One of India’s leading business houses, Tata group, suffered a setback when a company law court reinstated its ousted chairman Cyrus Mistry.
The National Company Law Appellate Tribunal on Wednesday restored Mistry – whose family owns a more than 18% stake – as the chairman of the Tata group, more than three years after his unceremonious exit.
In October 2016, Mistry, the sixth chairman of Tata Sons, was removed by the company’s board in a surprise move, and group patriarch Ratan Tata was appointed in his place. Mistry was subsequently ejected from all Tata companies after successive company boards withdrew their faith in him.
The appellate tribunal also held that the appointment of N. Chandrasekaran, the current chairman of Tata Sons, as executive chairman was “illegal.” Chandrasekaran, a veteran Tata employee, previously headed Tata Consultancy Services. He was elevated to the post of chairman of Tata Sons in February 2017.
The tribunal on Wednesday gave the company four weeks to implement its order. Tata Sons is likely to challenge this order before the Supreme Court.
A two-member bench of the appellate tribunal pronounced its judgment over the petitions moved by Mistry and the two investment firms challenging his removal from the group. The appellate tribunal had reserved its order in July this year, after completing its marathon hearing over the issue.
Soon after the appointment of Chandrasekaran in February 2017, Tata Sons had sought shareholders’ consent to convert itself as a private company in September 2018. Doing so would have reduced the minority shareholders’ rights to sell their shares.
The conversion into a private company was also held”‘illegal.” Mistry had opposed the move and earlier moved the NCLT, which had dismissed his petition, ruling in favor of Tata Sons.
In August 2018, Mistry accused Tata Sons of mismanagement and suppression of minority shareholders’ rights in the NCLAT by turning itself into a private company.
The verdict adds a new headache for the salt-to-software group, which faces business challenges including a cost-cutting drive at its Jaguar Land Rover Automotive Plc unit and the impact of an economic slump in India.
Mistry termed it as a “landmark judgement for minority shareholder rights.”
“Today’s judgment is not a personal victory for me, but is a victory for the principles of good governance and minority shareholder rights.… The outcome of the appeal is a vindication of my stand taken when the then board of Tata Sons, without warning or reason removed me, first as the executive chairman, and subsequently as a director of Tata Sons,” a press release quoted Mistry as saying.
Tata Sons was quick to respond, clearly indicating the battle is far from over and now headed to the Supreme Court. A press statement by the $110 billion group said it “will take appropriate legal recourse.”
Mistry was appointed as Tata Sons Executive Chairman in November 2011, replacing Ratan Tata who slipped into the role of Chairman Emeritus, a role where he continues.
Mistry is the younger son of billionaire Shapoor Pallonji Mistry. His brother Shapoor Mistry runs Eureka Forbes, and is the scion of the Shapoorji Pallonji group, one of the largest shareholders of Tata Sons with its estimated 18.4% equity.
When Mistry took over as chairman of the Tata Group, he was 44, the youngest to occupy the office. He was chosen by a selection panel and took charge in December 2012.
Tata Sons Private Limited is the principal holding company of the Tata group and is the majority shareholder and promoter of most Tata group companies including Tata Motors, Tata Steel and Titan.
Philanthropic trusts, the two primary ones being Sir Dorabji Tata Trust and Sir Ratan Tata Trust, hold 66% of the equity share capital of Tata Sons. In 2017-18, the revenue of Tata companies, taken together, was US$ 110.7 billion.