Company Tribunal Not A Labour Court Or Administrative Tribunal To Focus Entirely On Removal Of Director: Supreme Court In Tata-Mistry Case

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Case: Tata Consultancy Services Pvt Ltd v Cyrus Investments Pvt Ltd and Others

Coram: Chief Justice of India SA Bobde, Justices AS Bopanna and V Ramasubramaniam

Case No: CIVIL APPEAL NOs.440-­441 0F 2020

Court Observation: “The Company Tribunal is not a labour Court or an administrative Tribunal to focus entirely on the manner of removal of a person from Directorship”, the judgment delivered by a bench comprising Chief Justice of India SA Bobde, Justices AS Bopanna and V Ramasubramaniam observed.

“There may be cases where the removal of a Director might have been carried out perfectly in accordance with law and yet may be part of a larger design to oppress or prejudice the interests of some members. It is only in such cases that the Tribunal can grant a relief under Section 242”.

“…the validity of and justification for the removal of a person can never be the primary focus of a Tribunal under Section 242 unless the same is in furtherance of a conduct oppressive or prejudicial to some of the members”.

“In any event the removal of a person from the post of Executive Chairman cannot be termed as oppressive or prejudicial. The original cause of action for the complainant companies to approach NCLT was the removal of CPM(Cyrus Pallonji Mistry) from the post of Executive Chairman. Though the complainant companies padded up their actual grievance with various historical facts to make a deceptive appearance, the causa proxima for the complaint was the removal of CPM from the office of Executive Chairman. His removal from Directorship happened subsequent to the filing of the original complaint and that too for valid and justifiable reasons and hence NCLAT could not have laboured so much on the removal of CPM, for granting relief under Sections 241 and 242”.

“The judgment of the NCLAT was passed on 18.12.2019,by which time, a period of nearly 7 years had passed from the date of CPM’s appointment as Executive Chairman. Therefore, we fail to understand : (i) as to how NCLAT could have granted a relief not apparently sought for (though wished for); and (ii) what NCLAT meant by reinstatement “for the rest of the tenure”. That the question of reinstatement will not arise after the tenure of office had run its course, is a settled position”, the Court said.

“It is significant that Sections 241 and 242 of the Companies Act, 2013 do not specifically confer the power of reinstatement, nor we would add that there is any scope for holding that such a power to reinstate can be implied or inferred from any of the powers specifically conferred”.

“The architecture of Sections 241 and 242 does not permit the Tribunal to read into the Sections, a power to make an order(for reinstatement) which is barred by law vide Section 14 of the Specific Relief Act, 1963 with or without the amendment in 2018.Tribunal cannot make an order enforcing a contract which is dependent on personal qualifications such as those mentioned in Section 149(6) of the Companies Act, 2013”.

“The position in law that a contract of personal services cannot be enforced by Court is a long standing principle of law and cannot be displaced by the existence of any implied power, though none is shown in the present case”.


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