THE SUPREME Court on Friday stayed the National Company Law Appellate Tribunal’s (NCLAT) decision to reinstate Cyrus Mistry as the executive chairman of Tata Sons, observing that its December 18 order had “lacunae” and was “sorely lacking”.
A three-judge bench of Chief Justice of India S A Bobde and Justices B R Gavai and Surya Kant refused to accept the plea of Mistry’s counsel that the entire NCLAT order need not be stayed as Mistry had made it clear that he was not interested in returning to Tata Sons.
[PTI adds: The bench said the NCLAT’s decision suffers from “basic errors and we have to hear the matter in detail”. While ordering interim stay of the NCLAT order, the bench also said, “You (Mistry) have been out of the saddle for quite a long time. Does this hurt you now? How does it (stay order) hurt you today?”
The court said there was no prayer in the petition for reinstatement of Mistry, but the tribunal went ahead with it and ordered that. “We are looking at the order and the judicial attitude with which it was made. We find that it is sorely lacking. We find there are lacunae in the judicial orders passed by the NCLAT,” the bench said, issuing notices to Mistry and others.
In the only relief for the Mistry side, the court ordered that the Tatas will not exercise power under Article 75 of the ‘Articles of Association’ for pushing out shares of minority holders in the company.
Senior advocate C A Sundaram, appearing for Cyrus Investment Pvt Ltd, submitted that instead of staying the NCLAT order, notice should be issued and two weeks be given for filing the reply. However, the bench said, “Our first impression is not good about the order of the tribunal. The tribunal granted the prayer which was not prayed”.]
The matter has been posted for hearing after four weeks.
The Supreme Court’s decision is likely to come as a relief for Tata Sons and the group’s companies, which had been cautious with their October-December results for the current fiscal. The group’s software arm, Tata Consultancy Services (TCS), which usually comes out with its results in the first week of January, had decided to wait till the Supreme Court hearing.
In its December 18 order, the NCLAT had restored Mistry as the Executive Chairman of Tata Sons and director in the Tata Group for the rest of his tenure. Mistry, whose family owns close to 20 per cent in the Tata Group, was removed as chairman by the board of Tata Sons on October 24, 2016.
However, the appellate tribunal had stayed operation of its order for four weeks, to give Tata Sons a chance to appeal in the Supreme Court. In a strongly worded 172-page order, the tribunal had also set aside the Tata Group’s move to turn itself into a private company from a public limited company, terming it “illegal”.
On January 3, Tata Sons moved the Supreme Court, challenging the NCLAT’s decision. A day later, Ratan Tata, Chairman Emeritus of Tata Group, also moved the Supreme Court in his personal capacity, challenging certain strictures passed against him by the NCLAT.
Tata Group companies — Tata Consultancy Services and Tata Tele Services — moved the Supreme Court too, challenging the order to reinstate Mistry as director of these companies. Venu Srinivasan, chairman of TVS group, and other trustees of Sir Dorabji Tata Trust, also approached the Supreme Court.
In its plea, Tata Sons said the appellate authority had granted Mistry “various reliefs in a manner that is completely inconsistent with the annals of corporate law”, saying these reflect “non-appreciation of facts and (are) untenable in law”. It said the NCLAT order sets a “dangerous legal precedent”.
Ratan Tata, in his plea, said the treatment of Tata Sons as a “two-group company” in NCLAT’s order was wrong, as the Shapoorji Pallonji Group was always an investor and there had “never been any relationship akin to a partnership”. The Pallonji group, Tata said, has always been a financial investor in Tata Sons, and just because there was comity and mutual relationship, it did not indicate the existence of any partnership.
[PTI adds: Senior advocate N K Kaul appeared for Mistry while senior advocate Shyam Divan appeared for the shareholders which were on Mistry’s side. During the hearing, Sundaram said he was not pressing for the consequential relief of reinstatement of Mistry but was against his wrongful removal. Senior Advocates A M Singhvi, Harish Salve, Mukul Rohatgi and Mohan Parasaran represented the Tatas.]