National Company Law Tribunal (NCLT): The petitioner’s who held over 18% equity shares in Tata Sons Ltd., were propelled to file the company petition against Tata Sons Ltd., Ratan Tata (Chairman Emeritus) and others. The petition arose consequent to the incident on 24-10-2016 wherein the Co. Board meeting, Cyrus Mistry (Chairman) was removed from his position without giving 15 days notice. The petitioners alleged that the respondents conducted the affairs of the Co. In an oppressive manner which was prejudicial to the interest of the petitioners, the Co., and the public.
As per the petition, the factum of oppressive, arbitrary and prejudicial mismanagement lies in bleeding of Corus acquisition and overpriced take over, doomed Nano car project, Ratan Tata’s relationship with C. Sivasankaran (owner of Sterling Infotech Ltd.), DoCoMo Arbitration, and unjust investment of Ratan Tata at the cost of the Co., aviation industry misadventures, removal of Cyrus Mistry as Chairman of the Co., loss to the Co., in purchase of shares of Tata Motors. It was alleged that over time Tata Trusts directors had become the handmaiden of Ratan Tata and his lieutenant Noshir A. Soonawala (Vice Chairman, Tata Sons Ltd.); they had become a ‘Super Board’. They were alleged to control the Trusts Nominee Directors and thereby suppress the minority shareholders, the petitioners. It was further alleged that respondents acted as per Ratan Tata’s bidding, violating the Articles of Association. A grievance was also made against ‘legacy hotspots’. On the premise of these allegations modification in AoA was prayed for, along with demand to appoint an administrator to look after day-to-day affairs of the Co.; appointment of a retired Supreme Court Judge as non-executive Chairman, direction to the board not to remove Cyrus Mistry from the post of Chairman, restriction on the role of Soonawala, investigation into the affairs of the company, etc.
The Tribunal, in order to decide the petition, took upon an arduous task of visiting the history of Tata’s and the development of their corporations. In its 368-pages judgment, the Tribunal discussed each and every point raised by the petitioners and reached a conclusion that the petition was liable to be dismissed. The findings of the Tribunal are summarized (inter alia) hereinafter:
- Board of Directors are competent to remove the Executive Chairman, the recommendation of Selection Committee was not required.
- Removal of Cyrus Mistry was because he leaked company information to the Media, IT authorities, etc.
- No merit was found on the purported legacy issues.
- None of the articles of the AoA were oppressive against the petitioners.
- Majority (shareholders) Rule has not taken a back seat with the introduction of Companies Act 2013. They are never in conflict with each other. Corporate democracy is genesis and corporate governance is species.
Finding no merit in the issues raised by the petitioners, it was held that all the affairs of the company being conducted as per AoA which fully complied with the Companies Act. Further, no merit was found on the role attributed to the Ratan Tata and other Trustees of Tata Trust. Accordingly, basing its decision on the reasons as summarized above, the Tribunal dismissed the appeal. [Cyrus Investments (P) Ltd. v. Tata Sons Ltd., CP No. 82 (MB) of 2016, dated 12-07-2018]