to whose Board they are nominated. If this is understood, there
will be no confusion about the validity of the affirmative voting rights.
What is ordained under Section 166(2) is a combination of private interest
E and public interest. But what is required of a Director nominated by a
charitable Trust is pure, unadulterated public interest. Therefore, there
is nothing abhorring about the validity of the affirmative voting rights.
19.31 Relying upon the decision of this Court in Vodafone
International Holdings BV vs. Union Of India21, it was contended
F that a minority investor has what is called “participative rights, which is
a sub-sect of protective rights” and that these participative rights enable
the minority to overcome the presumption of consolidation of operations
or assets by the controlling shareholder.
19.32 But the decision in Vodafone (supra) arose under a
G completely different context. It was a tax dispute in relation to capital
gains arising from the sale of share capital of a company resident for tax
purposes in Cayman Islands, on the basis that it held underlying Indian
assets. It was in that context that this Court analysed the independent

21
(2012) 6 SCC 613
H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 1047
INVESTMENTS PVT. LTD. AND ORS.

legal existence of a subsidiary and held that even if directors are appointed A
at the behest of the parent company or removable by the parent company,
such directors of the subsidiary company will owe their duty to those
companies and are not to be dictated by the parent company if it is not in
the interest of the subsidiaries.
19.33 The decisions Re: Neath Rugby Limited22 and Central B
Bank of Ecuador and others vs. Conticorp SA and others
(Bahamas)23, are relied upon to show that while a nominee director is
entitled to take care of the interests of the nominator, he is duty bound to
act in the best interests of the company and not fetter his discretion.
19.34 The question as to (i) what is in the interest of the company, C
(ii) what is in the best interest of the members of the company as a
whole and (iii) what is in the interest of a nominator, all lie in locations
whose borders and dividing lines are always blurred. If philosophical
rhetoric is kept aside for a moment, it will be clear that success and
profit making are at the core of business enterprises. Therefore, the
best interest of the majority shareholders need not necessarily be in D
conflict with the interest of the minority or best interest of the members
of the company as a whole, unless there is siphoning of or diversion.
Such a question does not arise when the majority shareholders happen
to be charitable Trusts engaged in philanthropic activities. It is good to
wish that the creation gets liberated from the creator, so long as the E
creator does not have any control or ability to manipulate. In the
corporate world, democracy cannot be seen as an ugly expression, after
using the very same democratic process for the appointment of directors.
19.35 Much ado was made about pre-consultation and pre-
clearance by the Trustees, even before the Board took a call. But it was F
actually about nothing. Whenever an institution happens to be a
shareholder and a notice of a meeting either of the Board or of the
General body is issued, it is but normal for the institution to have an idea
about the stand to be taken by them in the forthcoming meeting.
G
19.36 Objections were raised about RNT vetting the minutes of
the meetings of the Board post facto and his participation as a shadow
Director. But as we have pointed out elsewhere, CPM himself sought,
22
(2010) B.C.C. 597
23
(2015) UKPC 11 Judicial Committee of the Privy Council (UK) H
1048 SUPREME COURT REPORTS [2021] 12 S.C.R.

A while accepting the office of Executive Chairmanship, the continued
guidance of RNT. When the Board, of which CPM was a Chairman,
nominated RNT as Chairman Emeritus and recorded their desire to look
forward to his support and guidance, it is not open to the complainant
companies to call RNT a shadow Director. If someone, aggrieved after
B his removal from office can engage in shadow-boxing through the
companies controlled by him, he cannot accuse the very same person
who chose him as successor to be a shadow director. Someone who
gained entry through the very same door, cannot condemn it when asked
to exit.
C
19.37 Therefore, the challenge to the affirmative voting rights
and the allegations revolving around pre consultation and pre clearance
by the Trusts of all items in the agenda and RNT’s indirect or direct
influence or grip over the Board are all liable to be rejected. That leaves
us with one more related issue, under this question of law and the same
D
relates to the claim of SP group for proportionate representation on the
Board. We shall now go to the same.
Claim for proportionate representation
19.38 As we have pointed out elsewhere, the Statute confers upon
E
the members of a company limited by shares, a right to vote in a general
meeting. And this right is proportionate to his shareholding as per Section
47(1)(b). Section 152 which contains provisions for the appointment of
Directors, does not confer any right of proportionate representation on
the Board of any company, be it public or private.
F
19.39 The maximum extent, to which the Parliament has gone
under the 2013 Act, is to make a provision under Section 151, enabling
“a listed company” to have one Director elected by such small
shareholders in such manner and on such terms and conditions as may
G be prescribed. Though a similar prescription was incorporated in Section
252(1) of the Companies Act, 1956, under Act 53 of 2000, it was not
exactly the same. For the purpose of easy appreciation, the proviso to
Sub-section (1) of Section 252 of the 1956 Act and Section 151 of the
2013 Act are presented in a tabular column as follows:
H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 1049
INVESTMENTS PVT. LTD. AND ORS.

A

B

C

D

19.40 The important features to be noticed in the 1956 Act and E
the 2013 Act are : (i) that Section 252 of the 1956 Act was applicable to
every public company but not to a public company which has become
such by virtue of Section 43A, indicating thereby that it would not have
had any application to Tata Sons; (ii) that in contrast, Section 151 of the
2013 Act applies only to listed companies; (iii) that for the application of
the proviso to Section 252(1) of the 1956 Act, the public company should F
have a paid-up capital of Rs.5 crores or more and 1000 or more small
shareholders; (iv) that in contrast the applicability of Section 151 of the
2013 Act does not depend upon either the paid-up capital or the number
of small shareholders; and (v) that the definition of the expression “small
shareholders” is just the same under both the enactments. G
19.41 It is interesting to note that the smallness conceived by the
1956 Act is virtually minuscule. One would qualify to be a small
shareholder only if he holds shares of a nominal value of Rs.20,000/- or
less, in a public company having a paid-up capital of Rs.5 crores or
more. This proportion works out to 1/2500 or 0.04%. H
1050 SUPREME COURT REPORTS [2021] 12 S.C.R.

