Tata wins temporary relief in India’s biggest corporate feud

NEW DELHI: Tata Group scored a temporary victory in a corporate feud after the nation’s top court said an ousted chairman can’t return to his old job, a move that promises to reduce the legal distractions threatening to stunt growth at the Us$111bil conglomerate.

A three-judge Supreme Court bench on Friday put on hold a lower court verdict last month that ordered Tata Sons Pvt, the group’s holding firm, to reinstate Cyrus Mistry as chairman. On Dec 18, the National Company Law Appellate Tribunal said Tata Sons illegally removed Mistry as chairman three years ago at the behest of Ratan Tata, 82, calling the action of the chairman-emeritus “oppressive” to minority shareholders.

Chief Justice Sharad Arvind Bobde said during the hearing that the tribunal made “an error” in its judgment and the lower court had no power to order the reinstatement of Mistry as Tata Sons chairman.

The top court said it would hear the case in detail later, but didn’t give a date for further proceedings.

The legal wrangling has weighed on the Tata Group – whose businesses span software to trucks and aviation – at a time when its flagship automobile and steel units have been facing challenges from a slump in demand. Crown jewel Jaguar Land Rover, acquired by Tata Motors Ltd in 2008, is looking for partners to bolster its flagging prospects, while Tata Steel Ltd is slashing as many 3,000 jobs in Europe.

The Supreme Court also allowed Tata Sons to remain a privately held firm, making it difficult for minority shareholders – including Mistry’s family – to sell. Tata Sons gave an undertaking not to alter minority investors’ stakes.

“It is a big blow to Cyrus Mistry’s efforts to protect his rights as a minority shareholder of Tata Sons,” said Shriram Subramanian, founder of proxy advisory firm Ingovern Research Services Pvt. in Bangalore.

Shares of Tata Motors and Tata Steel extended gains after the stay order issued by the top court. — Bloomberg