NCLAT order rewrites company’s Articles: Tata Sons in SC

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New Delhi, Jan 2 (IANS) Tata Sons on Thursday moved the Supreme Court, challenging the reinstatement of Cyrus Mistry as its Executive Chairman by the National Company Law Appellate Tribunal (NCLAT) as its verdict “would tear apart the rights of majority shareholders and directors enshrined under the Articles and the 2013 Act and disenfranchise all other shareholders including the Tata Trusts”.

The petition said Article 118 (of the Companies Act), which provides for selection of the Chairman, has been given a complete go-bye through the NCLAT judgement without even giving a finding on how the same is illegal. “In other words, the NCLAT judgment has re-written the Articles of Tata Sons, where the majority shareholders are subject to the minority – capsizing the fundamental rule of corporate democracy,” said the petition.

Tata Sons has challenged the complete order of the NCLAT, pronounced on December 18, restoring Mistry as Executive Chairman and also his immediate reinstatement as director of Tata Sons and three group companies – Tata Consultancy Services Ltd (TCS), Tata Industries Ltd and Tata Teleservices (Maharashtra) Ltd.

The petition seeks to set aside the NCLAT order in the wake of the TCS Board Meeting slated for January 9. The petition contended that Mistry did not seek his restoration as Executive Chairman of Tata Sons, yet the NCLAT judgement granted relief, which was not sought.

“Respondent (Mistry and others) specifically pleaded before the NCLT that they are not seeking reinstatement of Cyrus Mistry. The tenure of Cyrus Mistry as the Chairman and Director of Tata Sons expired in March 2017 and thus for good reason the Respondents did not seek such reinstatement,” said the petition.

The company is likely to mention the petition for urgent listing on January 6 after the apex court reopens after vacation.

The NCLAT, while reinstating Mistry, held that the appointment of N. Chandrasekaran as his successor is illegal, observing the haste in Mistry’s removal as Chairman of the Tata group’s holding company, and this action itself completely ignored the interest and oppression of minority shareholders. However, the appellate tribunal had granted the Tata Group four weeks to file an appeal against its judgement. The restoration order will only be operational after this time period.

Tata Sons’ petition said the direction to restore Mistry for his remaining term, without noticing that the term has come to an end is a recipe for disaster, for the reason that it will create unnecessary confusion in the working of companies and lead to more conflict.

“The companies, as noticed by the NCLAT, are large corporations having many subsidiaries and that Tata Group employees half a million people and contribute substantially to the economy of the country. Any shadow over the management of any of these companies puts public interest in jeopardy,” said the petition, stating the consequences of the direction is to put back Mistry as a director of a slew of companies and not merely Tata Sons.

“Any extension of the tenure available at the time of initial appointment would be ultra vires the jurisdiction of the NCLAT and would have to be set aside for that reason without more,” contended the petitioner.


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