The Supreme Court on Friday has stayed the NCLAT order restoring Cyrus Mistry as executive chairman of Tata group, observing that there were "lacunae" in the orders passed by the Tribunal.
A bench of Chief Justice S A Bobde and Justices B R Gavai and Surya Kant agreed to hear Tata Sons' plea challenging the National Company Law Appellate Tribunal (NCLAT) decision and issued notices to Mistry and others.
— CNBC-TV18 (@CNBCTV18Live) January 10, 2020
At the outset, the bench said the NCLAT decision suffers from "basic errors and we have to hear the matter in detail". It also said, "You (Cyrus) have been out of the saddle quite a long time. Does this hurt you....How does it hurt you today", a PTI report said. The NCLAT seems to have committed errors in adjudicating. The appellate tribunal seems to lack powers to pass the directions that it has, said Bobde, Chief Justice of India said.
The bench said there was no prayer in the petition for reinstatement of Mistry but the tribunal went ahead with it and ordered his reinstatement. "We find there are lacunae in the judicial orders passed by the NCLAT," the bench said issuing notices to Mistry and others.
#TataVsMistry Case | We are stating on record that we don't want the relief of Cyrus #Mistry's reinstatement as chairman of the @TataCompanies, Mistry's counsel Aryama Sundaram says in apex court — CNBC-TV18 (@CNBCTV18Live) January 10, 2020
Tata Sons Private Ltd (TSPL) challenged the 18 December decision of NCLAT that gave a big relief to Cyrus Investment Pvt Ltd and Mistry, restoring him as the executive chairman of TSPL.
The bench posted the matter after four weeks.
The top court also ordered that the Tatas will not exercise power under Article 25 of the Company Law for pushing out shares of minority holders in the company.
Senior advocate C A Sundaram, appearing for the company Cyrus Investment Pvt Ltd, submitted that instead of staying the NCLAT order, notice should be issued and two weeks be given for filing the reply.
However, the bench said, "Our first impression is not good about the order of the tribunal. The tribunal granted the prayer which was not prayed".
The Mistry's side wanted to place a note about interim arrangement which was not accepted by the bench.
Senior advocate N K Kaul appeared for Mistry while senior advocate Shyam Divan was appearing for the shareholders which were on Mistry's side.
During the hearing, Sundaram said he was not pressing for the consequential relief of reinstatement of Mistry but was against the wrongful removal of Mistry from Tata.
Senior advocates A M Singhvi, Harish Salve, Mukul Rohatgi and Mohan Parasaran represented the Tatas.
The Supreme Court said that Tata Sons will not use power under Article 75 to push Pallonji Group to sell its stake.
Article 75 empowers Tata Sons to purchase the shares of any shareholder at a price to be valued which will be the fair market price.
NCLAT orders restoration of Mistry as chairman, Tata Sons
On 18 December, the National Company Law Appellate Tribunal (NCLAT) ordered the restoration of Mistry back as the executive chairman of Tata Sons.
The Appellate Tribunal also held the appointment of the present executive chairman, N Chandrasekaran illegal.
However, the tribunal said the restoration order will be operational only after four weeks, the time allowed to Tatas to file an appeal, PTI reported.
Setting aside a lower court order, the NCLAT also quashed the conversion of Tata Sons into a private company from a public firm.
The December order by NCLAT called the appointment of N Chandrasekaran, head of the holding company of the $110-billion salt-to-software conglomerate, after Mistry’s removal, illegal and also asked Ratan Tata not to interfere with matters of the company.
The Tatas submitted that the verdict by the NCLAT "undermined corporate democracy" and the "rights" of its board of directors, a Reuters report said. A handful of Tata group companies, including its crown jewel Tata Consultancy Services Ltd, also appealed the decision.
Not interested in returning to Tata Group, says Mistry
While the petition was pending in the apex court, Mistry came out with a statement on Sunday saying that he is not interested in returning to the Tata Group and the decision was made in the interest of the Group, whose interests are far more important than the interests of any individual.
To dispel the misinformation campaign being conducted, I intend to make it clear that despite the NCLAT order in my favour, I will not be pursuing the executive chairmanship of Tata Sons, or directorship of TCS, Tata Teleservices or Tata Industries.
"I will however vigorously pursue all options to protect our rights as a minority shareholder, including that of resuming the thirty-year history of a seat at the Board of Tata Sons and the incorporation of the highest standards of corporate governance and transparency at Tata Sons," he said.
In the last three years, both in conduct and in their statements to the world at large, Tata Group's leadership has shown scant respect for the rights of minority shareholders, Mistry said, adding that it is time the Group's management introspects and reflects on its conduct as it embarks on future actions.
"I am humbled by the NCLAT order, which after review of the enormous material on record, recognised the illegal manner in which I was removed and the oppressive and prejudicial conduct of Tata and other Trustees," he said.
'NCLAT decision inconsistent with corporate law'
TSPL, formerly known as Tata Sons Limited, in its petition, has sought "setting aside of the impugned judgment in toto" of NCLAT, alleging it was "completely inconsistent with the annals of corporate law" and reflected "non-appreciation of facts", which was "untenable in law".
NCLAT held that the Tata Group's chairman emeritus Ratan Tata's actions against Mistry were oppressive and the appointment of a new chairman was illegal.
It, however, stayed the operation of its order with respect to Mistry's reinstatement for four weeks to allow TSPL to file an appeal in the top court.
In its appeal, filed through Karanjawala & Co, TSPL sought a stay on NCLAT's verdict as an interim relief.
"In other words, far from putting an end to the alleged acts complained of, the judgment (of the NCLAT) has sown the seeds for a never-ending discord and conflict between the shareholders of the appellant (TSPL), creating a recipe for an unmitigated disaster," it said.
The plea raised questions of law and said the order restoring Mistry to his "original position" as the executive chairman of TSPL for the "rest of the tenure" was illegal as his tenure "stood extinguished in March 2017".
The plea termed "illegal" NCLAT's declaration that Chandrasekaran's appointment as the chairman of TSPL was wrong and claimed he was appointed "in accordance with the articles and duly approved by the board and shareholders".
It alleged the NCLAT granted reliefs to Mistry which were not even sought.
"Respondent nos 1 (Cyrus Investment Pvt Ltd) and 2 specifically pleaded before the NCLAT that they are not seeking reinstatement of Mistry. The tenure of Mistry as the chairman and director of Tata Sons expired in March 2017 and thus, for good reason, the respondents did not seek such reinstatement," the plea said.
"Mistry was replaced as the chairman of Tata Sons on 24 October 2016, by the majority of its board of directors (all directors voted in favour of the replacement, except one who abstained from voting and the remaining one was Mistry himself) for loss of confidence and the impugned judgment, by restoring Mistry to the position as chairman, has undermined corporate democracy and rights of the board of directors," the plea said.
It said Mistry was removed following the procedure applicable to corporate appointments, as envisaged in law.
The plea alleged it was nobody's case that Mistry's removal had resulted in any serious prejudice being caused to the working of Tata Sons and it "violated law or any contract".
Mistry, the scion of the wealthy Shapoorji Pallonji family, had in December 2012 succeeded Ratan Tata as the executive chairman of Tata Sons, a post that also made him the head of all Tata Group-listed firms such as Tata Power and Tata Motors.
The NCLAT directed Tata Sons to not take any action against Mistry, whose family owned some 18 percent stake in the company. The remaining 81 percent is held by Tata Trusts and Tata Group companies, along with members of the Tata family.
--With inputs from agencies
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Updated Date: Jan 10, 2020 13:47:26 IST