The National Company Law Appellate Tribunal (NCLAT) on Wednesday restored Cyrus Mistry as the executive chairman of Tata Sons, three years after the younger son of billionaire construction magnet Pallonji Mistry was removed in the ugliest boardroom battle of one of India's largest business conglomerates.
The tribunal also ruled that the appointment of N Chandrasekaran as the head of the holding company was illegal.
The NCLAT held that Tata Sons' chairman Ratan Tata's actions against Mistry were "oppressive" and the company's move to turn private "unlawful", and gave the judgement for its reversal.
The Tata Sons' board had approved a plan to convert its holding company Tata Sons from a public limited company to a private one in 2017, a year after Mistry's removal. The step was approved to substantially reduce the powers of its shareholders, mainly Mistry, whose family owns over 18.5% in Tata Sons.
"The manner in which Cyrus Pallonji Mistry was suddenly and hastily removed without any reason and in absence of any discussion in the meeting of the board of directors on October 24, 2016, and his subsequent removal as director of different Tata companies... is justifying us to hold that the appellants have made out a clear case of 'prejudicial' and 'oppressive' action by respondents, including Ratan N Tata...," the NCLAT said in a terse order.
It also held that in future, at the time of appointment, 'Tata Group' — which is the majority group — should consult the minority Shapoorji Pallonji Group before appointing a chairman or director of the company and create a healthy atmosphere, removing the mistrust between the two groups which has caused global effects.
Tata Sons said it strongly believed in the strength of its case and will take appropriate legal recourse. It assured its shareholders that it will continue to act in accordance with law.
Mistry, the youngest chairman of Tata Sons, who took over after Ratan Tata retired in 2012, termed the NCLAT judgement a "victory for the principles of good governance and minority shareholder rights" and said it was time that "all of us work together for sustainable growth and development of the Tata Group, an institution that we all cherish".
The decision, which came a little before the market was to close, led to fall in shares of Tata group companies by about 4%.
In July last year, the NCLT had rejected Mistry's petition to reinstate him as the firm's chairman and found no merit in his allegations. Mistry had then approached appellate tribunal NCLAT against the verdict of NCLT.
After Mistry's removal in 2016, Ratan Tata had taken over as the interim chairman of Tata Sons.
Mistry's grandfather Shapoorji Mistry had first acquired a stake in Tata Sons in 1930s.