A 19.42 One must be careful to note that both under Section 252(1)
of the 1956 Act and under Section 151 of the 2013 Act, the spotlight was
only on “small shareholders” and not on “minority shareholders”
like the S.P. Group which holds around 18.37%. In fact, admittedly the
value of this 18.37% of shareholding of the S.P. Group, as of March-
2016 was around Rs.58,441 crores. It is claimed that the purchase
B
consideration of these shares at the relevant point of time was Rs.69
crores and that during the period from 1991 to 2016, SP group had received
aggregate dividends to the tune of Rs.872 crores. We do not know
whether this kind of a huge return on investment and the skyrocketing of
the appreciation of the value of investment, is also due to oppressive
C conduct or despite oppressive conduct.
19.43 Whatever it be, the right to claim proportionate representation
is not available even to a minority shareholder statutorily, both under the
1956 Act and under the 2013 Act. It is available only to a small
shareholder, which S.P. Group is certainly not.
D 19.44 The right to claim proportionate representation is not available
for the S.P. group even contractually, in terms of the Articles of
Association. Neither S.P. Group nor CPM can request the Tribunal to
rewrite the contract, by seeking an amendment of the Articles of
Association. The Articles of Association, as they exist today, are binding
E upon S.P. Group and CPM by virtue of Section 10(1) of the Act.
19.45 Realising the fact that they have no right, statutorily or
contractually or otherwise to demand proportionate representation on
the Board, S.P. Group has come up with a very novel idea, namely the
claim of existence of a quasi-partnership between the Tata group and
F SP group. It is contended by S.P. Group that there existed a personal
relationship between those in management of the S.P. Group and those
in management of Tata Sons for over several decades and that the
relationship was one of trust and mutual confidence. According to S.P.
Group, they acted as the guardian of the Tata Group when the Tata
Trust had no voting rights. Therefore, it is claimed that there is a right
G and a legitimate expectation to have a representation on the Board of
Tata Sons.
19.46 But we do not think that there ever existed a relationship in
the nature of quasi partnership. As we have pointed out elsewhere, the
company was incorporated in the year 1917 and S.P. Group became a
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TATA CONSULTANCY SERVICES LIMITED v. CYRUS 1051
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shareholder in 1965, namely after 50 years. A berth on the Board of A
Tata Sons was granted only in the year 1980 to CPM’s father. Therefore,
there is nothing on record in the form of pleadings or proof, to show that
there was either (i) a pre-existing relationship before the incorporation
of the company or (ii) a living in relationship picked up half way through,
by entering into an agreement in the nature of a partnership.
B
19.47 In fact, CPM’s father was inducted into the Board in 1980,
after 15 years of acquisition of shares and such induction was not in
recognition of any statutory or contractual right. After his father’s exit in
2004, CPM was inducted in 2006, neither in recognition of a contractual
right nor in recognition of a hereditary or statutory right.
C
19.48 The claim for proportionate representation can also be looked
at from another angle. RNT who was holding the mantle as the Chairman
of Tata Sons for a period of 21 years from 1991 to 2012, actually
conceded a more than proportionate share to the S.P. Group by nominating
CPM as his successor. Accordingly CPM was also crowned as Executive
Deputy Chairman on 16.3.2012 and as Chairman later. CPM continued D
as Executive Chairman till he set his own house on fire in 2016. If the
company’s affairs have been or are being conducted in a manner
oppressive or prejudicial to the interests of the S.P. group, we wonder
how a representative of the S.P. Group holding a little over 18% of the
share capital could have moved upto the top most position within a period E
of six years of his induction. Therefore, we are of the considered view
that the claim for proportionate representation on the Board is neither
statutorily or contractually sustainable nor factually justified.
19.49 Placing reliance upon section 163 of the Companies Act,
2013, it was contended that proportionate representation is statutorily F
recognised. But this argument is completely misconceived. Section 163
of the 2013 Act corresponds to section 265 of the 1956 Act. It enables a
company to provide in their Articles of Association, for the appointment
of not less than two-thirds of the total number of Directors in accordance
with the principle of proportionate representation by means of a
single transferable vote. First of all, proportionate representation by G
means of a single transferable vote, is not the same as representation on
the Board for a group of minority shareholders, in proportion to the
percentage of shareholding they have. It is a system where the voters
exercise their franchise by ranking several candidates of their choice,
with first preference, second preference etc. Moreover, it is only an H
1052 SUPREME COURT REPORTS [2021] 12 S.C.R.

A enabling provision and it is upto the company to make a provision for the
same in their Articles, if they so choose. There is no statutory compulsion
to incorporate such a provision.
19.50 Therefore, the fourth question of law is also to be answered
in favour of the Tata group and the claim in the cross appeal relating to
B affirmative voting rights and proportionate representation are liable to
be rejected.
20. Question No.5
20.1 The 5th question of law formulated for consideration is as to
whether the re-conversion of Tata Sons from a public company into a
C private company, required the necessary approval under section 14 of
the Companies Act, 2013 or at least an action under section 43-A(4) of
the Companies Act, 1956 during the period from 2000 (when Act 53 of
2000 came into force) to 2013 (when the 2013 Act was enacted) as held
by NCLAT ?
D 20.2 As we have pointed out elsewhere, Tata Sons was actually
incorporated as a Private Limited Company, but was deemed to have
become a Public Limited Company, with effect from 01.02.1975, by
virtue of Section 43-A (1A) of the Companies Act, 1956. However, by
virtue of the proviso to Sub-section (1A), the Articles of Association of
E the Company, continued to retain the provisions relating to the matters
specified in sub-clauses (a), (b) and (c) of Clause (iii) of Sub-section (1)
of Section 3 of the 1956 Act.
20.3 By Act 53 of 2000, the deeming fiction in section 43A was
removed and the whole concept of private companies becoming public
F companies disappeared from the date of coming into force of this Act 53
of 2000.
20.4 The Companies Act, 2013 did not include any provision similar
to section 43A. Therefore, Tata Sons passed a resolution in its 99th Annual
General meeting held on 21-09-2017 to alter the Memorandum and
Articles so as to insert the word “private” in between the words “Sons”
G
and “Limited” in its name.
20.5 On 09.07.2018, the complaint under sections 241 and 242
was dismissed by NCLT and hence Tata Sons approached the Registrar
of Companies on 19.07.2018 seeking an amendment to the Certificate
of Incorporation. It appears that S.P. Group filed objections with the
H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 1053
INVESTMENTS PVT. LTD. AND ORS.

