Ratan Tata arrives for the Tata Sons EGM at Bombay House; the meeting removed Cyrus Mistry as a member of the board
Image: Indranil Mukherjee / AFP / Getty Images
The pitched corporate battle that began on October 24, 2016, with Cyrus Mistry being sacked as chairman of Tata Sons, continued on February 6, 2017 with his removal as a director on the board of the holding company of the conglomerate, in which his family holds an 18.4 percent stake.
While Tata Sons may have been successful in removing all traces of Mistry from its headquarters at Bombay House, it may still be premature for them to claim victory, since a long-drawn legal battle is all but a given.
Mistry, 48, and his family’s investment firms that have moved court against Tata Sons, its directors, the Tata Trusts and their nominees, fought tooth and nail to obtain a stay on the extraordinary general meeting (EGM) of Tata Sons’ shareholders where a resolution seeking his removal was to be put to vote. The National Company Law Tribunal (NCLT), which is hearing the main petition alleging oppression of shareholders and mismanagement, refused to grant the stay. The petitioners then moved the National Company Law Appellate Tribunal (NCLAT) in New Delhi, but to no avail.
Consequently, the EGM went ahead on February 6 and, as expected, the shareholders of Tata Sons passed a resolution to remove Mistry as a director of the company.
Sources close to the developments at Bombay House say that neither side is willing to let up. Whichever party loses a case at any court of law will invariably appeal the decision in a higher court, they say, till all legal options are exhausted by either side.
It started with the Mistry family firms—Cyrus Investments and Sterling Investment—challenging NCLT’s refusal to grant a stay on the EGM, and their unwillingness to take an immediate decision on the maintainability of their petition at the NCLAT.
Tata Sons has claimed that Mistry’s petition is not maintainable since his family firms hold only 2.17 percent of the issued share capital of the company (including ordinary and preference shares).
A petition filed under Section 241 and 242 of the Companies Act of 2013 is not maintainable if the petitioners hold less than a tenth of the issued share capital of the company, or represent less than a tenth of the total number of shareowner members. But in the interest of hearing a case, a court of law can always waive this condition.
While the NCLAT has refused to intervene in the matter, it did provide some relief to Mistry by observing that when his case comes up for final hearing at the NCLT, the court should decide on the issues of maintainability and waiver first, and only then decide on the case based on merit.
The NCLAT further stated that if the tribunal’s Mumbai bench ruled in favour of Mistry, it could always issue an order to restore him as a director of Tata Sons.
Meanwhile, sources close to Mistry say he is chalking out his next professional pursuit.
“When Cyrus had left the Shapoorji Pallonji Group to take over as Tata Sons chairman, he had handed over the day-to-day management of the group to his brother, Shapoor,” says the source.
“Though he is back in the family business, he is clear that Shapoor should continue running the business. While he will support his brother in the management of the group, he is also planning to start a new venture of his own.”
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(This story appears in the 03 March, 2017 issue of Forbes India. To visit our Archives, click here.)