NCLAT reinstates Cyrus Mistry as executive chairman Tata Group rules N Chandrasekaran’s appointment as illegal.
Today, the National Company Law Appellate Court (NCLAT) reinstated former Tata group chairman Cyrus Mistry as Tata Group’s executive director. It said that N’s appointment was also held by the court. Chandra is illegal as the chairman of the board.
An NCLAT bench of two judges said the actions of Ratan Tata against Mistry were oppressive and it was illegal to appoint a new chairman.
The Tatas have the time in four weeks to appeal against the order as the court said the restoration order will only be effective after four weeks. The Tatas also have the right in the Supreme Court to appeal the order.
As the news came before the closing bell, Tata Motors ‘ shares on the BSE fell 5.25% to some $174.95. The Mistry family, with an 18.4 percent stake, is Tata Sons ‘ single largest investor.
In October 2016, Cyrus Mistry, who was Tata Sons ‘ sixth chairman, was removed from office. He took over as president in 2012 after his retirement was announced by Ratan Tata.
Throughout his appeals, Mistry claimed mainly that his dismissal was not under the Companies Act and that Tata Sons had systematic mismanagement of affairs.
The NCLT had previously dismissed petitions from two investment firms of Cyrus Mistry, Cyrus Investments Pvt Ltd. and Sterling Investments Corp challenging Mistry’ removal. There were a lot of allegations of misconduct on the part of Ratan Tata and board of the directors of Tata.
A tribunal’s special bench held that Tata Sons ‘ board of directors was “competent” to remove the company’s executive chairman. NCLT’s bench also said that Mistry was ousted as chairman because Tata Sons ‘ board and its majority shareholders had “lost confidence in him.”
As far as the Tata Sons board is concerned, the NCLAT has also given clear directions to Ratan Tata to maintain arms distance.
Also set aside was the decision of the Registrar of Companies to convert Tata Sons from public to private entity.
Today’s NCLAT judgment came in response to a petition from former Tata Group Chairman Cyrus P Mistry and his two investment firms– Cyrus Investments and Sterling Investments Corp — challenging his removal from the group.
A two-member NCLAT bench led by SJ Mukhopadhaya, Chairperson of Justice, ruled on the petitions.
Mistry later moved the NCLAT against the order of the NCLT.
According to the judgment, Suhas Tuljapurkar, Managing Partner, Legalism, said, “A single isolated incident such as the removal of a director who is not in the manner prescribed by law that constitutes the action of a minority shareholder shall be settled by law.” “If how Mistry is removed is kept by NCLAT in appeal, the matter has been adjudicated on the issue of law and not on the issue of law. Merits can be awarded only by the NCLT, not by the NCLAT.
Therefore, my view is that in a single isolated incidence has resulted in the oppression of a minority, then it will be ruled by NCLAT and obviously, they have ruled in favor of the Mistry group,” he added.