Registrar of Companies on the ground that they were filing appeals against A
the order of the NCLT. But the Registrar of Companies issued an
amended certificate on 06.08.2018.
20.6 Upon coming to know of the issue of amended Certificate of
Incorporation, S.P. Group filed an additional affidavit before NCLAT on
10.08.2018 in the appeals that came up for hearing. B
20.7 While allowing the appeals of S.P. Group by a judgment dated
18.12.2019, NCLAT declared the action of the Registrar of Companies
in issuing the amended Certificate of Incorporation as illegal with a
further direction to the Registrar of Companies to make necessary
corrections in the records showing the Company as a Public Company. C
20.8 The Registrar of Companies moved an application under
Sections 420(2) and 424(1) of the Companies Act, 2013 read with Rule
11 of the NCLAT Rules, 2016, seeking removal of the observations made
in Paragraphs 181, 186 and 187(iv) of the judgment. This application
was dismissed by the NCLAT by an order dated 06.01.2020, not only D
holding that no aspersions were cast in the judgment of the NCLAT on
the Registrar of Companies warranting any review/clarification, but also
providing certain additional reasons. It is under these circumstances that
the 5th question of law revolving around Section 43A of the 1956 Act as
amended by Act 53 of 2000, and the Companies Act, 2013 has arisen for
consideration. E

20.9 A look at Section 43A would show that it was actually inserted
under Companies (Amendment) Act 65 of 1960 with effect from
28.12.1960. This Section underwent two amendments, one under Act
41 of 1974 with effect from 01.02.1975 and another under Act 31 of
1988 with effect from 15.06.1988. Finally, by Act 53 of 2000, Section F
43A was made inapplicable with effect from 13.12.2000.
20.10 Section 43A, as inserted by Act 65 of 1960, together with
the amendments made under Act 41 of 1974, Act 31 of 1988 and Act 53
of 2000, is reproduced as follows:-
G
“43A. Private Company to become a public company in
certain cases.-
(1) Save as otherwise provided in this section, where not less
than twenty-five per cent of the paid-up share capital of a
private company having a share capital is held by one or
more bodies corporate, the private company shall,- H
1054 SUPREME COURT REPORTS [2021] 12 S.C.R.

A (a) on and from the date on which the aforesaid
percentage is first held by such body or bodies corporate,
or
(b) where the aforesaid percentage has been first so
held before the commencement of the Companies
B (Amendment) Act, 1960 (65 of 1960), on and from the expiry
of the period of three months from the date of such
commencement unless within that period the aforesaid
percentage is reduced below twenty-five per cent of the
paid-up share capital of the private company,
C become by virtue of this section a public company :
Provided that even after the private company has so become
a public company, its articles of association may include
provisions relating to the matters specified in clause (iii) of
sub-section (1) of section 3 and the number of its members
D may be, or may at any time be reduced, below seven :
Provided further that in computing the aforesaid
percentage, account shall not be taken of any share in the
private company held by a banking company if, but only if,
the following conditions are satisfied in respect of such share,
E namely:-
(a) that the share-
(i) forms part of the subject matter of a trust,
(ii) has not been set apart for the benefit of any body
corporate, and
F
(iii) is held by the banking company either as a
trustee of that trust or in its own name on behalf of a
trustee of that trust;
or
G (b) that the share-
(i) forms part of the estate of a deceased person,
(ii) has not been bequeathed by the deceased person
by his will to any body corporate, and
H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 1055
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(iii) is held by the banking company either as an A
executor or administrator of the deceased person
or in its own name on behalf of an executor or
administrator of the deceased person,
and the registrar may, for the purpose of satisfying himself
that any share is held in the private company by a banking B
company as aforesaid, call for at any time from the banking
company such books and papers as he considers necessary.
Explanation.-For the purposes of this sub-section, “bodies
corporate” means public companies, or private companies
which had become public companies by virtue of this section. C
(1A) Without prejudice to the provisions of sub-section (1),
where the average annual turnover of a private company,
whether in existence at the commencement of the Companies
(Amendment) Act, 1974, or incorporated thereafter, is not,
during the relevant period, less than 2 [such amount as may D
be prescribed], the private company shall, irrespective of its
paid-up share capital, become, on and from the expiry of a
period of three months from the last day of the relevant period
during which the private company had the said average
annual turnover, a public company by virtue of this sub-
section: E

Provided that even after the private company has so become
a public company, its articles of association may include
provisions relating to the matters specified in clause (iii) of
sub-section (1) of section 3 and the number of its members
may be, or may at any time be reduced, below seven. F
(1B) Where not less than twenty-five per cent of the paid-
up share capital of a public company, having share capital,
is held by a private company, the private company shall,-
(a) on and from the date on which the aforesaid
G
percentage is first held by it after the commencement of
the Companies (Amendment) Act, 1974, or
(b) where the aforesaid percentage has been first so
held before the commencement of the Companies
(Amendment) Act, 1974 on and from the expiry of the period
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1056 SUPREME COURT REPORTS [2021] 12 S.C.R.

