The Supreme Court on Friday set aside the 2019 order of the National Company Law Appellate Tribunal (NCLAT) by which Cyrus Mistry was reinstated as the executive chairman of the over $100 billion Tata Sons.
A bench headed by Chief Justice of India (CJI) SA Bobde allowed the appeals filed by the Tata Group, holding that well-settled principles had been overturned by the NCLAT when it decided the dispute in the previous round.
“All questions of law are ruled in favour of the Tata Group,” said the bench, which also included justices AS Bopanna and V Ramasubramanian.
The court also negated the NCLAT’s finding regarding “oppressive” practices resorted to by the Tata Sons Pvt Ltd in removing Mistry as the chairman of Tata Sons by a board meeting in October 2016.
About the issues relating to valuation of shares and the Shapoorji Pallonji (SP) Group pledging its shares in Tata Sons to raise funds, the top court maintained that both parties were at liberty to raise these before appropriate forum and that the court would not pass any order.
Tata Trusts, which owns a 66% stake in Tata Sons, is chaired by Ratan Tata. The Mistry family owns an 18.4% stake in the company.
Mistry’s SP Group and Cyrus Investments Pvt Ltd had submitted in the court that his removal as the chairman of Tata Sons was akin to a “blood sport” and “ambush” carried out without even giving him a prior notice of the agenda.
Senior advocate Shyam Divan, representing Mistry, had alleged that the removal was in complete violation of principles of corporate governance and pervasive violation of Articles of Association in the process.
The SP Group has claimed how Article 121 of the Articles of Association of Tata Sons, the flagship company, was used by Tata Trusts headed by Ratan Tata, to undermine the board. The Cyrus Mistry camp has argued in court that the Tata Trust was pre-consulted before every decision. This was against the tenets of a company which should be managed by an independent board of directors.
Tata Group, on other hand, had vehemently opposed the allegations and said there was no wrong doing and the board was well within its right to remove Mistry as the chairman.
Appearing for the Tata Group, senior lawyer Harish Salve has also offered to buy out Mistry family’s 18% stake in Tata Sons at a fair value, if required and if it could be proved that his client indulged in oppressive practices.
Tata Group also lashed out at Mistry camp, accusing them of trying to break up the group by sleight of hand. Senior advocate Harish Salve, appearing for Tata Sons, said that Article 71 of Articles of Association clearly provides for a buyout.
The apex court had on January 10 last year granted relief to Tata Group by staying the NCLAT order of December 18, 2019 by which Mistry was restored as the executive chairman of the conglomerate.
Mistry had succeeded Ratan Tata as chairman of Tata Sons in 2012 but was ousted four years later.
Tata Sons had earlier told the top court that it was not a ‘two-group company’ and there was no ‘quasi-partnership’ between it and Cyrus Investments Pvt Ltd.
In his reply to the Tatas’ petition challenging his reinstatement by the NCLAT last December, Mistry had also demanded that group chairman emeritus Ratan Tata should reimburse all the expenses to Tata Sons since his departure in December 2012 in keeping with best global governance standards.
By Hindustan Times