Rejecting the petition of Cyrus Mistry and his family firms against Tata Sons alleging oppression of minority shareholders, the Mumbai bench of the National Company Law Tribunal (NCLT) on Monday also dismissed his arguments in relation to alleged mismanagement in AirAsia.
The Mistry faction at the time of the hearings at the NCLT had alleged that directors of AirAsia India, including R Venkataramanan, were approving related-party transactions without reviewing any details or verifying the commercial terms. It was also alleged that Venkataramanan, the managing trustee of Tata Trusts, did not heed repeated warnings about the goings-on in Air Asia India by a company official.
AirAsia India is an equal joint venture between Tata Sons and Tony Fernandes-led Air Asia Investment, with Tata Sons holding 49% stake in the company and the other 49% held by AirAsia Investment. The remaining 2% is held by two directors on the board of AirAsia India. R Venkataramanan holds 1.5% stake and S Ramadorai holds 0.5%. While arguing the matter, Mistry’s counsel C Aryama Sundaram alleged that Bharat Vasani, nominee-director of Tata Sons to the board of directors of Air Asia India, who was also the Tata group legal counsel, through an email complained to Mistry about the same.
He said, Vasani “sounded repeated warnings about the goings-on in Air Asia India, and these evidences show the rampant and gross governance failures”. It was also alleged that Venkataramanan, who also has personal shareholding in Air Asia India, interfered with the interventions that Tata Sons ought to have made in Air Asia India. It was also argued that the board of Tata Sons contemplated even shutting down Air Asia India to protect the company from reputational and monetary damage. “All decisions taken at R-1 (Tata Sons) were under the advice of R-2 (Ratan Tata), who was actively involved in Air Asia India, including attending its board meetings as a special invitee,” Sundaram argued.
During the arguments it was highlighted that no due diligence was done on the JV partners of Air Asia India, and that shareholder agreement was “signed in a tearing hurry”. Issued regarding Air Asia board being “dysfunctional” and having “no corporate governance” were also put forth. It was alleged that Mistry was removed as executive chairman in response to his efforts to clear up the mismanagement and fraud of Air Asia India.
It was also pointed out to NCLT that post the removal of Mistry, at the next board meeting, Tata Sons infused further funds to the tune of $7 million into AirAsia India, which had been kept on hold pending an investigation into the extent of fraud. It is to be noted that in July 2017, Tata Sons in a statement had rejected the statement from Cyrus P Mistry which they said “seeks to insinuate wrongdoing in the affairs of Air Asia India by R. Venkataramanan”.