In a major victory for Cyrus Mistry in his legal battle against the Tata Sons, the National Company Law Appellate Tribunal (NCLAT) has reinstated him as the executive chairman of the Tata Group. The tribunal also ruled that the appointment of N Chandrasekaran as executive chairman is illegal. However, it has given the Tata Group four weeks to appeal against the order.
Mistry was removed as the Tata Sons chairman in November 2016. He had then moved the NCLT, which was the start of a long protracted legal battle.
Speaking to CNBC-TV18, Cyrus Mistry's Counsel Aryama Sundaram said a company like Tata Sons which also controls so many companies in which there is so much public money, needs to have corporate governance of an impeccable standard.
Edited excerpts from the interview:
If I could start by asking you to explain to us what the implications are of the NCLAT ruling now in favour of Cyrus Mistry?
The main takeaway from this is that Cyrus Mistry has certainly been vindicated for the manner in which he was sought to be removed because of his insistence on corporate governance, transparency in management and protection of minority shareholders interest. In fact, the entire case really centred around these aspects. A company like Tata Sons which also controls so many other companies in which there is so much public money and investor money, there has to be corporate governance of an impeccable standard, there has to be transparency in that governance and decisions taken should really protect the interest of all including the minority shareholders. We are very glad that the stand has been vindicated. What was done was totally oppressive and ought not to have been done by the board of directors.
What the NCLAT has also done is that it has stayed for four weeks, that part of the order which says that Cyrus Mistry should be reinstated as the Executive Chairman of Tata Sons. Now this gives the Tatas the next four weeks to file an appeal in the Supreme Court. I would imagine you are preparing yourself for that part of the legal battle as well, what is the strategy going to be?
Basically, I don’t think there will be too much of difference in the stances of either of the sides. As far as Mistry is concerned, the concern of the companies which holds the minority shareholders will continue to be the same as they were which caused them to approach the court in the first place and that will be reiterated before the apex court. We shall wait to see how the Supreme Court views this whole case now.
The plea for Mistry was essentially on the question of minority shareholders' rights as well as interference on the part of the Tata Trust in the functioning of Tata Sons, the changeover to a private entity which is also being struck down now by the NCLAT. Reinstatement as Executive Chairman is not part of the plea if I remember correctly?
I would have to correct you there because the main point was that the manner in which he was removed as an Executive Chairman was against all procedures. Don’t forget that these were the minority shareholders' companies which had moved the NCLT and the minority shareholders companies made it clear that it was not a question of Mistry’s personal interest in chairmanship or otherwise which was of relevance, but the minority shareholders' interest and the interest in a good corporate governance which should all be necessary for the good management of the company. The removal of Mistry, in the way he was removed without even following the procedures of the articles of the companies required was another sign of operation on the basis that Mistry was also a person who was part of the minority shareholders' family which has many of the shares and therefore it was felt that this was just one more act to totally annihilate the interest of the minority shareholders which is basically the thrust of the entire battle. So while the minority shareholders were not looking for reinstatement and positions of a particular person or not, what the minority shareholders were looking for was to ensure those three things corporate governance, transparency in management and strict abiding by the law.
I was specifically talking about reinstatement which was not something that was prioritised as part of the plea.
I have to correct you there - to say that reinstatement was not prioritised as a part of the plea is looking at it wrongly. The fact is a strong objection was taken at the manner of this removal. Now if his removal was bad, then the law will take its course. But what was being pointed out was this is not a personal battle being carried out, but really a battle in the larger interest.
If you could explain to us where this now leaves things as far as the Tatas are concerned because the Supreme Court has headed into vacation, we don’t know whether the Tatas will move the vacation bench or not, so what happens in the interim because only one part of the NCLAT order has been stated by the NCLAT which pertains to the reinstatement of Mistry, so does this leave in a sense a managerial black hole, a vacuum so to speak?
It is not a black hole at all. In fact, it is meant to be a board-managed company which was the whole thrust of these submissions. Therefore the insistence that the company should really be managed by the board and not be managed by shadow directors that is the Tata Trust shareholders dictating what the board should do. That was one of the main things which the petition saw. All that I would say would mean that the company ought to be board-managed that is what the whole aim is.
The NCLAT has also held the appointment of N Chandrasekaran as the executive chairman as illegal.
That would be consequential, would it not? If the removal of existing executive chairman was illegal then obviously what followed the consequences would follow which means that anyone else appointed pursuant to a wrong decision would equally be illegal.
Would that in any way show any uncertainty on what has transpired since 2016 at Tata Sons?
I do not think the aim would be to rewrite anything which has happened in the past, this will go on for the future now. I haven't gone through the order in full but I do not think there should be any uncertainty about what has happened. The idea is to ensure that the company henceforth would be a good board managed company with transparency in management, with good rules of corporate governance, looking after interests of all stakeholders in the company including the general public who are so interested in the various companies which Tata Sons holds shares in. On the whole the aim is to have better management of the company.
We haven't got a copy of the judgement yet, so decisions on that will be taken later, but you must realise that this judgement is just a couple of hours old, so give everyone time to decide what they do.
Do you also intend to file a caveat in the Supreme Court because the Tatas obviously will move the battle there?