Background
Tata Group is an Indian multinational conglomerate holding company founded by Jamshedji Tata in 1868. Cyrus Mistry was the Managing Director of Shapoorji Pallonji & Company, who is the minority shareholders in Tata Group. In December 2012, Cyrus Mistry was appointed as the Executive Chairman of the Tata Sons Ltd. and Ratan Tata was appointed as ‘Chairman Emeritus’ for advisory purposes.
In October 2016, Tata Sons voted to remove Cyrus Mistry from the position of Executive Chairman by the Board of Directors. In March 2017, the minority shareholders like, Shapoorjii Pallonjii Group, Cyrus Investment Pvt. Ltd and Sterling Investment Corporation Pvt. Ltd together moved an application in NCLT, Mumbai under Sections 241, 242 of Companies Act, 2013 asserting arbitrary and tyrannical acts by the majority shareholders. Tata Sons Limited is a group company comprising of Tata Trusts, Tata Family, Tata Group Cos. collectively hold over 81% of shares and Mistry with Shapoorji holding 18% of the shares. Therefore, the petitions were dismissed under Section 244 of Companies Act.
On Appeal, in September 2017, NCLAT directed the NCLT to hear the matter as an exceptional case as SP group had an investment of 1,00,000 Crore out of 6,00,000 Crore of total investment. NCLT in July 2018, issued a verdict in favour of Tata Sons on charges of mismanagement levelled against Mistry.
NCLAT Decision
On August 2018, an appeal was filed against the decision of NCLT in which Mistry claimed that the NCLT did not reflect on the merits of his case.
Mr Mistry had contended that Tata Sons Chairman Emeritus Mr Ratan N. Tata and Mr N.A. Soonawala kept “interfering in the affairs of the company and demonstrating their insecurity about their legacy are undermined instead of looking to what is in the best interests of the company. Over a period of time, this turned to insist that it is the will of the majority shareholder i.e. the ‘Tata Group’ that should prevail”.
On hearing the contentions, the NCLAT’s two-member bench headed by Chairperson Justice SJ Mukhopadhaya decided in favour of Cyrus Mistry. The NCLAT held the removal of Cyrus Mistry to be arbitrary and illegal in nature. The NCLAT also held that Tata sons abused its power for the removal of Cyrus Mistry and also the appointment of N. Chandrashekharan as executive chairman in place of Cyrus Mistry was held to be illegal. It also ruled that the Tata Sons’ transition from a public company to a private company was against Indian law. The NCLAT ordered to reinstate Cyrus Mistry in its position with immediate effect for the rest of the tenure.
Tatas moves Supreme Court
The Tata Sons have now moved an appeal against the order of NCLAT claiming that the order is undermined ‘Corporate Democracy’ and the rights of its shareholders. On January 3, Ratan Tata had also filed a petition in the apex court seeking to quash the tribunal’s order directing the group’s holding company Tata Sons to rehire the chairman it had fired in 2016. He said that the order holding him guilty of oppressive and prejudicial steps against the interests of Tata Sons shareholders without explaining the factual or legal foundation.
However, Cyrus Mistry has said that he has no plans to rejoin Tata. He, however, said that he will “vigorously pursue all options to protect our rights as a minority shareholder”.
Since the case is listed on a non-miscellaneous day, a Friday i.e. 10th January, the top court will most possibly issue notices to the Mistry faction to formally explain their legal position to the court and adjourn it for a final hearing on the issues raised in the petitions.
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