A fierce battle was held at the Supreme Court of India on December 8, 2020. Tata Sons Limited and Cyrus Mistry had a prolonged fight over the Chairperson of Tata Sons Limited. The two prominent industrialists, Tata Sons Limited and Cyrus Mistry have challenged a December 18, 2019 order of the National Company Law Appellate Tribunal (NCLAT), which had ordered the reinstatement of Cyrus Mistry as the Chairperson of Tata Sons Limited.
On January 10, 2020, the Supreme Court decided in favor of the NCLAT order. The Supreme court stated that removing Cyrus Mistry as Chairperson was illegal. Moreover, the Supreme Court also directed that Ratan Tata should not practice any decision in advancement, requiring a majority judgment of the Board of Directors of Tata Sons or a majority in the Annual General Meeting.
However, it was the day for the senior advocate Harish Salve who is fighting the case on behalf of Tata Sons. Throughout the day, he led a fierce legal battle and put down five main submissions. They are-
1-Pallonji group controls only 18 percent stake in Tata Sons while Tata Trusts endures 68 percent stake.
2- Bad business determination is not ‘mismanagement’- Salve replied this with this statement when CJI Bobde asked, “Are you saying that a decision that was taken that did not work (for the company) cannot be the basis for oppression or mismanagement?”
3- NCLAT has absolute control of all Tata companies with the minority shareholder.
Elaborating this point, Salve stated, “The NCLAT held that Tata Sons’ affairs have been or are being conducted in a manner ‘prejudicial’ and ‘oppressive’ to members including Cyrus Mistry and it was also ‘prejudicial’ to the interests of Tata Sons and its group companies. However, since winding up would prejudice the members of the company, the NCLAT found it fit to pass orders, including reinstatement of Cyrus Mistry.”
4- No lack of probity in running the company, For NCLAT to invoke powers under Section 242.
5- NCLAT has no “absolute” power to appoint Director under Section 242(2)(k)
Section 242 provisions for several steps that the tribunal can resort to change the company’s position. Among those are the controls to remove directors under section 242(2)(h) and appoint directors, which is provided under section 242(2) (k).
Salve argued that the NCLAT does not have such absolute powers under Section 242(2)(k) to appoint Directors.
As per the latest developments, it is a big win for Cyrus Mistry as the Supreme Court has ordered the reinstatement of Cyrus Mistry as Chairman of Tata Sons