Companies

NCLAT puts Cyrus Mistry back on Tata Sons saddle; co can appeal

Our Bureau New Delhi | Updated on December 19, 2019 Published on December 18, 2019

Cyrus Mistry

Appellate body rules that N Chandrasekaran’s appointment as Executive Chairman is illegal

In a major victory for former Tata Sons’ Chairman Cyrus Mistry, the National Company Law Appellate Tribunal (NCLAT) ordered Tata Group to reinstate him as executive chairman, a post from which he was ousted following a boardroom coup in 2016. On its part, Tata Sons said it “strongly believes” in the strength of its case and will take appropriate legal recourse.

The appellate tribunal also declared the appointment of former Tata Consultancy Services head N Chandrasekaran as Tata Group’s Executive Chairman and the conversion of Tata Sons from a public company to private company as “illegal”.

Tatas to appeal

In its order on Wednesday, the appellate tribunal stayed Mistry’s reinstatement for four weeks, allowing Tatas time to file an appeal.

Mistry, who was the sixth chairman of the Tata Group from 2012-2016, was ousted following a boardroom battle on October 24, 2016. Later, Mistry — through two family-run firms — Cyrus Investments and Sterling Investments Corp — moved the National Company Law Tribunal in Mumbai against Tata Sons.

The respondents belatedly ascribed disingenuous reasons to justify the removal of Cyrus Pallonji Mistry by inter alia linking it to his alleged lack of performance. However, none of the purported reasons provided for removing the 11th respondent (Mistry) as executive chairman had ever been discussed or deliberated prior to the removal. In any event, such fictitious reasons are clearly belied from the record, NCLAT said.

“I think this is a great vindication for the rights of minority stakeholders and the manner in which Mistry was ousted. The whole thrust was the company should have strict corporate governance, transparent management and interests of all minority shareholders should be protected, especially since the company controlled so many Tata firms with lakhs and lakhs of small public investors,” Mistry’s counsel C. Aryama Sundaram told BusinessLine.

In an e-mailed statement, Tata Sons said that it was analysing the order.

“It is not clear as to how the NCLAT order seeks to overrule the decisions taken by shareholders of Tata Sons and listed Tata operating companies at validly constituted shareholder meetings. The NCLAT order appears to even go beyond the specific relief sought by the appellant. Tata Sons strongly believes in the strength of its case and will take appropriate legal recourse,” the statement added.

‘Not a personal victory’

“Today’s judgment is not a personal victory for me, but is a victory for the principles of good governance and minority shareholder rights. For over 50 years, the Mistry family, as the significant minority shareholder of Tata Sons, has always endeavoured to play the role of a responsible guardian of an institution that the entire nation is proud of,” Mistry said in an e-mail statement.

“The outcome of the appeal is a vindication of my stand taken when the then board of Tata Sons, without warning or reason removed me, first as the executive chairman, and subsequently as a director of Tata Sons,” he added.

 

Also read: Cyrus Mistry saga: A timeline

 

Judgment summary

The following is a summary of the NCLAT's judgment

1. The acts of the Tata Sons Board including of RNT, NAS, and Nitin Nohria was prejudicial and oppressive

2. The 24 October 2016 resolution to remove CPM was illegal - therefore all subsequent acts, including appointing new Chairman also illegal.

3. CPM to be restored to his original position as Executive Chairman and Director of Tata Sons and other companies

4. Conversion of Tata Sons to private limited company was also illegal - ROC’s decision was illegal

5. Article 75 cannot be used against Mistry Group. Even against other persons it can only be used in exceptional circumstances with reasons to be recorded in writing

6. Certain observations in the NCLT Judgment against CPM and others were inappropriate — those observations are expunged

7. Entire NCLT Judgment is set aside. The part -- about reinstating CPM to the position of Executive Chairman -- has been suspended for 4 weeks

Published on December 18, 2019
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