Cyrus Mistry has said he will not press his claim to the executive chairman’s position at Tata Sons or the directorships at three Tata group firms but will assert his right to a board seat at the $111-billion Tata group’s holding firm in order to protect his interests as a minority shareholder.
In its order delivered on December 18, the National Company Law Appellate Tribunal (NCLAT) had ordered Tata Sons to reinstate Mistry as it executive chairman after declaring his removal from the position in October 2016 and the appointment of a successor as “illegal”. It had also ordered his reinstatement as a director on the boards of TCS, Tata Industries and Tata Teleservices.
In a statement issued on Sunday, Mistry said he wanted to dispel a misinformation campaign that was being conducted ever since the shock verdict was handed down.
“I intend to make it clear that despite the NCLAT order in my favour, I will not be pursuing the executive chairmanship of Tata Sons, or directorship of TCS, Tata Teleservices or Tata Industries.’’
But he said he would vigorously pursue all options to protect his group’s rights as a minority shareholder, including that of resuming the 30-year history of a seat on the board of Tata Sons.
He added that the Shapoorji Pallonji group would also pursue the incorporation of the highest standards of corporate governance and transparency at Tata Sons.
Mistry, whose family holds an 18.3 per cent equity shareholding in Tata Sons, said that though the SP Group is a minority partner, it has been a guardian of the Tata group for over five decades.
“This legal fight has never been about me. It has always been and will always be about protecting the rights of minority shareholders and upholding their right to demand a higher standard of corporate governance from controlling shareholders,” he added.
The Tatas are challenging the NCLAT verdict and the case is expected to come up before the Supreme Court on Monday even though it does not figure in the cause list for Monday.
A PTI report, quoting a lawyer associated with the Tata group, said the petition would be mentioned for urgent hearing. The petition is likely to be mentioned by senior advocate Abhishek Manu Singhvi, who was the lead counsel for the Tata group in the National Company Law Appellate Tribunal (NCLAT).
Meanwhile, the NCLAT court will be hearing the Registrar of Companies’ plea to be impleaded in the case on Monday. The case is listed before Justice S.J. Mukhopadhaya who delivered the order along with Justice Bansi Lal Bhat. The RoC is seeking an amendment in the order to remove adverse comments that it had made against the RoC in granting approval to Tata Sons’ application to convert itself from a public to a private company.
“Recent media reports attributed to Ratan Tata and others questioning the NCLAT judgment ahead of an important hearing in the Supreme Court, profess an interpretation of corporate democracy as being one of brute majoritarianism with no rights for minority stakeholders… The question in these legal proceedings is whether the oppressive actions of a majority that stifles minority shareholders is beyond reproach and outside judicial oversight,” the statement from the Mistry camp said.
It further observed that globally and in India, company law has evolved to protect the rights of minority shareholders and strengthen corporate governance.
According to Mistry, the Companies Act 2013 has considerably strengthened the statutory protections accorded to minority shareholders from the oppressive conduct of the majority shareholders. For corporate democracy to be strengthened, all stakeholders must operate within the ambit of law and protections that are enshrined statutorily, the statement added.
The Shapoorji Pallonji group has been associated with Tata Sons from 1965 when it first became a shareholder.
The statement said the founding fathers of the Tata Group had laid a strong ethical foundation that cared for all stakeholders. However, it went on to add that rights of minority shareholders have not been respected by the leadership of the group.
“Former Tata leaders worked together with the minority partner to create value for all stakeholders. In the last three years, both in conduct and in their statements to the world at large, the Tata group’s leadership has shown scant respect for the rights of minority shareholders,” Mistry observed.
Asking the group’s management to “introspect and reflect on its conduct”, Mistry said the NCLAT order had recognised the “illegal” manner in which he was removed and the oppressive and prejudicial conduct of Tata and other trustees of Tata Sons.
In his petition before the Supreme Court, Tata group chairman emeritus Ratan Tata has contended that Mistry was made the executive chairman of Tata Sons in a purely professional capacity and not as a representative of his group. The Tata Trusts holds 65.89 per cent of Tata Sons’ equity.
However, the situation is complicated by the fact that Tata Sons has issued preference shares that have skewed the pitch for Mistry.
In an earlier order delivered in September 2017, Justice Mukhopadhaya of the NCLAT had accepted the argument that the issue of 29.46 lakh preference shares meant that Mistry’s effective holding in Tata Sons went down to 2.82 per cent. Preference shares do not usually carry voting rights. But they can be voted on all resolutions if the company fails to pay dividends on them for two years or more.
Justice Mukhopadhaya had granted the SP Group a special waiver from a proviso in the Companies Act that bars a shareholder from pursuing a case of oppression of minority rights if he holds less than 10 per cent.
As a result of the preference shares, the NCLAT order in September 2017 order had recognised the fact that only Ratan Tata (effective holding of 31.43 per cent) and Narottam Sekhsaria (17.01 per cent) could bring any suit of oppression under section 241 of the Companies Act 2013. Even the Tata Trusts cannot do so because they no longer hold any preference shares.
Tata Sons has 51 shareholders.
The Tatas have also argued before the NCLAT that Cyrus Mistry, who was first appointed as a director of Tata Sons in 2006, had not been inducted into the board either in his capacity as the nominee of the Shapoorji Pallonji group or in the recognition of any such right of representation of SP Group.
Counsel for Tata Sons had argued before the appellate tribunal that as a result, the replacement of Mistry as chairman and his subsequent removal as director of Tata Sons “cannot be canvassed as a case of oppression or prejudice to the proprietary rights of the appellants (Cyrus Investments and Sterling Investment, group firms of the SP Group)”.
The Tata group is arguing that the December 18 order of the NCLAT grants reliefs to Cyrus Mistry that even he had not sought.
“Respondent No. 1 (Cyrus Investment Pvt Ltd) and 2 specifically pleaded before the NCLAT that they are not seeking the reinstatement of Mistry. The tenure of Mistry as the chairman and director of Tata Sons expired in March 2017 and, thus, for good reason, the respondents did not seek such reinstatement,” the plea said.
Mistry’s statement ahead of a crucial hearing of the apex court on Monday reiterates that position.
Mistry had been first appointed as a deputy chairman of Tata Sons in March 2012 and elevated as executive chairman in December that year when Ratan Tata formally stepped down.
He was removed as chairman of Tata Sons in October 2016 and as its director in February 2017.