Tata Sons has moved the Supreme Court seeking a stay on the National Company Law Appellate Tribunal’s (NCLAT) judgment that reinstated Cyrus Mistry as chairman. The petition is likely to be mentioned before the Chief Justice on January 6, when the court reopens after winter vacation.
“Restoring Cyrus Mistry to the position as Chairman has undermined corporate democracy and the rights of the board of directors,” Tata Sons said in its filing, a copy of which was reviewed by BusinessLine .
“The NCLAT has, in one stroke of the pen, pulled down the governance and corporate structure of the appellant (Tata Sons) so painstakingly put together by its founders, in the spirit of trusteeship and responsibility, in the course of last one century,” it said.
Per the petition, the direction to restore Mistry for his remaining term, which ended in March 2017, grants relief that was not sought. The order, which failed to notice that his term has ended, is also a “recipe for disaster”, it said.
Tata Sons also said the respondents had specifically pleaded before the National Company Law Tribunal (NCLT) that they were not seeking the reinstatement of Mistry as his tenure had expired.
Also read: NCLAT relied heavily on press release: Tata Group lawyers
A direction for him to continue as a functionary beyond the term would be contrary to the articles and established principles of the Company Law, and the NCLAT lacks the jurisdiction to grant any such relief, it added.
The appellate tribunal, by issuing such a direction, “has created confusion in the working of important corporate entities, some of which are listed companies”.
In its appeal filed through law firm Karanjawala & Co, Tata Sons stated that the reliefs provided by the NCLAT were “completely inconsistent with the annals of corporate law, reflects non-appreciation of facts and is untenable in law”.
The appellate tribunal, which has set aside NCLT’s judgment “without even discussing its findings and reasoning”, will set a “dangerous legal precedent”, it added. Interestingly, Tata Sons in its petition has made all the trustees of Tata Trusts — including Ajay Piramal, Venu Srinivasan, Nitin Nohria and Tata Sons Chairman N Chandrasekaran — as respondents.
Also read: Cyrus Mistry unlikely to stake a claim to Tata Sons’ chairman’s post
A public company
In its filing, Tata Sons also stated that another “serious error” was the finding that Tata Sons continued as a public company even after the change in legal status and after the Registrar of Companies (RoC), Mumbai, taking on record this change.
The NCLAT seems to have been influenced by a factually wrong finding that respondents had invested around ₹1 lakh crore. They had acquired majority of their shareholding through bonus and rights issues, it added.
Also read: NCLAT puts Cyrus Mistry back on Tata Sons saddle; company can appeal
The direction restraining Ratan N Tata and the nominee of Tata Trusts from taking any decision in advance, which requires a majority decision of the board or in the Annual General Meeting is “wholly nebulous” and seeks to stifle the exercise of rights of the shareholders and board members, it said.
This would result in their “disenfranchisement which cripples corporate democracy,” the petition added.
Read more: RoC Mumbai moves for amendment to NCLAT order in Tata-Mistry case
What Tata Sons says
Order to reinstate Mistry created confusion among corporate entities, some of which are listed companies
Mistry’s tenure as Chairman and Director of Tata Sons expired in March 2017. He didn’t seek reinstatement while the NCLAT provided it
The NCLAT’s finding that Tata Sons continued as a public company after a change in legal status, and after the RoC, Mumbai, took this on record is a serious error