Mistry camp says NCLAT verdict 'victory of good governance', but Cyrus unlikely to return to Tata Group

Cyrus Mistry (GettyImages)

The Cyrus Mistry camp today dubbed the verdict of the National Company Law Appellate Tribunal (NCLAT) restoring Cyrus Mistry as Chairman of Tata Sons as a “moral victory”.

Tata Sons is the main holding company of the steel-to-software Tata Group.

The NCLAT upheld Mistry’s contention that the manner in which he was removed from Tata Sons in a board meeting in October 2016 was illegal.

The tribunal also pronounced the appointment of Mistry’s successor, N Chandrasekaran, as Tata Sons chairman as illegal.

The court, however, suspended the part of its order, which reinstated Mistry as Chairman, for a period of four weeks, effectively allowing Tata Sons to appeal to the Supreme Court.

“The outcome of the appeal is a vindication of my stand taken when the then board of Tata Sons, without warning or reason removed me, first as the executive chairman, and subsequently as a director of Tata Sons,” Mistry said in a statement.

“Today’s judgment is not a personal victory for me, but is a victory for the principles of good governance and minority shareholder rights,” he added.

The Tata Sons board had removed Mistry, who took over from Ratan Tata in 2012, on grounds that it had lost “confidence” in him.

It later emerged that Mistry had clashed with Ratan Tata on a number of issues, including the decision to continue investing in the loss-making Tata Nano car.

Mistry also accused the Tata Sons board of mismanagement and said Ratan Tata would unduly influence its decisions.

Mistry unlikely to return to Tata Sons

Even as the order to reinstate Mistry as chairman of Tata Sons has been suspended for four weeks, insiders who did not wish to go on record said he is unlikely to return to Bombay House (the headquarters of the Tata Group) -- assuming the Tata Group does manage to obtain further relief on this from the SC.

They added that for Mistry, the battle was to only prove that Tata Sons was in the wrong in the manner in which they ousted him, a point that Mistry alluded to in his statement.

“The courts have said what we always maintained, that the way the board conducted itself in October 2016 was illegal,” Nirmalya Kumar, a former Tata Sons board member who sided with Mistry, told Moneycontrol. Kumar is now the Lee Kong Chian Professor of marketing at Singapore Management University & Distinguished Fellow INSEAD Emerging Markets Institute.

In any case, there is always the possibility that the Tata Group could still go ahead and again remove him as Chairman, this time following due process.

“I believe it is now time that all of us work together for sustainable growth and development of the Tata Group, an institution that we all cherish,” Mistry said in his statement.

The NCLAT also agreed with Mistry’s other arguments. For instance, it held the conversion of Tata Sons from a public company to a private company as “oppressive”, and declared it illegal. The Tata Group had used the conversion as a way to not allow Mistry’s Shapoorji Pallonji Group to sell their stake.

His position bolstered, Mistry is likely to only press for certain changes at Tata Sons, instead of taking up charge himself.

“For the Tata Group to prosper as an institution, it is important that the management of individual companies, their Boards, the management of Tata Sons, the Board of Tata Sons and the shareholders of Tata Sons, all work harmoniously within a robust governance framework, that in substance and form, protects the rights of all stakeholders, including shareholders, investors and the Tata Groups employees, who represent the strongest asset of the Group,” he said.

- Prince Thomas contributed to this story