A of three months from the date of such commencement,
unless within that period the aforesaid percentage is
reduced below twenty-five per cent of the paid-up share
capital of the public company,
become, by virtue of this sub-section, a public company,
B and thereupon all other provisions of this section shall apply
thereto:
Provided that even after the private company has so become
a public company, its articles of association may include
provisions relating to the matters specified in clause (iii) of
C sub-section (1) of section 3 and the number of its members
may be, or may at any time be reduced, below seven.
(1C) Where, after the commencement of the Companies
(Amendment) Act, 1988, a private company accepts, after an
invitation is made by an advertisement, or renews, deposits
D from the public other than its members, directors or their
relatives, such private company shall, on and from the date
on which such acceptance or renewal, as the case may be, is
first made after such commencement, become a public
company and thereupon all the provisions of this section shall
apply thereto:
E
Provided that even after the private company has so become
a public company, its articles of association may include
provisions relating to the matters specified in clause (iii) of
sub-section (1) of section 3 and the number of its members
may be, or may at any time be, reduced below seven.
F
(2) Within three months from the date on which a private
company becomes a public company by virtue of this section,
the company shall inform the Registrar that it has become a
public company as aforesaid, and thereupon the Registrar
shall delete the word “Private” before the word “Limited” in
G the name of the company upon the register and shall also
make the necessary alterations in the Certificate of
Incorporation issued to the company and in its memorandum
of association.
(2A) Where a public company referred to in sub-section
H (2) becomes a private company on or after the commencement
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 1057
INVESTMENTS PVT. LTD. AND ORS.

of the Companies (Amendment) Act, 2000, such company shall A
inform the Registrar that it has become a private company
and thereupon the Registrar shall substitute the word ‘private
company’ for the word ‘public company’ in the name of the
company upon the register and shall also make the necessary
alterations in the Certificate of Incorporation issued to the
B
company and in its memorandum of association within four
weeks from the date of application made by the company.
(3) Sub-section (3) of section 23 shall apply to a change
of name under sub-section (2) as it applies to a change of
name under section 21.
C
(4) A private company which has become a public company
by virtue of this section shall continue to be a public company
until it has, with the approval of the Central Government and
in accordance with the provisions of this Act, again become a
private company.
D
(5) If a company makes default in complying with sub-
section (2), the company and every officer of the company
who is in default, shall be punishable with fine which may
extend to five hundred rupees for every day during which the
default continues.
E
(6) & (7) omitted by Act 31 of 1988
(8) Every private company having a share capital shall, in
addition to the certificate referred to in sub-section (2) of
section 161, file with the Registrar along with the annual
return a second certificate signed by both the signatories of F
the return, stating either-
(a) that since the date of the annual general meeting with
reference to which the last return was submitted, or in the
case of a first return, since the date of the incorporation
of the private company, no body or bodies corporate has
G
or have held twenty-five per cent or more of its paid-up
share capital,
(b) …
(c) that the private company, irrespective of its paid-up
share capital, did not have, during the relevant period, an H
1058 SUPREME COURT REPORTS [2021] 12 S.C.R.

A average annual turnover of such amount as is referred to
in sub-section (1A) or more,
(d) that the private company did not accept or renew
deposits from the public.]
(9) Every private company, having share capital, shall file
B with the Registrar along with the annual return a certificate
signed by both the signatories of the return, stating that since
the date of the annual general meeting with reference to which
the last return was submitted, or in the case of a first return,
since the date of the incorporation of the private company, it
C did not hold twenty-five per cent or more of the paid-up share
capital of one or more public companies.
Explanation.- For the purposes of this section,-
(a) “relevant period” means the period of three
consecutive financial years.-
D
(i) immediately preceding the commencement of the
Companies (Amendment) Act, 1974, or
(ii) a part of which is immediately preceded such
commencement and the other part of which
immediately, followed such commencement, or
E
(iii) immediately following such commencement or
at any time thereafter;
(b) “turnover”, of a company, means the aggregate
value of the realization made from the sale, supply or
F distribution of goods or on account of services
rendered, or both, by the company during a financial
year;
(c) “deposit has the same meaning as in section 58A
(10) Subject to the other provisions of this Act, any
G reference in this section to accepting, after an invitation is
made by an advertisement, or renewing deposits from the
public shall be construed as including a reference to accepting,
after an invitation is made by an advertisement, or· renewing
deposits from any section of the public and the provisions of
H section 67 shall, so far as may be, apply, as if the reference to
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 1059
INVESTMENTS PVT. LTD. AND ORS.

invitation to the public to subscribe for shares or debentures A
occurring in that section, includes a reference to invitation
from the public for acceptance of deposits.
(11) Nothing contained in this section, except sub-section
(2A), shall apply on and after the commencement of the
Companies (Amendment) Act, 2000.” B
20.11 In its inception, Section 43A contained only one stipulation
namely that a private company in which not less than 25% of the paid up
share capital was held by one or more bodies corporate, shall become a
public company. But by Act 41 of 1974, two additional stipulations were
included. They are (i) that a private company whose average turnover C
during the relevant period is not less than an amount prescribed, shall
become a public company, irrespective of its paid up share capital; and
(ii) that a private company which holds not less than 25% of the paid up
share capital of a public company, shall become a public company.
20.12 By Act 31 of 1988, the benchmark of the average annual D
turnover that would determine the applicability of Section 43A was
prescribed as not less than Rs. 1 crore. In addition, Act 31 of 1988 also
made a private company which accepts deposits from the public, other
than its members or directors, to be a public company.
20.13 Two important prescriptions, which continued without any E
change, from the date of insertion of Section 43A, namely 28.12.1960,
till the coming into force of Act 53 of 2000 namely 13.12.2000, were
Sub-sections (2) and (4) of Section 43A. Sub-section (2) imposed an
obligation upon a private company which became a public company by
virtue of section 43A, to inform the Registrar. Upon receipt of such
information, the Registrar was ordained to delete the word “private” in F
the name of the company upon the register and also to make necessary
alterations in the Certificate of Incorporation and its Memorandum of
Association.
20.14 Sub-section (4) declared that the status of such a company
as a public company would continue until such time it becomes a private G
company (i) with the approval of the Central Government; and (ii) in
accordance with the provisions of the Act.
20.15 In Needle Industries (India) Ltd vs Needle Industries
Newey (India) Ltd24, this court pointed out (A) that there are 3 distinct
24
(1981) 3 SCC 333 H
1060 SUPREME COURT REPORTS [2021] 12 S.C.R.

