CYRUS BACK AFTER BOARD ROOM COUP
Mistry is reinstated as Tata Group Chairman after his dramatic sack in 2016; Restoration after four weeks during which period the Tata Group can appeal; move to turn private was unlawful, reversal ordered.
Cyrus Mistry has been reinstated as the executive chairman of Tata Sons by the National Company Law Appellate Tribunal (NCLAT), three years after his dramatic sacking at a board meeting, following which Ratan Tata took over as interim chairman.
The tribunal said that the restoration order will be operational after four weeks and the Tata Group can appeal in the Supreme Court during this period.
The court also said Tata Sons' move to turn private was unlawful and ordered a reversal. Tata Sons' board had approved a plan to go private in September 2017.
It was Mistry’s contention at the height of the showdown that he was hemmed in and sequestered by the brazen might of majority shareholders. The two-judge panel, too, said that Ratan Tata’s actions against Mistry were oppressive.
It will be recalled how in the fateful Tata Sons board meeting of October 24, 2016, Mistry was informed that Ratan Tata would be joining it. The agenda was, however, hijacked and Mistry was brought down in a palace coup where all the directors ganged up, barring Farida Khambata who abstained. Mistry had said categorically that he should have been given advance notice of his removal but Ratan Tata trashed this by saying that a press announcement would come later in the day.
Putting the ruling in perspective, Aryama Sundaram, counsel for Mistry, explained that it wasn't the individual right of Mistry which was being trampled, it was oppression and mismanagement of the board that was in question and this directly impacted varied shareholders, including millions of public shareholders.
‘‘The reason of his removal and the manner of his removal were thus under the scanner. The action of a majority was under question for it challenged the Articles of Association. The Companies Act expects the boards of corporates to conduct their business in a manner which looks after the welfare of all shareholders and stakeholders... it doesn't act on the whims and fancies of a majority
It wasn't the individual right of Mistry which was being trampled, it was oppression and mismanagement of the board that was in question and this directly impacted varied shareholders, including millions of public shareholders – Mistry’s counsel to IANS
shareholder," pointed out Mistry’s counsel. In the earlier judgment, the NCLT appeared to have gone with the Tata name and the majoritarian view. The ruling also says that, curiously, Tata Sons remained silent for 13 years and never took any step for conversion in terms of Section 43A (4) of the Companies Act, 1956. Even after the enactment of the Companies Act, 2013, which came into force on April 1, 2014, it had not taken any step under Section 14 for more than three years. Till date, no application has been filed before the Tribunal under Section 14 (2) for its conversion from public to private company.
"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," Cyrus Mistry said in a statement.
Tata Sons, in a statement said, "The NCLAT order appears to even go beyond the specific reliefs sought by the appellant. Tata Sons strongly believes in the strength of its case and will take appropriate legal recourse. Tata Sons assures its various stakeholders that it not only has always operated in a fair and equitable manner but also acted in accordance with the law and will continue to do so."
Mistry's family owns over 18 per cent stake in Tata Sons. He currently serves as managing director of Shapoorji Pallonji & Company, which is part of the Shapoorji Pallonji group owned by his family.