Finds no merit in allegations, says management more accountable to shareholders under the present regime
In a huge setback for Cyrus Mistry, the Mumbai bench of the National Company Law Tribunal (NCLT) on Wednesday dismissed his plea relating to his removal as Tata Sons chairman in October 2016. Mistry, through his firms Cyrus Investments and Sterling Investments, had contended that his removal was arbitrary and was a clear case of oppression of minority shareholders at the group. The tribunal also found no merit in his allegations against Ratan Tata and Tata Trust’s Noshir Soonawala of acting as “super directors” and said that the management is more accountable to shareholders under the present regime. Mistry had alleged inappropriate interference from Tata and Soonawala in the affairs of the group.
Issues related to mismanagement and breakdown of governance raised by Mistry with regard to the Nano project, AirAsia, and C Sivasankaran in Tata Teleservices were also rejected as well as his plea for proportionate representation for Mistry group firms on Tata Sons’ board. Though the Tata Group received a resounding victory at the tribunal, the matter is far from over as the Mistry group in a statement while expressing disappointment but no surprise at the order said it will appeal against it.
“The ruling of the National Company Law Tribunal is disappointing although not surprising. We will continue to strive for ensuring good governance and protection of interests of minority shareholders and all stakeholders in Tata Sons from the wilful brute rule of the majority. The ruling is in line with the earlier position expressed by the Tribunal. An appeal on merits will be pursued,” a statement from Mistry’s office said.
Welcoming the judgment, Tata Sons chairman N Chandrasekaran said, “The judgment has only reaffirmed and vindicated that Tata Sons and its operating companies have always acted in a fair manner and in the best interest of its stakeholders. The Tata Group has always been committed and will continue to be committed to transparency and good corporate governance of global standards. Tata Sons hopes that a finality will be given to the judgment of NCLT, Mumbai, by all concerned in the larger interest of companies, the shareholders and the public.”
Ratan Tata said in a statement, “The judgment of the NCLT has been a vindication of the actions that Tata Sons felt obliged to take in October 2016. It is a reinforcement of the principles and forthrightness that prevails in our judicial system, which should make all of us proud of our country and its democracy.”
The NCLT while dismissing Mistry’s plea stated that his conduct does not bode well for the smooth functioning of Tata Sons, as he allegedly leaked information to the media. It said that the board of directors was competent to dismiss him and said that it can’t stop Tata Sons from converting itself into a private company.The Mistry firms had sought proportionate representation on the Tata Sons board, no interference from the trustees of Tata Trusts who hold 66% in Tata Sons, stopping the conversion of Tata Sons into a private company, and protection from any forceful transfer of shares held by the Mistry family in Tata Sons.
Mistry’s contention was that the articles of association of Tata Sons are loaded against minority shareholders, which restricts his firms from freely selling their shares in the market. Mistry’s firms hold 18.4% stake in Tata Sons. Mistry, who was sacked as Tata Sons chairman on October 24, 2016, had moved the company tribunal in December that year alleging mismanagement and oppression of minority shareholders at Tata Sons.
After a series of setbacks in NCLT orders, on September 21, 2017, Mistry received a partial victory when the National Company Law Appellate Tribunal (NCLAT) granted his family firms waiver from a shareholding clause that prohibited them from filing cases against Tata Sons for mismanagement and oppression of minority shareholders.The appellate tribunal then directed the Mumbai bench of the NCLT to allow the Mistry family firms to present their case and decide on it on merits. The two-member NCLT bench then started hearing the case on merit in December 2017.