December 19, 2019

Cyrus Mistry’s Return As Tata Group Executive Chairman Likely To Lead To Tough Legal Battle In The Supreme Court

[ By Bobby Anthony ]


Several legal experts seem to differ on the National Company Law Appellate Tribunal (NCLAT) order reinstating Cyrus Mistry as the Executive Chairman of Tata Sons, and some are of the view that the NCLAT order may not hold ground in the Supreme Court.

Corporate and legal experts feel that as both the removal of Mistry as the Chairman and appointment of N Chandrasekaran had the approval of the board and more importantly that of shareholders, the decisions should not be considered illegal.

“The Chairman of the board is appointed and removed by the board itself. And then it is ratified by the shareholders meeting also. Shareholders are supreme,” Pavan Kumar Vijay, Founder of Corporate Professionals, said.

“The order may have been given on some procedural aspect, but I don't think it will sustain (if Tata Sons moves Supreme Court)," Vijay said.

The NCLAT has allowed for suspension of part of its order on reinstatement of Mistry as Executive Chairman of Tata Sons for four weeks, which means that Mistry would have be reinstated as Chairman only after said period.

During this period, the Tata Group can appeal against the NCLAT order in the Supreme Court.

Accordingly, Tata Sons is likely to move the Supreme Court and the company in a statement has said that it would take “appropriate legal recourse” and is currently analyzing the order.

As a matter of fact, legal advisers affiliated to Tata Sons have stated informally that they are baffled by the NCLAT order and believe the relief granted by the tribunal has gone “far beyond” what was sought by the plaintiffs, Cyrus Investments.

By ordering that Mistry be reinstated as executive chairman of Tata Sons, the NCLAT has granted relief which had never been sought at any stage, either before National Company Law Tribunal (NCLT) or the NCLAT, according to these legal sources.

Further, the order of the tribunal has displaced the current executive chairman, N Chandrasekaran, who had been selected following the procedure provided under the Articles of Association of Tata Sons, they said.

“The petition filed in NCLT specifically states that the petitioners are not seeking the relief of reinstating Cyrus Mistry (Respondent No 11) as chairman,” said the advisers cited earlier. “The order was beyond the relief sought by the aforesaid parties. While some prayers had never been sought from the inception, others were given up in writing during the course of arguments.”

The legal sources said that by ordering reinstatement of Mistry as a director of Tata Sons, the NCLAT has granted relief which had been specifically dropped in writing by the petitioners during the course of arguments before the NCLT.

The Tata Sons-Cyrus Mistry saga is likely to be one among those cases whereby the Supreme Court has overturned an NCLAT order, according to experts.

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