A types of companies, namely Private companies, Public Companies and
deemed to be public companies which occupy a distinct place in the
scheme of the Act (B) that private companies, which become public
companies, but which continue to retain in their articles those matters
mentioned in section 3(1)(iii) of the Act are also broadly and generally
subjected to the rigorous discipline of the Act and (C) that though section
B
43A companies cannot claim the same privileges to which private
companies are entitled, there are certain provisions of the Act which
would apply to public companies, but not to Section 43A companies. An
important observation found in Needle Industries, is that “the policy of
the Act if anything, points in the direction that the integrity and
C structure of section 43A proviso companies should, as far as
possible, not be broken up”.
20.16 Keeping the above stipulations in mind, let us now come to
the amendments made to Section 43A under Act 53 of 2000, with effect
from 13.12.2000. By this Act, two sub-sections namely Sub-section (2A)
D and Sub-section (11) were inserted in Section 43A.
20.17 By virtue of sub-section (11), all the provisions of Section
43A except sub-section (2A) were made inapplicable on and after the
commencement of Act 53 of 2000. This meant that with effect from
13.12.2000, the whole of Section 43A except Sub-section (2A) got
E washed out.
20.18 Sub-section (2A) prescribes the procedure to be followed
by a company, which has earlier become a public company by virtue of
Section 43A, but which has later become a private company after the
commencement of Act 53 of 2000, to have necessary changes effected.
F The procedure prescribed by sub-section (2A) for such re-conversion
(or Ghar Wapsi) is as follows:-
(i) The company shall inform the Registrar that
the company has again become a private
company; and
G (ii) The Registrar shall thereupon substitute the
word “Private Company” for the word
“Public Company” upon the register and
also make necessary alterations in the
Certificate of Incorporation and its
Memorandum of Association.”
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TATA CONSULTANCY SERVICES LIMITED v. CYRUS 1061
INVESTMENTS PVT. LTD. AND ORS.

20.19 But Act 53 of 2000 did not stop with section 43A. It also A
amended section 3(1)(iii) by inserting an additional sub-clause, namely
“(d)” along with sub-clauses (a), (b) and (c). Under this sub-clause (d)
of clause (iii) of sub-section (1) of section 3, the articles of association
of a private company should also contain a prohibition on any invitation
or acceptance of deposits from persons other than its members, directors
B
or their relatives. Section 3(1)(iii) after amendment under Act 53 of
2000 read as follows:
“3 (1) In this Act, unless the context otherwise requires, the
expressions “company”, “existing company”, “private
company” and “public company”, shall, subject to the
provisions of sub-section (2), have the meanings specified C
below:-
(iii) “private company” means a company which has a
minimum paid-up capital of one lakh rupees or such higher
paid-up capital as may be prescribed, and by is articles, -
D
(a) restricts the right to transfer its shares, if any ;
(b) limits the number of its members to fifty not including -
(i) persons who are in the employment of the company ; and
(ii) persons who, having been formerly in the employment of
the company, were members of the company while in that E
employment and have continued to be members after the
employment ceased ; and
(c) prohibits any invitation to the public to subscribe for
any shares in, or debentures of, the company ;
(d) prohibits any invitation or acceptance of deposits from F
persons other than its members, directors or their relatives:
Provided that where two or more persons hold one or more
shares in a company jointly, they shall, for the purposes of
this definition, be treated as a single member;”
20.20 Sub-clause (d) was what was added to section 3(1)(iii) by G
Act 53 of 2000, even while scrapping the concept of a deemed public
company. But this sub-clause (d) is nothing but sub-section (1C) of section
43A. Though section 43A was being scrapped in effect, the Parliament
wanted to retain the prescription contained in sub-section (1C) of section
H
1062 SUPREME COURT REPORTS [2021] 12 S.C.R.

A 43A and which is why sub-clause (d) was inserted under section 3(1)
(iii).
20.21 But while doing so under Act 53 of 2000, a major omission
happened. The omission related to section 27 (3) of the 1956 Act. Section
27 of the 1956 Act contained stipulations as to what the Articles of
B Association of (i) an unlimited company (ii) a company limited by
guarantee and (iii) a private company limited by shares, should contain.
It reads as follows:
“27. REGULATIONS REQUIRED IN CASE OF
UNLIMITED COMPANY, COMPANY LIMITED BY
C GUARANTEE OR PRIVATE COMPANY LIMITED BY SHARES
(1) In the case of an unlimited company, the articles shall
state the number of members with which the company is to be
registered and, if the company has a share capital, the amount
of share capital with which the company is to be registered.
D (2) In the case of a company limited by guarantee, the
articles shall state the number of members with which the
company is to be registered.
(3) In the case of a private company having a share capital,
the articles shall contain provisions relating to the matters
E specified in sub-clauses (a), (b) and (c) of clause (iii) of sub-
section (1) of section 3; and in the case of any other private
company, the articles shall contain provisions relating to the
matters specified in the said sub-clauses (b) and (c).”
20.22 No corresponding amendment was made to Section 27 (3),
F by Act 53 of 2000, so as to make it in tune with the amended section
3(1)(iii). The result was that on and from 13-12-2000 (the date of coming
into force of Act 53 of 2000), section 3(1)(iii) contained 4 requirements
for a private company, but section 27(3) referred only to 3 requirements.
The incongruity can be stated thus. To fall within the definition of a
private company, 4 stipulations contained in section 3(1)(iii) were to be
G
satisfied. But under section 27(3), it is enough if the Articles of Association
of a private company contained only 3 prescriptions.
20.23 Be that as it may, the consequence of the amendment to
section 3(1)(iii), under Act 53 of 2000, was that a company which wanted
to take the route of sub-section (2A) of section 43A, after the coming
H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 1063
INVESTMENTS PVT. LTD. AND ORS.

