NCLT said it found no merit in Mistry's allegations and ruled that the board of directors was competent to remove an executive chairman.

NCLT dismisses Cyrus Mistrys petition against Tata Sons over his removal
Atom Tata-Mistry Feud Monday, July 09, 2018 - 11:54

Putting a possible end to the 18-month feud between Ratan Tata and ousted Chairman Cyrus Mistry, the National Company Law Tribunal (NCLT) has dismissed Mistry’s plea against the Tata Sons Group regarding his ouster. In a hearing that went on for nearly four months, the bench, headed by Justices BSV Prakash Kumar and V Nallasenapathy, rejected Mistry’s petition to reinstate him in the Tata Sons board.

The tribunal observed that it didn’t find merit in the arguments related to the mismanagement of operations in the Tata Group companies and ruled that the board of directors was competent to remove an executive chairman.

According to several television channel reports, NCLT, in its order, observed that there was no interference from Ratan Tata or Tata Trustee NA Soonawala in the operations of the company. It said that it doesn’t agree that Ratan Tata worked as a shadow director and that there was no merit to the legacy issues raised by Mistry. It further observed that Mistry openly went against the board of directors.

Background:

Cyrus Mistry, who took over as the chairman of Tata Sons Group in 2012 post Ratan Tata’s retirement, was ousted from his position in October 2016.

What followed was an exchange of several allegations between both parties. Mistry’s firms questioned several happenings in the company such as continuing the Tata Nano project despite it being loss-making, commercial contracts being awarded to close confidants of Ratan Tata and other such mismanagement issues in the company, which they alleged set back the company by several crores.

In December 2016, Mistry filed a petition claiming that his removal was a result of mismanagement by the board’s trustees and oppression of minority shareholders and that the removal of Mistry was illegal. The case was filed against Tata Sons and 20 others.

The petition further alleged that there was an excessive interference by Tata Trusts in the company, which affected the corporate governance of the company and that there was violation of insider trading norms. Mistry also alleged that Ratan Tata was a chairman who never retired and that he was the influencing force behind the removal of Mistry. He also blamed the Nano project on Ratan Tata.

However, initially, the NCLT bench had dismissed the petition in early 2017 citing the eligibility clause. The eligibility clause required any minority shareholder to have a 10% equity share in the group, which is mandatory to file a mismanagement and oppression case under sections 241, 242 and 244.

This was then challenged in NCLT in New Delhi, which asked the bench to hear the matter stating that the waiver given to Mistry was on on principle and not on the merit. The Mumbai bench then began hearing the petition against Tata Sons in November 2017.

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