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NCLT dismisses Mistry's plea against removal as Tata Sons chairman

Tuesday, July 10, 2018

The National Company Law Tribunal (NCLT) dismissed pleas of Cyrus Mistry challenging his removal as Tata Sons chairman as also the allegations of rampant misconduct on part of Ratan Tata and the company's Board.

A special bench of the tribunal held that the Board of Directors at Tata Sons was "competent" to remove the executive chairperson of the company.

NCLT bench members B S V Prakash Kumar and V Nallasenapathy said that Mistry was ousted as chairman because the Tata Sons' Board and its majority shareholders had "lost confidence in him".

Reading out the judgement's operative part, the bench said that "he (Mistry) admittedly sent out crucial information related to the Tata firms to the Income Tax department, leaked information to the press, and after he came out in public against the company and its board members".

It further said: "The removal of Cyrus Mistry as executive chairperson was because the board lost confidence and not because they were contemplating that he would cause discomfort to Ratan Tata, Soonawala (N Soonawala, the group trustee), and other answering respondents...

"The Board is competent to remove an executive chairman. Mr Mistry's removal from the position of director came because he admittedly sent out company information to the I-T (department), press, and came out in public against the board and the trust."

The Tata Group had argued that the law clearly allows removal of a chairperson and director and Mistry was removed by a majority of seven out of nine, as Mistry had not voted for his removal and another official had abstained. The bench in its order today agreed with arguments of the Tata group. "We have found no merit in the argument that Ratan Tata, Soonawala interfered, or that their conduct caused prejudice to the company's interest. In view of all of the above, we hold that Mr Mistry's removal doesn't call for action under 241 of the (Companies) Act," it said.

According to section 241 of the Companies Act, any member of a company can make an application to the NCLT for seeking in case the company's affairs are being conducted in a manner prejudicial to public interest, or in a manner oppressive to any member of such company.

The tribunal rejected Mistry's allegations against Tata Sons Board and Ratan Tata of mismanagement of affairs and oppression of minority shareholders.

It also rejected all allegations of lapses in governance on part of the group when it came to Air Asia, Nano and Aircel, and of a breakdown of corporate governance.

The bench said it had found no merit in Mistry's allegations and concluded that the Board was acting in accordance with the Companies Act of 2013.

After the tribunal delivered its judgement, Mistry's office issued a statement describing the ruling as "disappointing although not surprising".

the Tata Sons-Cyrus Mistry case:
1. October 24, 2016: Tata Sons ousts Cyrus Mistry from the post of chairman; names Ratan Tata as interim chairman.
2. October 25, 2016: Mistry writes to Tata Sons' board accusing 'shadow control' by the Tata Trustees.
3. December 19, 2016: Mistry resigns as director from all Tata group firms.
4. December 20, 2016: Mistry moves National Company Law Tribunal (NCLT) alleging oppression of minority shareholders and mismanagement.
5. January 12, 2017: Tata Sons names N Chandrashekaran as Chairman.
6. February 6, 2017: Mistry removed from the post of director of Tata Sons' board.
7. September 21, 2017: Tata Sons' board approves plan to become a private company.
8. June 12, 2018: NCLT sets July 4 as date of order.
9. July 4, 2018: NCLT defers judgement till July 9.
10. July 9, 2018: NCLT dismisses Cyrus Mistry's pleas challenging his removal as chairman of Tata Sons. The tribunal says Mistry was removed as the board and its members lost confidence in him.

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