Mumbai: An NCLAT (National Company Law Appellate Tribunal) court on Wednesday restored Cyrus Mistry as Executive Chairman of Tata Group. The tribunal called Mistry's removal from the top post at Tata Group as "illegal".
Cyrus Mistry who was appointed as the sixth chairman of Tata Group in 2012 was ousted following a boardroom coup on October 24, 2016.
The case was heard by a two-judge panel of the National Company Law Appellate Tribunal on Wednesday. According to the tribunal's website, the case was heard at the court of Chairperson SJ Mukhopadhaya and Member (judicial) Bansi Lal Bhat. The bench observed that Ratan Tata's actions against Mistry were oppressive and the appointment of a new chairman was illegal. The court also said Tata Sons's move to turn private from a public company was unlawful and ordered a reversal.
Through two family-run firms -- Cyrus Investments and Sterling Investments Corp -- Mistry had moved the National Company Law Tribunal in Mumbai against Tata Sons and others for oppression and mismanagement. The tribunal had earlier dismissed the petitions.
An NCLT court in July'18 had upheld the decision taken by Tata Sons board of directors. At that time Mistry had called the decision as "disappointing". Back then, Mistry's office stated, "We will continue to strive for ensuring good governance and protection of interests of minority shareholders and all stakeholders in Tata Sons from the wilful brute rule of the majority."
With this announcement, the appointment of N Chandrasekaran has been declared illegal. On February 20, 2017, N. Chandrasekaran, who was heading Tata Consultancy Services, took charge as Chairman of Tata Sons which has now been declared illegal by NCLAT.
The Mistry family is the single largest shareholder in Tata Sons, with an 18.4 per cent stake. The petitioners, Cyrus Investments Pvt. Ltd and Sterling Investments Group of the Shapoorji Pallonji Group had filed the plea against the Tata Sons directors and trustees of Tata Trusts, alleging among other things, abuse of articles of association by outsiders, breakdown of governance and loss of ethical values.
During a previous case hearing, Tata Group counsel Abhishek Manu Singhvi had told an NCLT court that Mistry was appointed at the behest of Tata Trusts and his removal cannot be questioned by minority shareholders and he was removed as per provisions of the law by seven out of nine directors in which Mistry did not vote for his removal and one director abstained. Singhvi also argued that Mistry was removed because the Tata Sons Board had lost confidence in him, as he had intentionally and in bad faith, "leaked sensitive and confidential information" which eroded Tata Group's market value.
Stocks related to the Tata Group saw some volatility. Shares of Tata Motors Ltd. and Tata Consultancy Services Ltd. fell after the verdict, dragging down the Sensex. Tata Global Beverages (down 5.24%), Tata Coffee (down 3.88%), Tata Motors (down 3.72%), Tata Chemicals (down 2.67%), Tata TeleServices Maharashtra (down 1.64%), Tata Power (down 1.43%) and Tata Investment Corporation (down 1.4%) were stocks that saw a decline.
Stocks of Tata Steel (up 0.16%), Tata Metaliks (up 1.15%), Tata Communications (up 1.34%), Tinplate Company of India (up 1.61%), Tata Steel Long Products (up 1.85%) and Rallis India (up 1.88%) advanced.
The NCLAT order is expected to take effect after four weeks but the Tata Group has the option to challenge the ruling in the Supreme Court.