The Supreme Court on Friday ruled completely in favour of multi-billion dollar salt-to-software conglomerate, Tata Sons Pvt Ltd, by setting aside a National Company Law Appellate Tribunal (NCLAT) decision to re-instate minority shareholder Shapoorji Pallonji group's scion, Cyrus Mistry, as its chairman.
A three-judge Bench led by Chief Justice of India Sharad A. Bobde rejected arguments that the ouster of Mr. Mistry as chairman by the Tata Sons Board was "oppressive".
Chief Justice Bobde, who read out the judgement, said every question of law raised in the dispute falls in favour of the Tatas.
The court dismissed the appeals filed by the Shapoorji Pallonji group.
The Bench said the question of a "fair compensation" for Shapoorji Pallonji group cannot be adjudicated in the Supreme Court in this case.
The apex court by ruling in favour of the Tatas seemed to have acknowledged their argument that NCLAT judgement effectively amounted to vesting control of the company with minority (Shapoorji Pallonji group).
"Minority with 18 per cent holding has been effectively given power to rule over all the Tata Companies," senior advocate Harish Salve for Tata Sons had submitted during the extensive hearings.
The NCLAT decision had served a blow to corporate democracy and rights of the board of directors, Tata Sons had argued in its appeal.
Tata Sons said the Tribunal crossed its jurisdiction by terming the appointment of current incumbent N. Chandrasekaran as illegal while restoring Mr. Mistry as chairman.
Mr. Mistry’s tenure as chairman and director of Tata Sons had expired in March 2017. The NCLAT decision to restore him to his “original position” for the “rest of his tenure” was contrary to company law, a recipe for disaster and a dangerous precedent in law.
Besides, Mr. Mistry had never sought his reinstatement. The NCLAT had gone beyond its jurisdiction, the appeal by Tata Sons, filed through Karanjawala & Co, said.
A majority of board of directors at Tata Sons had voted for Mr. Mistry’s replacement as chairman on October 24, 2016 after losing confidence in him. He was again removed as the director of Tata Sons on February 6, 2017 following the procedure that applied to corporate appointments.
“Instead of bringing to bear an approach that would be consistent with corporate democracy and the right of the shareholders to exercise their votes in the manner they consider appropriate, the NCLAT took upon itself to go into various issues alien to such consideration… No reasons were given on how the process of replacement and removal was wrong and illegal,” Tatas had argued.
Mr. Salve submitted that NCLAT’s conclusions were based on an error that Tata Sons continued to be a public company. The areas of the Tribunal’s enquiries were clearly beyond its realm.
Minority shareholder Shapoorji Pallonji group had argued that the removal of Mr. Mistry as executive chairman of Tata Sons was oppressive and illegal.
It said the ouster was against the good faith and trust Shapoorji Pallonji had enjoyed with the Tata group for decades.
Senior advocate Shyam Divan for Shapoorji Pallonji Group, had said the amended Companies Act ushered in a richer corporate governance model quite different from the "Raja-Praja" model of the past. Eom