NCLT Verdict - Tata Mistry

The Supreme Court's decision on the legality of Cyrus Mistry's dismissal from
the Tata group brings to a close his four-year legal battle with Ratan Tata,
which started with the National Company Law Tribunal (NCLT) and ended
with the country's highest court. While the resoundingly in favour of Tata Sons
decision puts an end to years of bickering, it does nothing to resolve the larger
fight for dominance between the two families that control nearly 85 percent of
India's largest conglomerate. The court correctly decided that the terms of their
split, including the equal value of the Mistry family's 18.37 percent interest,
were not a matter for the court to decide. That leaves the original problem
unresolved and in desperate need of resolution if both parties are to move
forward with their respective businesses unaffected.
Mr. Cyrus Mistry was removed from the position of Executive Chairman on
October 24, 2016, because the Board of Directors and the majority of
shareholders, i.e., Tata Trusts, lost faith in him as Chairman, not because it was
feared that Mr. Cyrus would trigger Mr. Tata, Mr. Soonawala, and other
answering Respondents discomfort over alleged legacy issues. The Board of
Directors has the power to dismiss the Executive Chairman. There is no
recommendation from the selection committee. Is expected before he can be
removed from his role as Executive Chairman.

Mr. Cyrus Mistry was removed from his role as a director because he
admittedly sent company information to Income Tax Authorities, leaked
company information to the media, and publicly criticised the Board and the
Trusts, which does not bode well for the company's smooth operation, and we
have found no reason to believe that his dismissal as a director falls within the
scope of section 241 of Companies Act 2013.
However, the NCLT observes and verdict on the following points :-
(i). They do not believe that proportional representation on the Board of
Directors based on the petitioners' shareholding is possible as long as the
petitioners' shares are not represented in the Papers, as required by section 163
of the Companies Act, 2013.

(ii). They have not found any basis in claiming that alleged legacy issues such
as the Siva, TISL, Nano vehicle, Corus, Mr. Mehli, and Air Asia issues fall
within the scope of sections 241 and 242 of the Companies Act 2013.

(iii). No evidence or any other piece of information has been found which
claims that the company filing an application under section 14 of the Companies
Act 2013 requesting that this Tribunal change its status from public to private is
subject to the jurisdiction of sections 241 and 242 of the Companies Act 2013.

(iv). There is no point of argument or confliction that Mr. Tata and Mr.
Soonawala's advice and recommendations led to interference in the company's
affairs, so that their acts could be deemed prejudicial to the company's interests
under section 241 of the Companies Act 2013.

(v). The argument that Mr. Tata and Mr. Soonawala served as shadow
directors, forcing their wishes on the company so that action could be taken
under sections 241 and 242 of the Companies Act 2013, has no validity.

(vi). The claim that Articles 75, 1048, 118, and 121 of the Articles of
Association are per se discriminatory against the petitioners is without merit.

(vii). They have not found much merit in the statement that the implementation
of corporate governance in the Companies Act, 2013, has pushed Majority Rule
to the background; it's as if corporate democracy is the genesis, and corporate
governance is the species. They are never at odds with one another; in reality,
under the current system, management is more accountable to the shareholders.

(viii). In addition to the coercive remedy already in place, the 2013 Act also
contained the application of "fair and equal" grounds as a precondition to
passing any relief in mismanagement problems, which was not the case under
the previous Act.

“Now the interesting part under the new regime that Companies Act, 2013, the
Section for oppression and the Section for mismanagement have been abridged
into one section rendering just and fair ground relevant to both scenarios,”
NCLT said, examining the evolution of oppression and mismanagement remedy
by examining the legislative provisions in India. It is not that the regime of the
2013 Act has brought something new; in reality, the situation that existed from
1951 to 1956 has been restored under the 2013 Act. It is no longer appropriate
for any member to raise the question of mismanagement, arguing that since
mismanagement has been confirmed, relief should be given. Now, for
mismanagement, two requirements must be established: mismanagement and
grounds for winding up on just and fair grounds.”