Three years after Cyrus Pallonji Mistry was unceremoniously removed from the post of Executive Chairman of Tata Sons, the National Company Law Appellate Tribunal (NCLAT) ruled the decision “illegal”, paving the way for his reinstatement. Tata Sons is the holding company of companies within the Tata Group.

Option to appeal against the decision

The replacement of the present ‘Executive Chairman’ and reinstatement of Mr. Mistry will however come into effect after four weeks during which Tata Sons has the option to challenge the tribunal’s verdict before the Supreme Court.

Additionally, the tribunal clarified that the Mr Mistry will be reinstated as Director of the ‘Tata Companies’ with immediate effect.

Conversion to Private Limited declared illegal

It also declared as illegal the conversion of the ‘Tata Sons Limited’ from ‘Public Company’ to ‘Private Company’ by Registrar of Companies. The tribunal remarked the decision to convert the company private was ‘prejudicial’ and ‘oppressive’ to the minority shareholders including ‘Shapoorji Pallonji Group’.

Shapoorji Pallonji Group are in business with Tata Group i.e.— ‘Sir Dorabji Tata Trust’ and ‘Sir Ratan Tata Trust’ for more than four decades. Earlier Mr. Pallonji Shapoorji Mistry, father of Mr. Cyrus Pallonji Mistry, was appointed as the Executive Chairman of the Tata Sons.

For better protection of interest of all stakeholders, the tribunal said that in future at the time of appointment of the Executive Chairman, Independent Director and Directors, the ‘Tata Group’ which is the majority group should consult the minority group – ‘Shapoorji Pallonji Group’.

It also barred Tata Sons from invoking its power under Article 75, which empowers the ‘Tata Sons Limited’ at any time to transfer ‘ordinary shares’ of any of the shareholders without following the normal procedure of transfer, against Mr Mistry and other minority member.

Rationale by Mistry

The tribunal’s ruling came on a plea by Mr Mistry challenging his sudden removal from the post of ‘Executive Chairman’ pursuant to a decision of Board of Directors’ of the ‘Tata Sons Limited’.

Mr Mistry had contended that Tata Sons Chairman Emeritus Mr. Ratan N. Tata and Mr. N.A. Soonawala kept “interfering in the affairs of the company and demonstrating their insecurity about their legacy being undermined instead of looking to what is in the best interests of the company”.

About Tata Sons

Tata Sons Private Limited is the holding company of the Tata Group and holds the bulk of shareholding in the Tata group of companies including their land holdings across India, tea estates and steel plants.

Tata Sons Private Limited was established as a trading enterprise in 1868, engaged primarily in the lucrative opium and tea trade with Mongolia and China. About 66% of the equity capital of Tata Sons is held by philanthropic trusts endowed by members of the Tata family. The biggest two of these trusts are the Sir Dorabji Tata Trust and Sir Ratan Tata Trust. Tata Sons is the owner of the Tata name and the Tata trademarks, which are registered in India and several other countries. It is one of the largest conglomerates in South Asia.

Natarajan Chandrasekaran took over as Chairman of Tata Sons on 21 February 2017. The company also undertook conversion from a public limited company to a private limited one in 2017

Source: The Hindu

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