NCLT upholds Tata Sons' 2016 move sacking Cyrus Mistry as Chairman

Jul 9, 2018 16:28 IST
NCLT upholds Tata Sons' 2016 move sacking Cyrus Mistry as Chairman

The National Company Law Tribunal (NCLT) on July 9, 2018 upheld the October 24, 2016 decision of the Tata Sons’ Board of Directors of sacking its then Chairman Cyrus Mistry. The ruling was given by a Special NCLT Bench comprising B S V Prakash Kumar and V Nallasenapathy.

The NCLT ruled that the Tata Sons Board of Directors was competent to remove the Mistry as the board members had lost confidence in him. The NCLT also pointed out that Mistry had openly gone against the Board, and hence against the company.

Mistry had quit from the board of other six Tata Group companies, after he was abruptly ousted as the Tata Sons Chairman.

Ruling came on a plea filed by Cyrus Mistry

The much-awaited verdict of the NCLT came on a petition filed by Cyrus Mistry to reinstate him on the Board of Tata Sons.

The petitioners, Cyrus Investments Pvt Ltd and Sterling Investments Group of the Shapoorji Pallonji Group had filed the plea against the Tata Sons directors and trustees of Tata Trusts, alleging abuse of articles of association by outsiders, breakdown of governance and loss of ethical values.

Ouster of Cyrus Mistry

The board of Tata Sons Ltd in October 2016 replaced Cyrus Mistry as Chairman of the India’s largest conglomerate and named his predecessor Ratan Tata as the interim chairman for four months.

No reason was given for removing Mistry, but it is believed there were differences over management style and his approach of selling assets after writing them down. Mistry, who replaced Ratan Tata as chairman in December 2012, was only the sixth group Chairman in nearly 15 decades and the first from outside the Tata family.

The Allegation

The Tata Trusts  has alleged that  the Tata Group was concerned about the falling revenue and decrease  in funds earmarked for charity  work since Mistry took over as a chairman of Tata Sons. The trustees were also concerned about the fact that the independent performance of Tata Sons was declining day by day.

Defending claims by Cyrus Mistry

Curus Mistry has defended his tenure by asserting that he was burdened with a lot of problems which he inherited from his predecessors. He questioned the precedent decisions of Tata Sons such its entry into aviation, Tata Power’s bidding for Mundra Power Project, the continuation decision with Nano Car etc.

Tata Sons

Tata Sons is a part of the Tata group of companies. The chairman of Tata Sons is also basically the chairman of other operating companies of Tata Group.  Tata Sons decides on how much capital to allocate to other operating companies such as Tata Steel and Tata Motors.

Tata Trusts, the group of Sir Dorabji Tata Trust, Sir Ratan Tata Trust and other trusts, holds two third of the shares of Tata Sons.

 

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