On Thursday, Shapoorji Pallonji (SP) Group told the Supreme Court that removal of Cyrus Mistry as the Chairman of Tata Sons in a board meeting held in October 2016 was akin to a “blood sport” and “ambush” and was in complete violation of principles of corporate governance and pervasive violation of Articles of Association in the process.
Tata Group, on other hand vehemently opposed the allegations and said that there was no wrong doing and the board was well within its right to remove Mistry as the chairman.
A bench of Chief Justice SA Bobde and Justices AS Bopanna and V S Ramasubramanian, reserved its verdict on the cross appeals filed by Tata Sons Pvt Ltd and Cyrus Investments Pvt Ltd against the appellate tribunal NCLAT order which had restored Cyrus Mistry as the executive chairman of the over USD 100 billion salt-to-software Tata conglomerate.
Senior advocate Shyam Divan, appearing for SP group firm said, “Cyrus Mistry was not served any advance notice and what happened on October 24, 2016 board meeting was akin to blood sport and ambush. Corporate governance is not blood sport or ambush. There has to be some decency, ethics and fair play”.
He said, “Principles of corporate governance went for a toss and there was complete pervasive violation of Articles of Association and complete breach of statutes under the Companies Act”.
Countering Divan’s submission of corporate governance and standards, senior advocate Harish Salve, appearing for Tatas’ said “such a fuss is being made about them but all due norms were followed and we were within our rights”.
Divan said that under Article 118 for removal of chairman of a company there has to be a selection committee like it is the case when appointment has to be made but in this case it was not done.
He added that highest level of transparency and fair play is required in an important company like Tata, which is not only national but global company.
Salve said that decision to remove Mistry as chairman of Tata Sons was taken unanimously by the board.
He said that after his removal from the post of chairman, Ratan Tata had told Mistry that the decision to stay in the board is upto him but he walked out of the board and “wrote a very nasty email”.
During the hearing, Divan said that when the motion for removal of Mistry was moved in the board meeting Farida Khambata, an independent director in Tata Sons, refused to vote for ouster and one other abstained but the motion was passed by majority.
Divan said that four months prior to the board meeting, letters were written by Ratan Tata praising Mistry for his work and even directors were showering tribute for his exemplary work on restructuring.
“His (Mistry) performance was evaluated by 50 independent directors of different Tata Companies and they have endorsed him,” Divan said adding that the ouster was only to benefit the majority shareholders.
The bench then asked Divan as to who has the power to remove Mistry or appoint according to the Articles of Association.
Divan replied that it is the general body which can do in its meeting after passing of a resolution.
“It is similar to the appointment. If you want to proceed with removal then you have to come up with a resolution of general body. You have to go through this process for removal of chairman,” he said, adding that even NCLAT have said that there was no performance related issue with Mistry.
He said that relationship has to be built by trust and faith and probity is more than making profit but “what you have done here is an ambush, a situation where no advance notice was served”.
“Mistry’s removal was wrongful and liable to struck down as it will shake the faith of minority shareholders”, Divan said, while concluding his submission.
Countering Divan”s submission, Salve said “if required we will buy them (stakes of SP group) on a fair value, if Tata’s action is held to be oppressive”.
The bench asked all the parties to file comprehensive written submission within a week and subject index and reserved its verdict.
The top court had on January 10 granted relief to Tata group by staying the NCLAT order of December 18 last year by which Mistry was restored as the executive chairman of the conglomerate.
Mistry had succeeded Ratan Tata as chairman of Tata Sons in 2012 but was ousted four years later.
Tata Sons had earlier told the top court that it was not a “two-group company” and there was no “quasi-partnership” between it and Cyrus Investments Pvt Ltd.
In his reply to the Tatas’ petition challenging his reinstatement by the NCLAT last December, Mistry had also demanded that group chairman emeritus Ratan Tata should reimburse all the expenses to Tata Sons since his departure in December 2012 in keeping with best global governance standards.
Mistry is seeking representation in the company in proportion to the 18.37 per cent stake held by his family, the cross-appeal has said.