In a huge setback to the Tata Group, the National Company Law Appellate Tribunal (NCLAT) on Wednesday reinstated Cyrus Mistry as chairman of Tata Sons, holding his removal in October 2016 as “illegal”.
Setting aside the July 9, 2018, order of the Mumbai bench of the National Company Law Tribunal, which had dismissed all pleas of Mistry, the appellate tribunal also said that Tata Group’s actions against Mistry were “prejudicial” and “oppressive” and the appointment of N Chandrasekaran as his successor was “illegal”. It also said that Tata Sons’ move to turn into a private company from a public limited was unlawful and ordered its reversal.
With Tata Sons once again becoming a public limited company, the value of the Mistry family’s 18.4% stake could be around Rs. 90,000 crore.
However, the NCLAT said the order relating to reinstatement of Mistry as chairman of Tata Sons will take effect after four weeks, thus, giving Tata Group the option to challenge the ruling in the Supreme Court.
Though the matter is likely to drag on for another couple of years as Tatas are sure to challenge the adverse decision, the matter has come full circle for Mistry who had moved the NCLT in December 2016 challenging his ouster.
In his appeal in the appellate tribunal, through his firms Cyrus Investments and Sterling Investments, Mistry had contended that his removal as chairman was arbitrary and was a clear case of oppression of minority shareholders at the Tata Group. He had also alleged that Tata Group chairman emeritus Ratan Tata and Tata Trust’s Noshir Soonawala acted as “super directors” and made inappropriate interference in the affairs of the Group.
The NCLAT also upheld issues related to mismanagement and breakdown of governance raised by Mistry with regard to the Nano project, and interference by serial entrepreneur C Sivasankaran.
Mistry, through his firms, had sought proportionate representation on Tata Sons board, no interference from the trustees of Tata Trusts who hold 66% in Tata Sons, reversal of Tata Sons into a public limited company, and protection from any forced transfer of shares held by his family in Tata Sons.
He had contended that the articles of association of Tata Sons are loaded against minority shareholders, which restrict his firms from freely selling their shares in the market. Mistry’s firms hold a 18.4% stake in Tata Sons.
After a series of setbacks in NCLT, Mistry had tasted a partial victory on September 21, 2017 when the NCLAT had granted his family firms waiver from a shareholding clause which prohibited them from filing cases against Tata Sons for mismanagement and oppression of minority shareholders.
The appellate tribunal had then directed the Mumbai bench of the NCLT to allow the Mistry family firms to present their case and decide on its merits. It was after this that the NCLT dismissed his plea and the matter once again came before the NCLAT.
Mistry, a scion of wealthy Shapoorji Pallonji family, was in a coup removed as chairman of Tata Sons in October 2016. He was the sixth chairman of Tata Sons and had taken over in 2012 after Ratan Tata. He was later also removed as director on board of Tata Sons.