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The Bombay High Court has quashed proceedings initiated against Tata Sons’ former Chairman Ratan Tata, current Chairman N Chandrasekaran, and eight directors in a criminal defamation case filed by Nusli Wadia.
A Division Bench of Justices Ranjit More and Bharati Dangre passed a ruling to this effect on Monday.
In December last year, a Magistrate court in Mumbai had issued notice to Ratan Tata and the others in the criminal defamation case filed by Wadia in 2016.
Wadia filed the complaint after he was voted out by the shareholders through an extraordinary meeting from the boards of some of the Tata Group companies including Tata Steel, Tata Motors and Tata Chemicals.
In his complaint, Wadia had claimed that Ratan Tata and others had made defamatory statements against him after they removed Cyrus Mistry as Chairman of Tata Sons in October 2106.
He complained that Tata and others had been instrumental in preparing the allegedly defamatory content of the Special Notice and that they collectively ensured that the contents were published and circulated.
The Magistrate court held that the statements made in the notices issued for the extraordinary general meeting for the removal of Wadia and the news items that followed were defamatory in nature.
Submissions before the Bombay High Court
Appearing for Ratan Tata, Senior Counsel Abhishek Manu Singhvi told the High Court that the defamation case was a fallout of a corporate dispute.
He argued that the November 2016 letters and minutes of the meeting circulated by Tata Sons to its group companies only sought for Wadia’s removal as he was acting against the company’s interests. He contended that the notice of his removal cannot be construed as libel.
Singhvi also argued that there was non-application of mind on the part of the Magistrate who initiated the defamation proceedings. This was reflected in the issuance of notice despite the fact that the place of residence of certain respondents was beyond the jurisdiction of the Magistrate.
Wadia’s counsel, advocate Aabad Ponda, however, asserted that the requisition for removal under the Companies Act was used to defame Wadia. He contended that Special Notices for the extraordinary general meeting were deliberately sent to the print media in order to bring disrepute to Wadia.
At the outset, the High Court ruled that a company is well within its rights to remove a Director as per Section 169 of the Companies Act, if it is found that he was acting against the interests of the company.
As regards the truthfulness of the content of the Special Notice, the Court held,
“It is not necessary for us to assess or judge the truthfulness of the imputation/allegation since ultimately the allegations levelled against the respondent No.2 has caused his removal by the Board of Directors of the respective companies.
The imputation contained in the Special Notice cannot be viewed independent of the purpose for which it is included in the Special Notice and if the petitioners have adopted a legal course permissible to be adopted under the frame work of the statute governing it, we do not think the allegations can be termed as “per se defamatory”.”
The Court found merit in Singhvi’s submission that there was non-application of mind on the part of the Magistrate in issuing notice. As noted in the judgment,
“The Magistrate before issuing the process, has failed to take into consideration the conspectus of the matter and though it is the duty cast upon him to be satisfied before issuance of a process, he had concluded without any material being placed before him that the statement is defamatory.”
The High Court also noted that it is not conclusively established whether it was Ratan Tata and the others who leaked the information to the media.
“It could not be said that it was circulated widely over a section of general public. Publication of news about a resolution passed by well-acclaimed business house happened to be business news for media and Ratan Tata and Nusli Wadia being well- known business personalities, the story of removal of Wadia happened to be a hot topic for media.”
The Court went on to observe that there was no prima facie defamation involved and that it could not find any actual harm caused to Wadia’s reputation. It noted that the element of mens rea was absent and that the publication of the content was only limited to the Board of Directors and the shareholders.
In this backdrop, the Court opined that since summoning of an accused such as Ratan Tata and others is a serious matter affecting his dignity and reputation in society, there has to be application of mind before initiating the process.
It, therefore, allowed Tata’s plea, ruling that,
“We conclude that the order passed by the magistrate is without application of mind and cannot be sustained and resultantly, we quash and set aside the impugned order.”
Senior Advocates Mohan Parasaran and Amit Desai also appeared for Ratan Tata, N Chandrasekaran and other petitioners. They were briefed by a Shardul Amarchand Mangaldas team led by Nitesh Jain along with Atul Jain, Adrish Majumdar, Zulfiquar Memon, Parvez Memon, Waseem Pangarkar, Chirag Naik, Sidharth Sharma, L Nidhiram Sharma, Azeem Samuel, and Ashwin Kumar.