The Supreme Court on Friday set aside the December 2019 order of the National Company Law Appellate Tribunal that had reinstated Cyrus Mistry as the chairperson of Tata Sons Limited, Live Law reported. A three-judge bench of Chief Justice of India SA Bobde and Justices AS Bopanna and V Ramasubramanian had reserved its judgement on the matter on December 17 last year, after both Tata Sons and Mistry had filed appeals against the NCLAT order.
On Friday, the Supreme Court dismissed the appeals filed by Mistry and Shapoorji Pallonji Group, a minority shareholder in Tata Sons owned by him, Live Law reported.
“We find all the questions of law are liable to be answered in favour of the appellants, Tata Group and the appeals file by the Tata Group are liable to be allowed and Shapoorji Pallonji group is liable to be dismissed,” the court said, according to Bar and Bench.
The court held that Tata Sons’ decision to remove Mistry from the post, and subsequently from the company’s board, did not amount to oppression of minority stakeholders or mismanagement, as was alleged.
On Shapoorji Pallonji’s plea to separate ownership of the group by extinguishing its shares in Tata Sons, in lieu of “fair compensation”, the court said it cannot rule on the matter and and asked the two groups to explore legal options, Bar and Bench reported.
Timeline of the case
Mistry took over as Chairman of Tata Sons after Ratan Tata in December 2012 and was removed from the post on October 24, 2016, by the majority of the board of directors of the company, following a spell of disagreements. Then in February 2017, shareholders voted for the removal of Mistry from the board of Tata Sons.
Mistry then filed an appeal at the National Company Law Tribunal under Sections 241 and 244 of the Companies Act, 2013 alleging oppression of minority stakeholders and mismanagement in Tata Sons.
In July 2018, the NCLT dismissed Mistry’s petition holding that the board of directors are competent to remove the chairman and that no selection committee is required to remove the executive chairman. Mistry then challenged the NCLT decision to its appeal body, the National Company Law Appellate Tribunal.
On December 19, 2019, the NCLAT overturned the NCLT verdict and reinstated Mistry as the Tata Sons chairperson. It also held that the board meeting – where the decision to remove Mistry was taken – was illegal.
Tata Sons and Ratan Tata challenged the NCLAT decision in the Supreme Court in January 2020, following which the court stayed the NCLAT order. Mistry, meanwhile, filed a counter-appeal in the Supreme Court in February 2020, submitting that the NCLAT order had failed to secure Shapoorji Pallonji Group “from any prejudicial conduct in the future”.
After the hearing in the case – one of the most high-profile and long drawn legal battles in recent times in India’s corporate sector – concluded in December, the Supreme Court reserved its judgement.