Tata vs Mistry: SC to hear Cyrus Mistry’s plea for Tata Sons board seat

Mistry wants the SP group firms - Cyrus Investment Pvt Ltd and Sterling Investment Corporation - should be given proportionate representation on the Tata Sons board and all its committees, which allegedly was denied to his family group.

The Supreme Court on Friday sought response from the Tata Group and Ratan Tata on the cross-appeal by Cyrus Mistry-run family firms seeking proportionate representation for the Shapoorji Pallonji (SP) Group on the Tata Sons board.

Mistry wants the SP group firms – Cyrus Investment Pvt Ltd and Sterling Investment Corporation – should be given proportionate representation on the Tata Sons board and all its committees, which allegedly was denied to his family group. He claimed that the Group owns 18.37% of equity share capital in Tata Sons whose stake is worth over Rs 1.5 lakh crore, thus making it the single largest non-Tata shareholder. Besides, he also sought that the affirmative votes in the hands of select Tata Sons directors should be struck down and directors of the Shapoorji Pallonji Group should be given similar powers.

The Bench led by Justice AS Bopanna sought response from 23 respondents, including Tata Sons and Ratan Tata, and also tagged the Mistry firms appeal with a batch of appeal filed by Tata Sons and others against the National Company Law Appellate Tribunal’s (NCLAT) December judgment. It gave both sides four weeks’ time to complete pleadings so that the case can be finally heard at the earliest.

Earlier, the Supreme Court on January 10 had stayed in entirety the NCLAT’s December 18 order that reinstated Cyrus Mistry as chairman of Tata Sons which had termed his removal in October 2016 as “illegal”. The appellate tribunal while terming Tata Group’s actions against Mistry as “prejudicial” and “oppressive” had also termed Tata Sons’ move to turn into a private company from a public limited as unlawful, and had ordered its reversal.

While NCLAT had ruled in favour of Mistry, it had refused to amend the Article of Association, which was claimed to have been “misused” to undermine the SP Group.

Senior counsel CA Sundaram, appearing for the Mistry firms, on Friday argued that while the NCLAT had upheld their arguments with clear findings that favoured them, the subsequent relief granted by it doesn’t do “full justice” to them.

He claimed that the appellate tribunal failed to protect the rights of SP Group from any future prejudicial conduct by not amending or striking down AoA that were allegedly “misused” to hurt the SP group’s interests.

If the NCLAT had granted relief, it would have addressed their complaint of oppression against Tata Sons and brought an end to it, the Mistry group said.

“The application of high standards of governance and probity stand undermined causing prejudice to the interest of minority shareholders of Tata Sons and indeed hurting the interests of Tata Sons itself, at the hand of the majority shareholders – the trustees of the Tata Trust,” it said while challenging Article 121 of the AoA of Tata Sons which allow select directors to override the views of the board of directors.

The appeal stated that the NCLAT despite having found that there was oppression, it limited its own jurisdiction on the “erroneous premise” that it did not have the power to strike down the Articles of a company, thus overlooking its powers conferred under Section 242 of the Companies Act. In the process, it allowed Article 121 and Article 75, a “draconian provision” and “sources of oppression,” to continue and this has no place in modern Company Law, it added.

The appeal also seeks for striking down of affirmative vote in hands of select Tata Sons directors, allowing them to override the entire Tata Sons’ board.

Mistry wants the SC either to delete the necessity of an affirmative vote in the hands of select directors under Article 121 that enables them to override the view of the entire board or alternatively the requirement of an affirmative vote conferred on directors nominated under Article 104B should be restricted to matters covered by Article 121A and such rights be extended to the majority directors of the Mistry firms.

Recounting several instances of the SP Group extending financial help to Tata Sons, the firms claimed that the SP Group has proved to be a “Guardian of the Tata Group for over six decades”.

Earlier, Tata Sons, its chairman emeritus Ratan N Tata and various Tata firms including TCS, Tata Tele and Tata Trusts had approached the top court seeking quashing of the NCLAT’s order that directed reinstatement of Mistry as chairman and as director of three group companies. Tatas claimed that Mistry was removed since “he had failed to timely capitalise on business opportunities when they presented themselves and Tata Sons’ financial performance, under his tenure, was also deeply unsatisfactory”.