In a major development in the Tata Sons-Cyrus Mistry case, the National Company Law Appellate Tribunal (NCLAT) has ordered the restoration of Cyrus Mistry as the Executive Chairman of Tata Sons on Wednesday. The NCLAT also held the appointment of N Chandrasekaran as the Executive Chairman of the group as illegal.
The tribunal, however, added that the order of restoration of Mistry is going to be operational after four weeks. The period will allow the Tata group to file for an appeal against NCLAT’s latest decision.
The news broke during the fag end of market hours on Wednesday. Shares of key Tata group companies – Tata Motors slipped 3.05 per cent to Rs 174.70 on the BSE, while that of Tata Consultancy Services (TCS) ended 0.07 per cent higher at Rs 2,167.25 and Tata Steel settled 1.16 per cent higher at Rs 444.60 on Wednesday.
Hours after the NCLAT’s decision, Mistry in a statement that the outcome of his appeal is a vindication of his stand. “Today’s judgment isn’t a personal victory for me, but is a victory for the principles of good governance and minority shareholder rights. The outcome of the appeal is a vindication of my stand,” he was quoted in a statement by ANI.
Earlier this year in January, Cyrus Investments – is the investment firm of Shapoorji Pallonji (SP) Group, had contended to the tribunal that Cyrus Mistry was removed as the chairman of Tata Sons against the company’s Articles of Association (AoA).
Cyrus Investments had also urged for the modification in Tata Sons’ AoA, particularly Article 75, which empowers it to ask minority shareholders to transfer their shares.
The SP Group had also earlier requested the NCLAT to order amending Article 121 of the Tata Group’s Articles of Association, alleging that the article was helping Dorabji Tata Trust and Ratan Tata Trust, part of the Tata Trust, to govern the whole Group even as they are the minority shareholders.
Who is Cyrus Mistry?
Cyrus Mistry, son of Pallonji Mistry who is the owner of the Shapoorji Pallonji group and the biggest stakeholder in the Tata group, was appointed to the top position in 2012. Relations were seen as amicable between Mistry and Tata until the vitriol of recent days emerged.
Mistry had effected several changes in the business practices due to which capital expenditure increased but returns to shareholders decreased. He replaced the trusted hands of Ratan Tata and his proposed sale of Tata Steel port plant in the UK was seen as harming the goodwill earned by Tata abroad. The extended dispute with the Docomo group proved to be one of the nails in the coffin. Tata had to cough up $1.2 billion in the arbitration to the Japanese group.
A Civil Engineer from London’s prestigious Imperial College, Mistry was involved in the family’s flagship construction business before he left it to join the Tatas. He learnt the business ropes at Tata Industries, Tata Steel, Tata Chemicals and Tata Motors. And his hard work paid off as he rose to be the director of several other companies like Forbes Gokak, United Motors (India) and Shapoorji Pallonji and Co.
Cyrus Mistry, whose family owns 18.4 per cent stake in Tata Sons, had challenged his removal in the National Company Law Tribunal (NCLT).
The case of oppression and mismanagement against Tata Sons and 20 others, including Ratan Tata, filed by Mistry family entities – Cyrus Investments and Sterling Investments – were however in March 2017 dismissed by the NCLT ruling that they were not eligible to pursue the allegations.
Section 244 of the Companies Act, 2013 allows a shareholder of a company to bring an oppression and mismanagement case against the firm if it holds not less than one-tenth of the issued share capital.
On appeal, the Cyrus Mistry firms had secured a partial win at the NCLAT, which waived the 10 per cent shareholding requirement but remitted the matter to the NCLT.
In July last year, the NCLT rejected Mistry’s petition to reinstate him and found no merit in his allegations of operational mismanagement and oppression of minority shareholders.
Mistry had approached the appellate tribunal against the verdict of Mumbai NCLT. The NCLAT had reserved its judgment after completion of arguments from both sides in July this year. The judgment was pronounced by a two-judge bench headed by Justice S J Mukhopadhyay on Wednesday.
(with inputs from PTI)
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