into force of Act 53 of 2000 and reconvert itself into a private company, A
was required to satisfy the rigours of sub-clauses (a), (b) and (c) as well
as (d) of clause (iii) of sub-section(1) of section 3. In other words, the
Articles of Association of such a company should contain all the 4
prescriptions namely (i) restriction on the right to transfer shares (ii)
limitation on the number of members (iii) prohibition of any invitation to
B
the public to subscribe for shares/debentures and (iv) prohibition of any
invitation or acceptance of deposits from persons other than members/
Directors or their relatives.
20.24 The Articles of Association of Tata Sons had the prescriptions
contained in sub-clauses (a), (b) and (c), but not sub-clause (d).
Therefore, they did not take any steps in terms of sub-section (2A) of C
section 43A after the advent of Act 53 of 2000.
20.25 But Companies Act, 2013 changed the complexion of the
game. It not merely put an end to the concept of deemed public companies,
but also restored the definition of the expression ‘private company” to
the position that prevailed before Act 53 of 2000. Section 2(68) of the D
2013 Act which defines a “private company” incorporated only the original
3 prescriptions contained in sub-clauses (a), (b) and (c) of clause (iii) of
sub-section (1) of section 3. The stipulation inserted as sub-clause (d)
by Act 53 of 2000, is omitted in section 2(68). Section 2(68) of the 2013
Act reads as follows:- E
Sec 2 (68) “private company” means a company having a
minimum paid-up share capital of one lakh rupees or such
higher paid-up share capital as may be prescribed, and which
by its articles,
(i) restricts the right to transfer its shares; F
(ii) except in case of One Person Company, limits the
number of its members to two hundred:
Provided that where two or more persons hold one or
more shares in a company jointly, they shall, for the
G
purposes of this clause, be treated as a single member:
Provided further that—
(A) persons who are in the employment of the company;
and
H
1064 SUPREME COURT REPORTS [2021] 12 S.C.R.

A (B) persons who, having been formerly in the
employment of the company, were members of the
company while in that employment and have continued
to be members after the employment ceased,
shall not be included in the number of members; and
B (iii) prohibits any invitation to the public to subscribe for
any securities of the company;
20.26 But Companies Act, 2013, created one confusion. Different
provisions of the Companies Act, 2013, came into force on different
dates (driving people crazy). Section 2(68) which defines a private
C company, came into force on 12-09-2013 vide S.O. 2754 (E) dated 12-
09-2013. This notification issued under section 1(3) of the 2013 Act,
fixed 12-09-2013 as the appointed date for the coming into force of
section 2(68).
20.27 But on 12-09-2013, the date appointed for the coming into
D force of section 2(68) of the Companies Act, 2013, the old Act, namely
the Companies Act, 1956 had not been repealed. The provisions for
repeal are contained in Section 465 of The Companies Act, 2013. Section
465(1) repeals the 1956 Act, subject to certain stipulations mentioned in
the provisos there under. Sub-section (2) of Section 465 of the Companies
E Act, 2013 provides a list of matters which will stand saved despite the
repeal of the 1956 Act. Sub-section (3) of Section 465 makes it clear
that the mention of particular matters in Sub-section (2) shall not be held
to prejudice the general application of Section 6 of the General Clauses
Act, 1897.

F 20.28 The provisions of Section 465, in so far as they relate to the
repeal of the 1956 Act are concerned, came into force on 30-01-2019,
vide S.O. 560 (E) dated 30-01-2019. In other words, the provisions of
the 1956 Act continued to be in force till repealed on 30-01-2019. It
means that the criteria for a “private company” under sub-clauses (a),
(b), (c) and (d) of clause (iii) of sub-section (1) of section 3 of the 1956
G Act, did not stand repealed until 30-01-2019. But the new definition of a
“private company” under section 2(68) of the 2013 Act had already
come into effect on and from 12-09-2013.
20.29 As a result, we had 2 definitions of the expression “private
company” from 12-09-2013 [the date appointed for the coming into force
H of section 2(68) of the 2013 Act] to 30-01-2019 (the date on which
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 1065
INVESTMENTS PVT. LTD. AND ORS.

section 3(1) of the 1956 Act became a dead letter consequent upon the A
repeal of the 1956 Act through the notification of the repeal provision
under section 465).
20.30 Therefore, we have to fall back upon section 465(3) of the
2013 Act to conclude that section 2(68) of the 2013 Act will prevail over
section 3(1)(iii) of the 1956 Act. In other words, on and from 12-09- B
2013, the question whether a company is a private company or not, will
be determined only by the definition of the expression “private company”
found in section 2(68) of the 2013 Act.
20.31 The articles of association of Tata sons contain the restrictions
prescribed in sub-clauses (a), (b) and (c) of Section 3(1)(iii) of the 1956 C
Act, but they do not satisfy the requirement of sub-clause (d) incorporated
in the year 2000. However, on and from 12-09-2013, which is the date
appointed for the coming into force of section 2(68) of the 2013 Act, the
articles of association of Tata Sons satisfy the requirements of Section
2(68) of the 2013 Act. Therefore, it was and it continues to be a private
company. D

