InvestorQ : Why is the Mistry family demanding that Tatas seek NCLT approval for converting into a private limited company?
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Why is the Mistry family demanding that Tatas seek NCLT approval for converting into a private limited company?

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Niti Shenoi answered.
4 months ago
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There is a new twist to the ongoing case between the Tatas and the Mistry family. While Harish Salve is the counsel arguing the case on behalf of the Tata group, another eminent lawyer C Ariyama Sundaram is arguing the case on behalf of the Mistry Family. Many of the recent arguments have been raised by Sundaram against the private limited conversion.

Here is a quick background. When the dispute between the Tatas and the Mistry family was still on, the Tatas decided to pass a resolution to convert Tata Sons from a public limited company into a private limited company. This was done because the Tata Trusts owned about 66% of the shares of Tata Sons and hence could muster a majority.

Now the Mistry family counsel, Ariyama Sundaram, has demanded that Tata Sons apply to NCLT for approval to convert into private limited company. Mistry counsel, Ariyama Sundaram, has argued that this was mandatory under the new Companies Act 2013. However, such an approval was not sought by the Tatas at the time of conversion.

Tata Sons had applied to the ROC to convert Tata Sons into a private limited company. According to Ariyama Sundaram, such a move was against the spirit of the Companies Act as they were required to approach the NCLT for the approval, whereas they had approached the ROC for the same.

As a result of this conversion, Tatas had managed to block the recent proposal by Mistry family to pledge their stake in Tata Sons to raise loans to fund their genuine business needs. The hearing will continue in the court on 16 December, and there appears to be no easy solution in sight, unless there is an attempt to thrash out an out-of-court settlement.

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