Updated: March 30, 2021 8:26:54 am
The Supreme Court Friday allowed all appeals by the Tata Group and upheld its decision to sack Cyrus Pallonji Mistry as the chairman and executive director of the group. The judgment brings down curtains on one of the ugliest publicly-fought boardroom wars in the history of Corporate India.
What did the Supreme Court say in its judgment in the Tata Mistry case?
While allowing all the appeals by Tata Group, a three-judge bench led by Chief Justice of India Justice S A Bobde set aside the entire December 2019 order of the National Company Law Appellate Tribunal (NCLAT) that reinstated Mistry to his post.
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The three-judge SC bench also held that it would not go into the details of the compensation to be awarded or adjudicate on whether Tata Group could or could not use Article 75 of its Articles of Association.
The issue of resolving the value of the 18.4 per cent stake that the Mistry family holds in Tata Sons has been left to the parties, allowing them to take a legal route if they so wish to. The court also held that there was no oppression of minority shareholders of the Tata Group or any mismanagement at Tata Sons.
A detailed copy of the judgment is awaited.
What lies ahead for the Tata and Mistry group after the SC verdict?
The verdict is likely to ease the process of separation of the two family groups, which had been together for more than 70 years. With an 18.37 per cent stake, the Mistry family owned Shapoorji Pallonji (SP) group is the biggest minority shareholder in the Tata Group outside of the majority shareholder, Tata Sons.
The Shapoorji Pallonji group has in the Supreme Court already said that it was ready to exit from Tata Sons, provided it gets an “early resolution” and a “fair, equitable solution”. The Tata Group has valued the Mistry family shares in Tata Sons at Rs 70,000-80,000 crore, while the Mistry family has claimed that its shares in the group were worth close to Rs 1.75 lakh crore.
What had happened so far in the Tata-Mistry dispute at various stages?
On October 24, 2016, Mistry was removed from his post of Chairman of Tata Sons by the board. Mistry, who was at one time a protege of Tata Sons Chairman Emeritus Ratan Tata, was sacked both as Executive Chairman and Director.
Following his ouster, Mistry had moved the Mumbai bench of the National Company Law Tribunal (NCLT) challenging his removal and said that the majority shareholder of Tata Sons, the Tata Group was indulged in oppression of minority shareholders of the group. In his plea, Mistry had also alleged that the Tata Group had the Articles of Association of the company to undermine the board of Tata Sons.
In its 2017 judgment, the NCLT upheld Mistry’s removal from as Executive Chairman and Director and had observed that just because the board of Tata Sons had held a board meeting at short notice or included the item agenda (that removed Mistry from his post at the top) at the last minute, it could not be termed as a fraud.
“Of course, removal of Cyrus would have become heart-burn not only to Mr Cyrus but to others holding the shareholding of the petitioners, but it cannot ipso facto become a grievance,” the NCLT had held.
In December 2019, the NCLAT had reinstated Cyrus Pallonji Mistry to the position of Executive Chairman of Tata Sons and Director of the Tata Group of companies for the remainder of his tenure.
It had also termed Tata Group’s decision to convert from a public limited company to a private company was “prejudicial and oppressive to the minority members and depositors” and, therefore, illegal.
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