by Elton Gomes
In a big blow to Cyrus Mistry, the National Company Law Tribunal (NCLT) today dismissed his lawsuit against Tata Sons. The Tribunal stated that it had failed to find any merit in the allegations made regarding mismanagement at the $100 billion Tata conglomerate. The case was ongoing for over 18 months.
What the NCLT said
The two-member Mumbai bench of the NCLT comprising of B.S.V. Prakash Kumar and V. Nallasenapathy said in its order: Dont find merit in arguments related to mismanagement in Tata Group cos. The bench dismissed all allegations against Tata Trusts chairman Ratan Tata and trustee N. Soonawala of being super directors of the Tata Sons board.
The bench stated that Tata Sons was capable enough to sack an executive chairman, and it also said that Mistrys conduct might not be beneficial for Tata Sons as he had openly opposed the board. The bench stated that Mistry was dismissed as chairman as the board of directors lost faith in him. Judicial member B. S. V. Prakash Kumar said, The Board is competent to remove Mistry. No selection committee was needed, the Times of India reported.
The bench said, No merit in legacy issues – do not fall within section 241 of the Companies Act which provides for minority shareholders to move for relief against acts of oppression, as per the Times of India report.
In addition, the bench rejected Mistrys demand for proportionate representation on the board and mentioned that it cannot prevent Tata Sons from converting itself into a private company. Furthermore, the NCLT bench said that it also did not find any merit in accusations against Aircel promoter C. Sivasankaran and Air Asia.
The allegations that were leveled against Tata Sons
In December 2016, two firms owned by Cyrus Mistrys family had filed cases of oppression and mismanagement against Tata Sons and 20 others, including Ratan Tata. Mistrys removal as Tata Sons chairman in October 2016 was the genesis of the dispute. In March 2017, the NCLT dismissed the accusations against the Tatas and said that both Mistry firms are ineligible to take the allegations forward.
Mistry has raised multiple governance issues in the group, including alleged wrongdoings at AirAsia India. Additionally, Cyrus Investments Pvt Ltd and Sterling Investments Corporation Pvt Ltd moved the NCLT accusing Tata Sons of oppressing minority shareholders.
In a letter written to the directors of Tata Sons two weeks ago, Mistry intended to seek accountability and information from the board. He questioned N. Chandrasekarans move to sell its telecom arm to Airtel. Furthermore, among other issues, Mistry sought information on massive debt-driven acquisitions by Tata Steel and its recent tie-up with ThyssenKrupp.
Mistrys petition alleges that Tata Sons has abused the articles of association and the governance framework, which has enabled Ratan Tata to gain complete control of the company. The petition names several directors from the Tata Sons board, such as Amit Chandra, Ishaat Hussain, Ajay Piramal, Venu Srinivasan, Nitin Nohria, Farida Khambatta, Ralf Spelth, N. Chandrasekaran, N.A. Soonawala, R.K. Krishna Kumar, R. Venkataraman, and majority shareholder Tata Trusts.
What does Mistry intend to do now?
A statement from the office of Cyrus Mistry stated: The ruling of the National Company Law Tribunal is disappointing although not surprising. 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. Mistry has confirmed that an appeal on merits will be pursued.
Not only the facts that were under consideration but also subsequent facts and developments that continue to evidence oppression and mismanagement will be under scrutiny and will be pursued in full earnest, Mistry said in a statement, as reported by Bloomberg Quint.
Elton Gomes is a staff writer at Qrius