Big blow to Ratan Tata; NCLAT restores Cyrus Mistry as Tata Sons Executive Chairman
NEW DELHI : In a major development in the Tata Sons-Cyrus Mistry case, the National Company Law Appellate Tribunal (NCLAT) has ordered the restoration of Cyrus Mistry as the Executive Chairman of Tata Sons on Wednesday. The NCLAT also held the appointment of N Chandrasekaran as the Executive Chairman of the group as illegal.
The tribunal, however, added that the order of restoration of Mistry is going to be operational after four weeks. The period will allow the Tata group to file for an appeal against NCLAT’s latest decision.
NCLAT has also withheld its order for four weeks to restore Cyrus Mistry to the posts. Mistry was represented before the tribunal by Sonali Jaitley and Jaiyesh Bakshi. Earlier, the Mumbai bench of the National Company Law Tribunal (NCLT) had earlier dismissed the petitions filed by the two investment firms Cyrus Investments Pvt Ltd and Sterling Investments Corp, challenging the removal of Cyrus Mistry. Later on, Mistry had also approached the NCLAT over the NCLT order.
In July this year, the Mumbai bench of National Company Law Tribunal (NCLT) had dismissed Cyrus Mistry plea challenging his ouster as chairman of the Tata Group. The NCLT further stated that the board of directors are competent enough to remove the executive chairman. The NCLT in its judgment said that Cyrus Mistry was removed because Tata Sons Board and its members lost confidence in him.
Cyrus Mistry, the sixth chairman of Tata Sons, was abruptly removed from the position in October 2016. He had taken over as the chairman in 2012 after Ratan Tata announced his retirement. Worth mentioning here that Cyrus Mistry and his family own approximately 18 per cent stake in Tata Sons.
In September 2018, Tata Sons had received shareholders’ nod to convert the company from being a public limited company into a private limited company. A public limited company allows shareholders to legally sell their stake to anyone, but in the case of a private limited firm, a shareholder cannot sell the shares to external investors.
This NCLAT verdict which will come into effect after four weeks could signal a long drawn out battle for the $110-billion group which has interests from something as basic as salt to automobiles, steel and software. The two-judge panel of NCLAT termed the group’s chairman emeritus Ratan Tata’s actions against Mistry as oppressive but Ratan Tata can appeal to the Supreme Court. Shares of Tata Motors Ltd and Tata Consultancy Services Ltd fell after the verdict.
“The outcome of the appeal is a vindication of my stand taken when the then board of Tata Sons, without warning or reason removed me, first as the executive chairman, and subsequently as a director of Tata Sons,” Cyrus Mistry said in a statement.
A two-judge panel of the NCLAT said on Wednesday that Tata Sons’ move to turn private was unlawful and ordered a reversal. Tata Sons’ board had approved a plan to go private in September 2017.
Tata Sons, in a statement said, “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.”
In July last year, the National Company Law Tribunal (NCLT) dismissed Mr Mistry’s plea challenging his removal as chairman of Tata Sons. The NCLT held that the Tata Sons board was competent to remove him as executive chairman and that he was ejected as the board members had lost confidence in him.
He appealed to the National Company Law Tribunal to overturn the dismissal and, following an unfavorable ruling, appealed to the NCLAT seeking to expunge disparaging remarks against him in the original order.
Mr Mistry currently serves as managing director of Shapoorji Pallonji & Company, which is part of the Shapoorji Pallonji group owned by his family. He joined the board of Tata Sons in 2006 and was appointed deputy chairman in November 2011.
The news broke during the fag end of market hours on Wednesday. Shares of key Tata group companies – Tata Motors slipped 3.05 per cent to Rs 174.70 on the BSE, while that of Tata Consultancy Services (TCS) ended 0.07 per cent higher at Rs 2,167.25 and Tata Steel settled 1.16 per cent higher at Rs 444.60 on Wednesday.
Who is Cyrus Mistry?
Cyrus Mistry, son of Pallonji Mistry who is the owner of the Shapoorji Pallonji group and the biggest stakeholder in the Tata group, was appointed to the top position in 2012. Relations were seen as amicable between Mistry and Tata until the vitriol of recent days emerged.
Mistry had effected several changes in the business practices due to which capital expenditure increased but returns to shareholders decreased. He replaced the trusted hands of Ratan Tata and his proposed sale of Tata Steel port plant in the UK was seen as harming the goodwill earned by Tata abroad.
The extended dispute with the Docomo group proved to be one of the nails in the coffin. Tata had to cough up $1.2 billion in the arbitration to the Japanese group.
A Civil Engineer from London’s prestigious Imperial College, Mistry was involved in the family’s flagship construction business before he left it to join the Tatas. He learnt the business ropes at Tata Industries, Tata Steel, Tata Chemicals and Tata Motors. And his hard work paid off as he rose to be the director of several other companies like Forbes Gokak, United Motors (India) and Shapoorji Pallonji and Co.
What happened?
Cyrus Mistry, whose family owns 18.4 per cent stake in Tata Sons, had challenged his removal in the National Company Law Tribunal (NCLT). The case of oppression and mismanagement against Tata Sons and 20 others, including Ratan Tata, filed by Mistry family entities – Cyrus Investments and Sterling Investments – were however in March 2017 dismissed by the NCLT ruling that they were not eligible to pursue the allegations.
(With Agency Inputs ).
