Tata Sons wins temporary relief in feud with Cyrus Mistry

Last month, the NCLAT said Mistry was illegally ousted in October 2016 at the behest of Ratan Tata, the chairman-emeritus of the group, and that the actions were “oppressive” for minority shareholders.
On December 18, the NCLAT said Tata Sons illegally removed Cyrus Mistry as chairman.(Reuters File Photo)
On December 18, the NCLAT said Tata Sons illegally removed Cyrus Mistry as chairman.(Reuters File Photo)
Published on Jan 11, 2020 03:14 AM IST
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Livemint, New Delhi | ByPrathma Sharma

The Supreme Court (SC) on Friday said there were “basic errors” in the National Company Law Appellate Tribunal (NCLAT)’s observations and stayed the tribunal’s order reinstating Cyrus Mistry as executive chairman of Tata Sons.

“Our first impression is not good about the order of the tribunal,” said a bench headed by Chief Justice SA Bobde. “The tribunal granted the prayer which was not prayed for.”

The bench, also comprising justices BR Gavai and Surya Kant, said the matter needs to be heard in detail, and issued notices to Cyrus Investments Pvt. Ltd and Mistry for a hearing after four weeks.

Last month, the NCLAT said Mistry was illegally ousted in October 2016 at the behest of Ratan Tata, the chairman-emeritus of the group, and that the actions were “oppressive” for minority shareholders. It also restrained Tata and his representatives from taking any decision that would require a majority vote on the board of Tata Sons.

As part of its order, the tribunal had ruled that the appointment of Natarajan Chandrasekaran as chairman of Tata Sons in early 2017 and the subsequent transition from a publicly-held company to a private entity were also illegal. It further ordered that Tata Sons be restored as a public company to give minority shareholders more autonomy to sell their shares.

The tribunal verdict was seen as a blow to the legacy of former chairman Ratan Tata.

Despite the tribunal’s ruling in his favour, Mistry said earlier this month that he will not seek to return to the post of executive chairman in Tata Sons, nor stake a claim as the director of the three group companies.

Instead, Mistry said he will seek a board seat at Tata Sons to improve its governance standards.

Tata Sons had challenged the tribunal’s decision reinstating Mistry as executive chairman, saying that the order had put at risk the holding company’s efforts to cut costs, sell assets and boost growth across Tata group companies. It had further said the order had created “confusion in the working of important corporate entities, some of which are listed companies”. The conglomerate said the order restoring Mistry’s directorship in three group companies was inconsistent with corporate democracy because his removal was through shareholder approval.

The interim stay against the NCLAT order comes as a big relief for the Tata group, though it was largely expected.

“Even though Cyrus Mistry has issued a statement against pursuing the chairmanship as granted in the NCLAT order, Tata Sons was fearing whether they will be in contempt if they did not move to implement the order after the four weeks of grace period,” said a lawyer, who was part of Tata Sons’ legal team, on condition of anonymity.

“The Supreme Court observation that there was an error in judgment (by the NCLAT) as it gave reliefs not asked for in the original petition shows the order may not withstand the scrutiny of the apex court in its entirety,” said Mohit Saraf, senior partner, L&L Partners, formerly Luthra and Luthra Law Offices.

Jayshree P Upadhyay in Mumbai contributed to this story
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Thursday, January 27, 2022