20.32 In other words, the status of Tata Sons-
(i) was that of a private company till 31-01-1975;
(ii) was that of a deemed public company under section 43A from
01-02-1975 till 12-12-2000; E
(iii) was that of a company that continued to be a deemed to be
public company from 13-12-2000 till 11-09-2013 by virtue of section
3(1)(iii) of the 1956 Act as amended by Act 53 of 2000 with effect from
13-12-2000; and
F
(iv) was that of a private company with effect from 12-09-2013
within the meaning of section 2(68) of the 2013 Act.
20.33 Interestingly, it is not disputed by anyone that today Tata
Sons satisfy the parameters of section 2(68) of the 2013 Act. The dispute
raised by the S.P. Group and accepted by NCLAT is only with regard to
the procedure followed for reconversion. NCLAT was of the opinion G
that Tata Sons ought to have followed the procedure prescribed in Section
14(1)(b) read with Sub-sections (2) and (3) of Section 14 of the Companies
Act, 2013 for getting an amended certificate of incorporation. NCLAT
was surprised (quite surprisingly) that Tata Sons remained silent for more
than 13 years from 2000 to 2013 without taking steps for reconversion in H
1066 SUPREME COURT REPORTS [2021] 12 S.C.R.

A terms of Section 43A(4) of the 1956 Act. While on the one hand, NCLAT
took note of the “lethargy” on the part of Tata Sons in taking action for
reconversion, NCLAT, on the other hand also took adverse notice of the
speed with which they swung into action after the dismissal of the
complaint by NCLT.
B 20.34 But what NCLAT failed to see was that Tata sons did not
become a public company by choice, but became one by operation of
law. Therefore, we do not know how such a company should also be
asked to follow the rigors of Section 14(1)(b) of the 2013 Act. As a
matter of fact, Section 14(1) does not ipso facto deal with the issue of
conversion of private company into a public company or vice versa.
C Primarily, Section 14(1) deals with the issue of alteration of Articles of
Association of the company. Incidentally, Section 14(1) also deals with
the alteration of Articles “having the effect of such conversion”.
20.35 By virtue of the proviso to sub-section(1A) of Section 43A
of the 1956 Act, Tata Sons continued to have articles that covered the
D matters specified in sub-clauses (a), (b) and (c) of Clause(iii) of Sub-
section(1) of Section 3 of the 1956 Act. Though it did not have the
additional stipulation introduced by Act 53 of 2000, namely the stipulation
relating to acceptance of deposits from public, this additional requirement
disappeared in the 2013 Act. Therefore, Tata Sons wanted a mere
E amendment of the Certificate of Incorporation, which is not something
that is covered by Section 14 of the 2013 Act. NCLAT mixed up the
attempt of Tata Sons to have the Certificate of Incorporation amended,
with an attempt to have the Articles of Association amended. Since Tata
Sons satisfied the criteria prescribed in Section 2(68) of the 2013 Act,
they applied to the Registrar of companies for amendment of the
F certificate. The certificate is a mere recognition of the status of the
company and it does not by itself create one.
20.36 As pointed out by this court in Ram Parshotam Mittal Vs.
Hillcrest Realty25, “it is not the records of the Registrar of Companies
which determines the status of the company”. The status of the
G company is determined by the Articles of association and the statutory
provisions.
20.37 NCLAT was wrong in thinking that Tata Sons ought to
have taken action during the period 2000-2013 and obtained approval of
25
(2009) 8 SCC 709
H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 1067
INVESTMENTS PVT. LTD. AND ORS.

the Central Government to become a private company under Sub-section A
(4) of Section 43A of the 1956 Act. Sub-section (11) of section 43A,
inserted under Act 53 of 2000 made all sub-sections of Section 43A
except sub-section (2A), inapplicable on and after the commencement
of the Act. Therefore, it is clear that Sub-section (4) ceased to exist on
and from 13.12.2000 and hence the question of Tata Sons seeking the
B
approval of the Central Government under Sub-section (4) during the
period 2000-2013 did not arise.
20.38 The only provision that survived after 13.12.2000 was Sub-
section (2A) of Section 43A. It survived till 30-01-2019 until the whole
of the 1956 Act was repealed. There are two aspects to Sub-section
(2A). The first is that the very concept of “deemed to be public company” C
was washed out under Act 53 of 2000. The second aspect is the
prescription of certain formalities to remove the remnants of the past.
What was omitted to be done by Tata Sons from 2000 to 2013 was only
the second aspect of Sub-section (2A), for which Section 465 of the
2013 Act did not stand as an impediment. Section 43A(2A) continued to D
be in force till 30-01-2019 and hence the procedure adopted by Tata
Sons and the RoC in July/August 2018 when section 43A(2A) was still
available, was perfectly in order.
20.39 As rightly held by this court in Darius Rutton Kavasmaneck
vs. Gharda Chemicals Ltd 26, Parliament always recognised the E
possibility of a deemed public company again reverting back to the
status of a private company. Though this court took note of the conflict
between section 27(3) and section 3(1)(iii)(d), after the amendment by
Act 53 of 2000, this court nevertheless held in Gharda Chemicals that
by incorporating the requirement of sub-clause (d) of section 3(1)(iii) in
the Articles of Association, a deemed public company can revert back F
to its status as a private company, in view of sub-section (2A) of section
43A, by incorporating necessary provisions in the Articles. In simple
terms, a company which becomes a deemed public company by operation
of law, cannot be taken to have undergone a process of fermentation or
coagulation like milk to become curd or yogurt, having an irreversible G
effect.
20.40 Therefore, NCLAT was completely wrong in holding as
though Tata Sons, in connivance with the Registrar of companies did
26
(2015) 14 SCC 277 [see the editor’s note in the SCC report regarding the conflict
between sec.27(3) and sec. 3(1)(iii)(d)] H
1068 SUPREME COURT REPORTS [2021] 12 S.C.R.

