Tatas making Cyrus chairman wrong decision of lifetime: Supreme Court


NEW DELHI: The Supreme Court on Friday upheld Cyrus P Mistry’s removal from the post of executive chairman of Tata Sons and rejected the Shapoorji Pallonji Group’s accusations against Ratan Tata, including Tata Sons board’s allegedly oppressive practices against minority shareholders.
The court dismissed SP Group’s last-minute plea for evaluation of its shares for an honourable exit from Tata Sons through payment of fair compensation. The bench said, “At this stage, and in this court, we cannot adjudicate on fair compensation. We will leave it to the parties to take the Article 75 route or any other legally available route.”

A bench of Chief Justice SA Bobde and Justices AS Bopanna and V Ramasubramanian in a 282-page judgment shredded SP Group and Mistry’s arguments against Tata Sons and wondered how the National Company Law Appellate Tribunal (NCLAT) could have deviated from the law to order Mistry’s reinstatement even after expiry of his tenure as executive chairman and direct conversion of Tata Sons into a public company.

The court said, “In fact, it may be conceded today by Tata Sons that one important decision that the board took on March 16, 2012 (appointment of Mistry as executive deputy chairman) certainly turned out to be the wrong decision of a lifetime.”

Writing the judgment for the bench, CJI Bobde laid the blame squarely at the doors of Mistry and SP Group for starting the fight with Tata Group and Ratan Tata. “It is an irony that the very same person who represents shareholders owning just 18.37% of the total paid-up share capital and yet identified as the successor to the empire, has chosen to accuse the very same board of conduct oppressive and unfairly prejudicial to the interests of the minorities,” the bench said.
The SC blamed Mistry for bringing misfortune on himself by attempting to set the house on fire, the safekeeping of which was entrusted to him. “In any event, the removal of a person from the post of executive chairman cannot be termed as oppressive or prejudicial,” the SC said.

“Mistry himself sought, while accepting the office, the continued guidance of Ratan Tata. When the board, of which Mistry was chairman, nominated Ratan Tata as chairman emeritus and recorded their desire to look forward to his support and guidance, it was not open to the SP Group to call Ratan Tata a shadow director. If someone, aggrieved after his removal from office can engage in shadow boxing through the companies controlled by him, he cannot accuse the very same person who chose him as successor to be a shadow director. Someone who gained entry through the very same door, cannot condemn it when asked to exit,” the CJI said.

Dismissing the claim of SP Group companies that Tata Sons’ affairs were conducted in a manner oppressive towards minority shareholders like SP Group, the SC said, “If the company’s affairs have been or are being conducted in a manner oppressive or prejudicial to the interests of the SP Group, we wonder how a representative of the SP Group, holding a little over 18% of the share capital, could have moved up to the topmost position within a period of six years of his induction.”

Referring to Mistry’s conduct in causing a sensation by leaking to media his confidential email accusing Tata Sons directors of not discharging their duties and calling Tata Trust’s nominee directors “postmen” and his writing to tax authorities about Tata Sons’ accounts, the bench said such conduct surely warranted his removal.
“A person who tries to set his own house on fire for not getting what he perceives as legitimately due to him does not deserve to continue as part of any decision-making body (not just the board of a company). It is perhaps this realisation that made the complainant companies (SP Group) give up their original prayer for restraining the company from removing Mistry and singing a different tune seeking proportionate representation on the board,” the SC said.

The SC slammed the NCLAT for ordering Mistry’s reinstatement even when it was not sought by the SP Group. “It is incomprehensible that the NCLAT directed reinstatement, and that too of a director of a company, after the expiry of his term of office. Needless to say that such a remedy would not have been granted even by a labour court/service tribunal in matters coming within their jurisdiction,” the CJI said.

Referring to Mistry’s team’s allegation about failed business ventures like the Tata Nano car project and telecom venture Docomo, the SC said, “Failed business decisions and the removal of a person from directorship can never be projected as acts oppressive or prejudicial to the interests of the minorities, it is too well settled.”
The SC also rejected SP Group’s claim for proportionate representation on the Tata Sons board.
“The right to claim proportionate representation is not available even to a minority shareholder statutorily, both under the 1956 Act and under the 2013 (Companies) Act. It is available only to a small shareholder, which SP Group is certainly not. The right to claim proportionate representation is not available to the SP Group even contractually, in terms of the articles of association. Neither SP Group nor Mistry can request the tribunal to rewrite the contract, by seeking an amendment of the articles of association,” the SC said.



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