In a major setback for Ratan Tata, the National Company Law Appealte Tribunal ruled yesterday that the sudden removal of Cyrus Mistry as executive chairman of Tata Sons in 2016 was illegal and restored Mistry to his former position. Tata Sons is the holding company for Tata group companies that make everything from salt to software.
The NCLAT also held that the appointment of N Chandrasekaran, the current chairman of Tata Sons, was illegal. Chandrasekaran was named chairman in February 2017. Tata Sons has four weeks to challenge the order in the Supreme Court.
The two-member NCLAT bench headed by Justice S J Mukhopadhaya had reserved the order on an appeal filed by Mistry in July. Mistry had appealed against NCLT’s order, which upheld Tata Sons’ decision to first remove him as a chairman and then as director of Tata Sons.
Mistry said in a statement, “Today’s judgment is not a personal victory for me but is a victory for the principles of good governance and minority shareholder rights. For over 50 years, the Mistry family, as the significant minority shareholder of Tata Sons, has always endeavoured to play the role of a responsible guardian of an institution that the entire nation is proud of. 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.”
Meanwhile, Tata Sons said in its statement, “Tata Sons has received and is analysing the order of the NCLAT. It is not clear as to how the NCLAT Order seeks to overrule the decisions taken by shareholders of Tata Sons and listed Tata operating companies at validly constituted shareholder meetings. 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.”
The bench also reversed Tata Sons’ decision to turn itself from a public limited firm into private limited one. The judgement read, “Tata Sons turned into a private limited company in a marked departure of being a public limited company even as the matter was sub judice. Moreover, Articles 121 and 121A were introduced in 2000 and 2014 to safeguard the interests of the company, but they were blatantly misused and became ‘Articles of Oppression’ to further the ends of majoritarianism.”
The bench also observed that, despite stepping down from the position of executive chairman, Ratan Tata was interfering in company affairs. It said the level and scale of interference on a wide range of topics which extended well beyond legacy hotspots. Over 550 emails were exchanged between Tata and Mistry.
The judgement also came down heavily on the way Mistry was removed and observed, “No committee was formed for removal of the incumbent chairman as required under Article 118.”
The NCLAT also held that the appointment of N Chandrasekaran, the current chairman of Tata Sons, was illegal. Chandrasekaran was named chairman in February 2017. Tata Sons has four weeks to challenge the order in the Supreme Court.
The two-member NCLAT bench headed by Justice S J Mukhopadhaya had reserved the order on an appeal filed by Mistry in July. Mistry had appealed against NCLT’s order, which upheld Tata Sons’ decision to first remove him as a chairman and then as director of Tata Sons.
Mistry said in a statement, “Today’s judgment is not a personal victory for me but is a victory for the principles of good governance and minority shareholder rights. For over 50 years, the Mistry family, as the significant minority shareholder of Tata Sons, has always endeavoured to play the role of a responsible guardian of an institution that the entire nation is proud of. 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.”
Meanwhile, Tata Sons said in its statement, “Tata Sons has received and is analysing the order of the NCLAT. It is not clear as to how the NCLAT Order seeks to overrule the decisions taken by shareholders of Tata Sons and listed Tata operating companies at validly constituted shareholder meetings. 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.”
The bench also reversed Tata Sons’ decision to turn itself from a public limited firm into private limited one. The judgement read, “Tata Sons turned into a private limited company in a marked departure of being a public limited company even as the matter was sub judice. Moreover, Articles 121 and 121A were introduced in 2000 and 2014 to safeguard the interests of the company, but they were blatantly misused and became ‘Articles of Oppression’ to further the ends of majoritarianism.”
The bench also observed that, despite stepping down from the position of executive chairman, Ratan Tata was interfering in company affairs. It said the level and scale of interference on a wide range of topics which extended well beyond legacy hotspots. Over 550 emails were exchanged between Tata and Mistry.
The judgement also came down heavily on the way Mistry was removed and observed, “No committee was formed for removal of the incumbent chairman as required under Article 118.”
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