Mumbai: In one of 2019’s biggest corporate developments, the National Company Law Appellate Tribunal (NCLAT) has restored Cyrus Mistry as executive chairman of the Tata Group as well reinstated him as director of Tata Sons and as director of three Tata companies.
The shares of Tata Group companies fell after the order came, reducing their gains, and several of them closed in the red.
Cyrus Mistry was removed as Tata Group chairman on October 24, 2016 after being at the helm for over four year after his appointment in 2012, after the retirement of Ratan Tata. He was the sixth chairman of the group, and only the second after Nowroji Saklatwala to not bear the Tata surname.
The NCLAT order will take effect after four weeks, the time window allowed to the Tata Group to appeal in the Supreme Court against the NCLAT order by Mr S.J. Mukhopadhaya, NCLAT chairperson, and Justice Bansi Lal Bhat, NCLAT’s member (judicial).
Setting aside a lower court order, the NCLAT also quashed the conversion of Tata Sons into a private company from a public firm, and directed the Registrar of Companies to make a correction in its records and show Tata Sons Ltd as a public company.
The NCLAT’s 172-page order also directed Ratan N. Tata and the nominees of the Tata Trusts to desist from taking any decision in advance which requires a majority decision of the board of directors or at the annual general meeting.
It also held that the appointment of N. Chandrasekaran, former chief executive of Tata Consultancy Services, as executive chairman of the Tata Group in January 2017 was illegal.
“The proceedings of the sixth meeting of the board of directors of ‘Tata Sons Limited’ held on Monday, 24th October 2016, so far as it relates to the removal and other actions taken against Mr Cyrus Pallonji Mistry is declared illegal and is set aside. In the result, Cyrus Pallonji Mistry is restored to his original position as executive chairman of ‘Tata Sons Limited’ and consequently as director of the ‘Tata Companies’ for the rest of the tenure. As a sequel thereto, the person who has been appointed as ‘executive chairman’ in place of Mr Cyrus Pallonji Mistry (respondent), his consequential appointment is declared illegal,” NCLAT order said.
Upholding the interest of minority shareholders in such matters and the manner in which Cyrus Mistry was removed, the NCLAT said: “Such power can be exercised only in exceptional circumstances and in the interest of the company, but before exercising such power, the reasons should be recorded in writing and intimated to the concerned shareholders whose rights will be affected.”
Senior advocate C.A. Sundaram, Cyrus Mistry’s counsel, reacting to the NCLAT order, said: “Cyrus Mistry has been vindicated for the manner in which he has been removed. Cyrus Mistry’s insistence was on corporate governance, protection of minority shareholders’ interests. There has to be corporate governance of (an) impeccable standard.”
Earlier, on July 9, 2018, the Mumbai bench of NCLT had dismissed the petitions filed by the two investment firms Cyrus Investments and Sterling Investments Corp. challenging Mr Mistry’s removal. Later, Mr Mistry personally approached the NCLAT over the NCLT order on August 3, 2018.
Mr Mistry’s pleas in the NCLT against his removal as Tata Sons chairman also included allegations of misconduct on part of Ratan Tata and the Tata Sons board.
A special bench of the NCLT had held that the board of directors at Tata Sons was competent to remove the executive chairperson of the company. The NCLT bench also said that Mr Mistry was ousted as chairman because the Tata Sons’ board and its majority shareholders had lost confidence in him.
