MUMBAI: The corporate battle between Cyrus Mistry and Tata Sons took a surprising turn on Wednesday with the National Company Law Appellate Tribunal (NCLAT) ordering Mistry’s reinstatement as Executive Chairman of the country’s most valuable holding firm, from which he had been removed in October 2016. It also termed the appointment of N Chandrasekaran at the helm of affairs of the company illegal.
Notably, NCLAT also restored the status of Tata Sons as a public limited company. Tatas had in September 2017 converted the firm into a privately held company. The Tribunal has given Tata Sons four weeks to reinstate Mistry, by which time the Mumbai-headquartered group can move the Supreme Court for a stay and reversal of the order.
Till the time the matter gets decided one way or the other in the apex court, the NCLAT order will remain a damning indictment of Tata Sons. Questions which come into focus include those of corporate governance and management of affairs leading to losses.
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“It was unbecoming of a large institution to remove an Executive Chairman without notice and turn a public limited company into private… So, winning at every stage has been important,” said a legal expert on Mistry’s win.
Mistry had been removed after a high profile public clash over-running of the Tata Group with Ratan Tata who had earlier hand-picked Mistry for the top job. Among other things, Mistry wanted to shut down Ratan Tata’s loss-making Nano project and forge a joint venture with US pizza chain Little Caesars. Neither was to the liking of Tata. The veteran also did not like Mistry’s proposal to contribute `10 crore for the Odisha elections in 2014 as Tatas had major projects in that state.
However, the one that spells trouble for Tatas is the order on protection of minority stakeholders’ interest. NCLAT has directed that majority shareholders Tata group consult minority stake owners Shapoorji Pallonji Group run by the Mistry family and “any person on whom both the groups have trust be appointed as Executive Chairman or Director as the case may be which will be in the interest of the Company…”
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Some analysts differed with the NCLAT judgment. “It is the shareholders who have a commercial interest and can decide who would head the company. How can NCLAT decide?” asked Deven Choksey, MD, KR Choksey. “To me it is absolutely baffling. If you want to decide who will head the company, you should also be accountable. It is going to invite more trouble,” he said.
Market participants and experts are looking at whether the SC will go by NCLAT ruling in as much as protecting minority shareholders or go by the point of Tata Sons as to whether the Tribunal can overrule decision taken by shareholders. Mistry said the judgment is not a personal victory but a win for the principles of good governance and minority shareholder rights. Tata Sons in a statement questioned the NCLAT order in terms of overruling the decisions taken by shareholders of Tata Sons and the group’s listed companies.
“The NCLAT order appears to even go beyond the specific reliefs sought by the Appellant. Tata Sons strongly believes in the strength of its case and will take appropriate legal recourse. Tata Sons assures its various stakeholders that it not only has always operated in a fair and equitable manner but also acted in accordance with the law and will continue to do so,” it said. Tata Sons’ counsel senior advocate A M Singhvi said the group is deeply disappointed with the order.