Mistry alleges ‘miscarriage of justice’ in review plea

In its review petition in the Supreme Court, the SP group has said the rights of minority shareholders like them have been affected with the Supreme Court order in the Tata versus Mistry case, and has led to “miscarriage of justice”. These errors “will have wider ramifications for implementation of the statutory safeguards enshrined in the Companies Act 2013 and hence petition”, it said.

In its review petition in the Supreme Court (SC), the SP group has said the rights of minority shareholders like them have been affected with the Supreme Court order in the ‘Tata versus Mistry’ case, and has led “miscarriage of justice”.

These errors “will have wider ramifications for implementation of the statutory safeguards enshrined in the Companies Act 2013 and hence petition”, it said.

The group said the Companies Act, 2013, was legislated after consultation to raise corporate governance standards, but some of the observations and findings of the SC’S judgment on March 26 eroded them and diluted the legislative intent behind the Act.

SP group had last week filed a review petition after the top court rejected its appeal and set aside an earlier National Company Law Appellate Tribunal (NCLAT) order that had reinstated Mistry as chairman of the Tata group.

The apex court had said Mistry’s sacking was in accordance with the law and one of the biggest mistakes made by the Tata Sons board was to appoint Cyrus Mistry chairman of the board.

In its review petition, the SP group said while on the one hand the judgment held that the removal of a director “can never be oppressive or prejudicial”, on the other hand, it said where the removal was oppressive, relief could be granted.

“This is relevant because if one of these two approaches is to be accepted then the complaints raised by the SP Group would fall within the formulation of the law even as laid down in the judgment,” it said.

The SP group said the judgment had failed to apply the findings of the NCLAT without even declaring them to be perverse. This, the judgment itself acknowledges, is the legal standard to be met before a court of law can interfere with such findings. Besides, it said the SC had ignored the findings of the NCLAT and wrongly declared that the tribunal could not go into the justification for Mistry’s removal.

“This flawed approach has become

the basis to declare that the ouster of a CMD (one the Supreme Court judgment acknowledges is a representative of the minority shareholder no less) and the manner employed to achieve them (which it holds was not pre-meditated but well planned), can never be a subject matter of a complaint under Section 241 of the 2013 Act — a finding that is exfacie

contrary to Section 241(1)(b) which the Judgement overlooks in its entirety,” it said.

The judgment, the review petition said, held that Mistry was not “managing director” of Tata Sons but only “executive chairman” and hence the requirement of a shareholder resolution to remove an MD, as required under

Articles 105A, would not be breached.

“These findings are contrary to the record and stand of the Tatas themselves that Mistry was indeed a Managing Director. Further, the NCLAT had also observed that the removal of Mistry was contrary to the provisions of Article 118,” the SP group said.

Declaring that investment-holding firms such as Tata Sons, whose majority shareholders are charitable trusts, are effectively sui generis virtually grants them judicial exemption from the application of Sections 241-242 of the Companies Act, it said.

The judgment, according to the SP group, makes the error of treating the application of company law as a variable based on the identity of the shareholder of the company.

Contrary to the statutory provisions of the Companies Act, 2013, it seeks to dilute fiduciary duties of directors, depending on which shareholder has nominated the director.

The judgment has overlooked the fact that a director must act in the best interests of the firm and members under Section 166(2), and not just to further interests of the shareholder who nominated the director, it said. The judgment confuses the duty of “independent judgement” expected of all directors under Section 166 with the qualification criteria for a director to be termed “Independent Director”, a special type of Director under Section 149, it added.