Name:- tejas chaugule
Roll no:-M2241
Institute:- fr c rodrigues
MMS SEM2
TATA VS CYRUS MISTRY.
In the Board Meeting of Tata Sons Limited held on 24th October 2016 Mr. Cyrus Mistry was replaced from the post of Executive Chairman with immediate effect on the ground of trust deficit and repeated departures from the culture of Tata Group and Mr. Ratan Tata was appointed as the interim chairman of Tata Sons. On 25th October 2016 Tata Sons filed limitations in all the courts to prevent expelled Cyrus Mistry. In turn, Cyrus Investments Private Limited and Sterling Investment Corporation Private Limited, belonging to the SP Group, filed a petition before NCLT under the Companies Act, 2013, on the grounds of unfair prejudice, oppression and mismanagement. On 6th February 2017 shareholders of Tata Sons removed Mr. Cyrus Mistry as director of Tata Sons.
The allegations made by Mr. Cyrus Mistry regarding the management of the Tata Group include that the Articles of Association (AOA) are oppressive as they allow the Tata Trusts to control the affairs of the company, and that there is a huge interference by Mr. Ratan Tata and Mr. N.A. Soonawala in every decision of the company.
Other allegations include the continuation of the unsuccessful Nano Car Project, the illegal removal of Mrs. Cyrus Mistry as the chairman of the company, the overpayment for the acquisition of Corus. There is also an allegation of a fraudulent transaction worth Rs. 22 crore in Air Asia by Tata Trusts.
The Tata Group has denied these allegations and has taken legal action against Mr. Mistry. The matter is still under investigation, and it is important to wait for the outcome before making any conclusions.
The NCLT initially dismissed the petition filed by Cyrus Mistry under Sections 241-242 of the Companies Act, 2013. The NCLT also noted that the petitioners did not meet the criteria of 10% ownership in a company for filing a case of oppression and mismanagement under the Companies Act, 2013.
The NCLT held that the allegations made regarding Air Asia were made with impunity by Cyrus Mistry, flouting all legal principles. As for the allegations on the Nano project, the NCLT held that the allegations were made without making Tata Motors a party to the case.
However, after the NCLT rejected the petition, the two companies appealed to NCLAT. The NCLAT reversed the orders passed by NCLT and ruled in favor of Cyrus Mistry, stating that he shall be reinstated at his original designation as Executive Chairman of ‘Tata Sons Limited’ and consequently as Director of the ‘Tata Companies’ for the rest of his tenure. The final order was dated 18.12.2019.
The NCLAT also directed the reinstatement of Mistry as director of the various Tata Group companies from which he was removed and ordered the appointment of a new chairman for Tata Sons within four weeks. The judgement was hailed as a major victory for Mistry however, Tata Sons appealed against the NCLAT order in the Supreme Court.
The Supreme Court also upheld the conversion of Tata Sons into a private company. The Court also rejected allegations of mismanagement and oppression of minority shareholders by Tata Sons. The Court stated that NCLAT had gone beyond its jurisdiction by granting relief that was not sought by Mistry and his companies. The Court also stated that NCLAT’s order reinstating Mistry was not feasible and practical and would create confusion and instability in the company. The Supreme Court’s verdict ended the long-standing legal battle between Tata Sons and Cyrus Mistry.
Overall, the legal battle has given us a better understanding of the legal framework surrounding corporate governance and the rights of minority shareholders. It has also shed light on the complex power dynamics within family-run businesses and the challenges that arise when there is a change in leadership.