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Why it's advantage Tata in India's biggest business battle

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MG Arun
MG ArunJul 17, 2018 | 12:43

Why it's advantage Tata in India's biggest business battle

The verdict in the biggest corporate battle of the decade is out, and this round has comprehensively gone to the Tatas. But, Cyrus Mistry is defiant. The former chairman of Tata Sons, ousted in a boardroom coup on October 24, 2016, is planning to move the higher courts against the National Company Law Tribunal’s (NCLT) verdict in a case he fought against the salt-to-software Tata Group following his removal.

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Mistry is likely to move the National Company Law Appellate Tribunal (NCLAT), a higher authority, against the NCLT verdict after the latter, on July 9, dismissed his lawsuit against Tata Sons, saying it didn’t find merit in allegations of mismanagement at the Tata group.

The two-member bench, comprising BSV Prakash Kumar and V Nallasenapathy, said it found no merit in Mistry’s allegations that Tata Trust chairman Ratan Tata and trustee N Soonawala were being “super directors” of Tata Sons board. The bench said Tata Sons board was competent enough to dismiss an executive chairman and added Mistry’s conduct did not augur well for the functioning of Tata Sons as he openly went against the board. It also rejected Mistry’s demand for proportionate representation on the board and said that it can’t stop Tata Sons from converting itself into a private company.

Removal of Mistry as executive chairman happened because the board of directors and the majority of shareholders, ie Tata Trusts, lost confidence in Mistry as chairman, and not because they contemplated that Mistry would cause discomfort to Ratan Tata over purported legacy issues. The board is competent to remove the chairman, and no selection committee recommendation is required before removing him.

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Mistry was removed from the position of director because he admittedly sent the company information to income tax authorities, “leaked the company information to the media” and openly came out against the board and the Trusts, which hardly augurs well for the smooth functioning of the company, and the bench did not find any merit to believe that his removal as director falls with the ambit of section 241 of the Companies Act 2013.

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Basically, the bench has said that most of the inputs that came from Tata and NA Soonawala were actually solicited from them, and it was not an interference. It would not fall under the ambit of conducting the affairs of the company. Also, Mistry himself was privy to every action in relation to the company, so it cannot be an interference.

Since Tata is the chairman of the majority shareholders of the company and Soonawala is one of the trustees of the trust, “as long as their suggestions are not fraught with mala fides, it has to be treated as the advice and suggestions for the benefit of the company”, not as an interference.

The company was run for more than 100 years, the Tatas dedicated not only their fortunes but their lives for the good of the society by giving everything to the trusts.

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Therefore, Mistry and others should have to be “more careful” in making allegations against the Trusts and the people working for it. The purpose, the bench said, should not be to dig a mountain to get a mole.

By comprehensively dismissing all of Mistry’s arguments, the NCLT Mumbai bench has given the Tatas a reason to cheer. But the issues raised by Mistry are something that the group should look into because many of them are those concerning the health and future of what was one of India’s most respected corporate groups.

(Courtesy of Mail Today)

Last updated: July 19, 2018 | 18:18
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