The Supreme Court on Friday (March 26) set aside the National Company Law Appellate Tribunal (NCLAT) order that had reinstated Cyrus Mistry as the chairman of the over $100 billion Tata Group in 2016.
The judgment brought to an end one of the most high-profile and publicly fought corporate battles in the country.
What the SC Said
Although a detailed copy of the verdict is awaited, a three-judge bench headed by Chief Justice SA Bobde set aside the entire December 2019 order of the NCLAT. “All questions of law are in favour of Tata Group,” the judges said.
The bench also held that it would not go into the details of the compensation to be awarded or adjudicate on whether Tata Group could or could not use Article 75 of its Articles of Association.
Article 75 says: “The company may at any time by Special Resolution resolve that any holder of ordinary shares do transfer his ordinary shares. Such member would thereupon be deemed to have served the company with a sale notice in respect of his ordinary shares.”
The court left the issue of resolving the value of the 18.37 per cent stake that the Mistry family holds in Tata Sons to the parties. It also held that there was no oppression of minority shareholders of Tata Group or any mismanagement at Tata Sons – as alleged by Mistry.
The Mistry family-owned Shapoorji Pallonji (SP) Group is the biggest minority shareholder in Tata Group. Following the judgment the two families are expected to part ways — provided they can come to a quick resolution over valuation. The SP Group has told the SC it is ready to exit from Tata Sons, provided it gets a “fair, equitable solution”. The Tata Group has valued the Mistry family stake at ₹70,000-₹80,000 crore; the Mistry family’s valuation is close to Rs 1.75 lakh crore.
Timeline of the Dispute
Cyrus Pallonji Mistry takes charge of Tata Group in 2012 – the sixth chairman of the group, and only the second, after Nowroji Saklatwala, to not bear the surname ‘Tata’.
Board removes Mistry from his post on October 24, 2016. A one-time protege of Tata Sons Chairman Emeritus Ratan Tata, Mistry is sacked both as executive chairman and director. Mistry moves the Mumbai bench of the National Company Law Tribunal (NCLT) challenging his removal, claims Tata Group is indulged in oppression of minority shareholders.
The NCLT upholds Mistry’s removal and observes that just because the board held a meeting at a short notice or included the item agenda removing Mistry at the last minute, it could not be termed as a fraud. “Of course, removal of Cyrus would have become heart-burn not only to Mr Cyrus but to others holding the shareholding of the petitioners, but it cannot ipso facto become a grievance,” the NCLT says.
In December the NCLAT – the NCLT is a body having original jurisdiction. The NCLAT is a body having appellate jurisdiction – reinstates Mistry for the remainder of his term. It also terms Tata Group’s decision to convert from a public limited company to a private company “prejudicial and oppressive to the minority members and depositors” and, therefore, illegal.
In March the SC allows all appeals by Tata Group and upholds its decision to sack Mistry. “All questions of law are in favour of Tata Group,” the court says.