The Case Analysis of Tata Sons vs Cyrus Investments Pvt. Ltd

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Written by: Ms Devshree Dangi

Tata group is India’s largest business group and running a business in seven sectors around eighty countries and even more. 66% of Tata groups shares are owned by the various Tata trust. And one of the major parts of 18% of it is controlled by Shapoorji Pallonji group. The heir apparent of Shapoorji Pallonji group is Cyrus Mistry.

Cyrus Mistry was appointed as chairman of Tata Sons in the year 2011. He was the 6th chairman of Tata Sons. But around 4 years ago he had been removed from the position of chairman of Tata Sons.

The sudden removal of Cyrus Mistry as a chairman gave rise to the historical battle between Tata Sons and the Mistry family. It is a crucial battle in the business world. Everyone is curious to know about the Supreme Court’s decision over this matter.

The matter had been tried in  National Company Law appellate tribunal. The National Company Law appellate tribunal already passed its order stating that the removal of Cyrus Mistry by Tata group was illegal and also the proceedings of the board meeting of Tata sons held on 24th October 2016 was also illegal.

Now both Cyrus Mistry and Tata sons have challenged this order of National Company Law appellate tribunal before the Supreme Court.

It will be interesting to know that will the Tata sons again prove guilty and Cyrus Mistry will get his position as chairman of Tata sons back again or will the Tata sons be free from the allegations made by Cyrus Mistry against them.

Background

It is well known to everyone that the Tata group is the largest business group which is running its business in seven sectors in more than eighty countries.

In the year 2011, Cyrus Mistry was appointed as a chairman of Tata Sons. He was the sixth chairman of Tata Sons.

But on 24th October 2016, Cyrus Mistry was removed from the position of chairman of Tata sons after a board meeting of Tata sons held on the same day. After his removal, Ratan Tata was appointed as the interim chairman of Tata Sons.

The selection committee was constituted by  Board of Tata sons for the selection of new chairman comprising Mr Ratan N Tata, Mr Venu Srinivasan, Mr Amit Chandra, Mr Ronen Sen and Lord Kumar Bhattacharya following the newly amended provisions of Articles of Association of Tata Sons.

After his removal, Cyrus Mistry fired and appeal in National Company Law appellate tribunal Mumbai for an injunction. The appeal filed intersection 241, 242 and 244 of companies Act 2013 for the prevention of oppression and mismanagement.

National Company Law appellate tribunal had on December 18, 2019, ordered that on 24th October 2016 the proceedings of the board meeting of Tata sons removing Cyrus Mistry chairman was illegal.

National Company Law appellate tribunal had also ruled that the appointment of N Chandrasekaran as head of the holding company of the $110 billion salt-to-software conglomerates was illegal.

National Company Law appellate tribunal passed an order to reinstate Cyrus Mistry as executive chairman of Tata Sons.

After this order has passed by the National Company Law appellate tribunal the Tata sons challenged this order before the Supreme Court on January 2, 2020.

Supreme Court on January 2020 has put a stay on National Company Law appellate tribunal’s order saying the tribunal order suffered from “basic errors”.

The three-judge bench of Supreme Court comprising Chief Justice S A Bobde and Justices BR Gavai and Surya Kant stated: “We have to hear the matter in detail”.

“Our first impression is not good about the order of the tribunal. The tribunal granted the prayer which was not prayed…There was no prayer in the petition for reinstatement of Mistry but the tribunal went ahead with it and ordered his reinstatement,” the Bench stated.

With this statement, the Supreme Court has on January 2020 stay the order of National Company Law appellate tribunal.

After this matter reached to the Supreme Court Cyrus Mistry made a public statement that he would not pursue the executive chairmanship of Tata Sons.

“I will however vigorously pursue all options to protect our rights as a minority shareholder, including that of resuming the 30-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.

Current status of the case

The previous order passed by National Company Law appellate tribunal has surprised the Supreme Court. The Supreme Court’s reaction over the order of National Company Law appellate tribunal was really bad. The Chief Justice of India has observed “Fairness is not something that was imbued in legal proceedings in this case. We are completely surprised, this is too much”

The three-judge bench comprising of Chief Justice S A Bobde and Justices A S Bopanna and V Ramasubramanian has asked the parties to file compiled written submissions and subject index in the matter.

the meeting was conducted through video conferencing and during the meeting, Shapouri Pallonji group has claimed that the articles of associations and provisions of companies Act were breached in the removal of Cyrus Mistry 80 chairman of Tata Sons in the year 2016.

The allegations made against Tata sons were denied by the Tatas. Tatas said there was no wrong at their part they were within the limits of their rights to remove Mistry.

Critical analysis

Companies Act 2013 do not have any provision with regard to the position of chairman of aboard. Although the rules made under the act Rekha chairperson his authority but they are not specific on the subject as to who and how a director become chairperson of the board.

The Act provides the procedure for electing a chairperson for the shareholders meeting. Section 104 of the Act provided for the appointment of the chairman of the general meeting. In addition to this Section, the chairman of general meetings is created based on the provisions of AoA(Article of Association).

At present, the Supreme Court has not given any final decision. Right now only the Supreme Court has secured the decision and it will be very interesting to know what will happen next.


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