The Supreme Court on Friday has set aside the National Company Law Appellate Tribunal (NCLAT) order issued in December 2019 that ordered Tata Sons to reinstate Cyrus Mistry as it chairman.
In a massive 282-page judgment, a bench headed by Chief Justice of India S.A. Bobde rejected the plea of the Mistry group that the Tatas had indulged in oppression, mismanagement and had trampled with the rights of the minority shareholders, and hence the company should be wound up.
“If someone, aggrieved after his removal from office can engage in shadowboxing through the companies controlled by him, he cannot accuse the very same person who chose him as successor to be a shadow director. Someone who gained entry through the very same door, cannot condemn it when asked to exit,” the Supreme Court said.
“Therefore, the challenge to the affirmative voting rights and the allegations revolving around pre-consultation and pre clearance by the Trusts of all items in the agenda and RNT (Ratan Tata) indirect or direct influence or grip over the board are all liable to be rejected.”
The court said Mistry’s removal as executive chairman of Tata Group was justified as “a person who tries to set his own house on fire for not getting what he perceives as legitimately due to him, does not deserve to continue as part of any decision making body”.
The court passed the judgment while dealing with a batch of petitions filed by various Tata Group companies and cross petitions filed by SP (Shapoorji Pallonji) Group challenging the judgment passed by NCLAT on December 18, 2019.
The bench expressed surprise that the NCLAT chose to order the reinstatement of Cyrus Mistry even when no such prayer was made by SP Group and further the tribunal had ordered his continuation beyond the actual tenure which ended technically on March 31, 2017.
The apex court said a deemed public company can revert back to its status as a private company, in view of subsection (2A) of Section 43A, by incorporating necessary provisions in the articles.
“In simple terms, a company which becomes a deemed public company by operation of law, cannot be taken to have undergone a process of fermentation or coagulation like milk to become curd or yoghurt, having an irreversible effect.
“Therefore, NCLAT was completely wrong in holding as though Tata Sons, in connivance with the Registrar of Companies did something clandestinely, contrary to the procedure established by law. The request made by Tata Sons and the action taken by the Registrar of Companies to amend the Certificate of Incorporation were perfectly in order,” the bench said upholding Tata Sons’ decision to rechristen itself as a private limited company.
The court also declined to deal with the application moved by SP Group praying for the alternative relief of directing Tata Sons and others to cause a separation of ownership interests of SP Group in Tata Sons through a scheme of reduction of capital by extinguishing the shares held by SP Group in lieu of fair compensation.
Tata Sons on Friday hailed the order by the Supreme Court. The order of the court vindicates its position and upholds the governance standards adopted by the conglomerate over the years, it said.
