Tata Sons moves SC against NCLAT order reinstating Cyrus Mistry
02 Jan 2020
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Tata Sons, the holding company of the Tata group of companies, has moved the Supreme Court challenging the 18 December order of the National Company Law Appellate Tribunal (NCLAT) reinstating ousted former chairman of the salt-to-aerospace conglomerate Cyrus Mistry as the company’s executive chairman.
Tata Sons moved the apex court seeking early interim relief from the tribunal order reinstating Cyrus Mistry ahead of the TCS board meeting scheduled for 9 January to consider Q3 results.
The appellate tribunal set aside a lower court order and also quashed the conversion of Tata Sons into a private entity from a public company.
On 18 December 2019, the tribunal had restored Mistry as executive chairman of Tata Sons and ruled that appointment of N Chandrasekaran as the head of the holding company of Tata Sons was ''illegal.''
The NCLAT, however, stayed the operation of the order with respect to reinstatement of Mistry for four weeks to allow Tatas to appeal. Tata Sons also sought a stay on the tribunal’s order till its appeal is decided in view of the TCS board meeting on 9 January.
Mistry had contested his removal as chairman in 2016, accusing the group of not following due process and alleged inappropriate interference in the company’s affairs by family patriarch and the conglomerate’s former chairman, Ratan Tata.
The NCLAT sided with Mistry, deeming the appointment of N Chandrasekaran as group chairman illegal and asked Ratan Tata not to interfere with matters. It, however, gave Tata Sons four weeks to file an appeal with the Supreme Court.
Mistry family-owned frims hold stakes in Tata Sons and can oppose an interim stay, which could force the Tatas to re-induct Cyrus Mistry pending a final order. The NCLAT ruled on 19 December that Mistry should be reinstated as director of Tata Sons and three group firms — TCS, Tata Industries and TTSL (Maharashtra). Mistry had been ousted as Tata Sons chairman in October 2016 and was eventually succeeded by N Chandrasekaran.
Mistry, a scion of wealthy Shapoorji Pallonji family, was in a coup removed as Chairman of Tata Sons in October 2016. He was the sixth chairman of Tata Sons and had taken over in 2012 after Ratan Tata. He was later also removed as director on board of Tata Sons.
However, Mistry and Tata family patriarch Ratan Tata had reportedly differed on key investment decisions, including manufacturing of world's cheapest car Nano.
Listed companies can delay declaration of results by 45 days after the end of each quarter and this would give TCS, which is to hold its board meeting on 9 January, time until mid-February to obtain relief from the Supreme Court.
The holding company also will avoid holding a board meeting.
So far, only Tata Global Beverages Ltd is the only Tata company to hold a board meeting — to announce a CEO — following the NCLAT decision.
Seeking an immediate stay on the entire order from the Supreme Court is a better option for Tata Sons than postponing a scheduled board meeting.
Cyrus Mistry can also make an application before the NCLAT for seeking specific directions for compliance with the order passed in the upcoming board meeting.
Tata Sons board members have assured chairman N Chandrasekaran of their support through messages and calls, said executives aware of the matter. The chairman has held a meeting with group CEOs to apprise them of developments and allay concerns.
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