Will 2020 End Tata Sons In Crisis?

Tata Sons moved to the Supreme Court challenging the National Company Law Appellate Tribunal (NCLAT) order reinstating Mr Cyrus Mistry as the executive chairman of the group by company law tribunal NCLAT last month.

On December 18, the NCLAT restored Cyrus Mistry to restore his post in one of India’s oldest and largest conglomerates. This move is after three years (October 2016) of the dramatic sacking of Mistry at a board meeting following which Mr Ratan Tata took over as interim chairman and eventually was succeeded by Mr N Chandrasekaran.

The flow of the situation

In December 2016, Mistry resigned as director from all Tata Sons companies and moved to the NCLT claiming oppression of minority shareholders and mismanagement. Following which he was removed from the company in January 2017.

Mistry had filed a lawsuit against Tata Sons after he was removed from the company and alleged that appointment of Mr N Chandrasekaran was illegal.

In July, last year NCLAT by dismissing his plea stated that the Tata Sons board was capable of removing him as executive chairman and that he was expelled as the board members had lost confidence in him.

To which he appealed to the tribunal to overturn the dismissal and, following an unfavourable ruling, appealed to the NCLAT seeking to cancel disparaging remarks against him in the original order.

Legal experts stated that Mr Mistry’s family-owned firms that hold stakes in Tata Sons could oppose an interim stay, which could force the Tatas to re-induct Mr Cyrus Mistry pending a final order.

NCLAT on December 19 2019, ruled that Mistry should be reinstated as director of Tata Sons and three group firms — TCS, Tata Industries and TTSL (Maharashtra).

“By ordering Cyrus Mistry’s reinstatement, the NCLAT order has created uncertainty in the working of important corporate entities, some of which are listed companies,” the petition said.

A two-judge panel of the NCLAT stated last month that Tata Sons chairman emeritus Ratan Tata’s actions against Mistry were harsh. The tribunal also said Tata Sons’ move to convert private was unlawful and ordered a reversal. In September 2017, Tata Sons’ board had adopted a plan to go private.

Currently, Mr Mistry is serving as managing director of Shapoorji Pallonji & Company, which is part of the Shapoorji Pallonji group owned by his family.

Tata Sons Expected to Avoid Board Meeting

It is reported that TCS is scheduled to have a board meeting on January 9 to consider Q3 results. However, the report also said that Tata Sons are believed to avoid the meeting as they don’t want to complicate the situation as well as there is no emergency.

The legal representative of Mistry stated that “They (Tatas) sought a stay on the chairmanship, but reinstatement as director was (to be) ‘forthwith’.”

Mr Sudip Mahapatra, a partner at law firm S&R Associates, said that listed companies generally get a window of 45 days to announce the result after the end of each quarter; this means TCS would get time till mid-February to obtain relief from the apex Court.

As per the reports, it is said that Tata Sons board members have assured chairman Mr N Chandrasekaran their full support through calls and messages. As per a corporate governance expert, the board should meet and discuss the impact and implications moving ahead and that there should be continually planning irrespective of what will be the decision of the Supreme Court. A senior TCS executive stated the order adds to uncertainty for the company, which may see its US business affected by the upcoming presidential elections.

The Registrar of Companies (RoC) has moved the NCLAT to challenge itself in the case. The RoC that is part of the corporate affairs ministry has sought deletion of the words–“illegal” and “with the help of the RoC” used by the tribunal in its order. The appellate tribunal is yet to hear the matter.

Kautilya Sharma

Founder @NewsAurChai & @RockShaftIND, | @NMIMS_India | Alumnus | Writer | Passionate Chai Drinker | Political Nerd | Traveller #Beingबंजारा | Optimist । Practical

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