A something clandestinely, contrary to the procedure established by law.
The request made by Tata Sons and the action taken by the Registrar of
Companies to amend the Certificate of Incorporation were perfectly in
order.
20.41 It was argued on behalf of SP group (i) that in 1995 Tata
B Sons allowed renunciation of entitlement to rights issue, in favour of
rank outsiders, throwing the restriction contained in section 3(1)(iii) to
the wind (ii) that till September 2002, Tata Sons accepted deposits from
public and hence sub-clause (d) of section 3(1)(iii) was not satisfied (iii)
that as per the circular of the Department of Company Affairs, a
company which does not approach the RoC for reconversion would be
C deemed to have chosen to remain as a public company (iv) that as per
RBI circular dated 1-1-2002 private companies accepting deposits would
become public companies (v) that till the year 2009, Tata Sons chose to
describe itself only as a public company in the forms filed under Rule 10
of the Companies (Acceptance of Deposits) Rules, 1975 (vi) that the
D conversion adversely affected the ability of Tata Sons to raise funds
increasing borrowing costs (vii) that Tata Sons will be required to refund
the investments made by insurance companies on account of the
conversion and (viii) that the act of conversion lacked probity and was
also prejudicial to the interests of the minority shareholders and the
company as well as independent directors.
E
20.42 But we are not impressed with the above contentions. Once
the company had become a deemed public company with effect from 1-
2-1975, the privileges of a private company stood withdrawn and the
company was entitled in law to allow renunciation of shares under rights
issue. In any case, the validity of what was done in 1995 was not in
F question. That they accepted deposits from public till September 2002, is
the reason why they were not reconverted as a private company at that
time. Once a new definition of the expression “private company” came
into force with effect from 12-09-2013 under section 2(68) of the 2013
Act, the only test to be applied is to find out if the company fits into the
G scheme under the new Act or not. We need not go to the circulars
issued by the department or the RBI when statutory provisions show the
path with clarity. The description of the company in the forms filed under
Rule 10, reflected the true position that prevailed then and they would
not act as estoppel when the company was entitled to take advantage of
the law. That the ability of the company to raise funds has now gone and
H
TATA CONSULTANCY SERVICES LIMITED v. CYRUS 1069
INVESTMENTS PVT. LTD. AND ORS.

that the company will have to repay the investments made by insurance A
companies, are all matters which the shareholders and the Directors are
to take care. The question before the court is whether the reconversion
is in accordance with law or not. The question is not whether it is good
for the company or not.
20.43 The real reason why SP group and CPM are aggrieved by B
the conversion is, that most of their arguments are traceable to provisions
which apply only to public and listed public companies. If re-conversion
goes, they may perhaps stand on a better footing. But that would
tantamount to putting the cart before the horse. One may be entitled to
a collateral benefit arising out of a substantial argument. But one cannot
seek to succeed on a collateral issue so as to make the substantial C
argument sustainable.
20.44 Therefore, question of law No. 5 is accordingly answered
in favour of Tata Sons and as a consequence, all the observations made
against the appellants and the Registrar of companies in Paragraphs
181, 186 and 187 (iv) of the impugned judgment are set aside. D

21. Conclusion
21.1 Thus in fine, all the questions of law are liable to be answered
in favour of the appellants-Tata group and the appeals filed by the Tata
Group are liable to be allowed and the appeal filed by S.P. Group is liable E
to be dismissed. But before we do that we should also deal with the
application moved by S.P. Group before us during the pendency of these
proceedings, praying for the alternative relief of directing Tata Sons and
others to cause a separation of ownership interests of the S.P. Group in
Tata sons through a scheme of reduction of capital by extinguishing the
shares held by the S.P. Group in lieu of fair compensation effected through F
a transfer of proportionate shares of the underlying listed companies,
with the balance value of unlisted companies and intangibles including
brand value being settled in cash.
21.2 Interestingly, such an application was filed after Tata Group
moved an application for restraining S.P. Group from raising money by G
pledging shares and this court passed an order of status quo on
22.09.2020. For the first time S.P. Group seems to have realized the
futility of the litigation and the nature of the order that the Tribunal can
pass under Section 242. This is reflected in Paragraph 62 of the application,
H
1070 SUPREME COURT REPORTS [2021] 12 S.C.R.

A where S.P. Group has stated that they are seeking such an alternative
remedy as a means to put an end to the matters complained of.
21.3 As a matter of fact, S.P. Group should have sought such a
relief from the Tribunal even at the beginning. As we have pointed out
elsewhere a divorce without acrimony is what is encouraged both in
B England and in India under the statutory regime.
21.4 But in an appeal under Section 423 of the Companies Act,
2013, this Court is concerned with questions of law arising out of the
order of NCLAT. Therefore, we will not decide this prayer. It should be
pointed out at this stage that Article 75 of the Articles of Association is
C nothing but a provision for an exit option (though one may think of it as
an expulsion option). After attacking Article 75 before NCLT, the S.P.
Group cannot ask this Court to go into the question of fixation of fair
value compensation for exercising an exit option. What is pleaded in
Paragraph 72 of the application for separation of ownership interests,
require an adjudication on facts, of various items. The valuation of the
D shares of S.P. Group depends upon the value of the stake of Tata Sons
in listed equities, unlisted equities, immovable assets etc., and also perhaps
the funds raised by SP group on the security/pledge of these shares.
Therefore, at this stage and in this Court, we cannot adjudicate on the
fair compensation. We will leave it to the parties to take the Article 75
E route or any other legally available route in this regard.
21.5 In the result, all the appeals except C.A. No.1802 of 2020
are allowed and the order of NCLAT dated 18.12.2019 is set aside. The
Company Petition C.P. No. 82 of 2016 filed before NCLT by the two
Companies belonging to the S.P. Group shall stand dismissed. The appeal
F C.A. No.1802 of 2020 filed by Cyrus Investments Pvt. Ltd., and Sterling
Investments Corporation Pvt. Ltd. is dismissed. There will be no order
as to costs.
All IAs including the one for causing separation of ownership
interests of the S.P. Group in Tata Sons namely IA No.111387 of 2020,
G are dismissed.

Bibhuti Bhushan Bose Appeals disposed of.

H