Lawstreet Journal

[DAY7] Lack of financial probity is not the only ground on which just and equitable winding up of company can take place : Senior Counsel Dwarkadas in Tata V Mistry Case

Lawstreet Journal 21 Dec 2020 8:16pm

Image courtesy: Lawstreet Journal Business [DAY7] Lack of financial probity is not the only ground on which just and equitable winding up of company can take place : Senior Counsel Dwarkadas in Tata V Mistry Case

Senior Counsel Shyam Divan commenced his arguments stating that the proposal going around for pre-consultation was contrary to what is provided under the Companies Act, 2013 under which directors should act independently. 

He even traced various letters, emails and what transpired in board meeting which eventually led to Mistry's removal as executive chairperson. 

THREE SECTIONS OF COMPANIES ACT, 2013 HAVE BEEN BREACHED: DIVAN

Divan further added that the statutory provisions of Companies Act was violated.

He extensively cited, "Section 166 - on mandate that directors have to exercise independent judgement, Section 188(10) - Secretarial rules to be followed which was not in the case including giving of notice, and Section 149 - which mandates board has to manage company, not majority shareholder. "

"What happened was illegal, wrong and completely oppressive", Divan stated. 

When CJI Bobde asked if Cyrus Mistry was the Managing Director, Salve argued that there is no contract as such and it was by operation of law that he became MD. 

Once he was removed as Executive Chairperson, he ceased to be MD" , Salve added.

 

EVERY DIRECTOR WAS REQUIRED TO ACT IN GOOD FAITH AND INDEPENDENTLY BUT THEY FAILED TO DO SO: DIVAN

Divan submitted that the actions by Board of Director were against foundational principles of decency and they were burdensome and prejudicial. 

Taking reference from the celebrated judgement of Needle Industries,  Divan further submitted that Probity is much more thanmaking financial profits.

Mr. Divan concluded his argument stating, "Section 10(1) of Companies Act 2013 says articles of company will have to be subject to the act. Hence, you… Continue Reading...


Tagged: Tata-Mistry  
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