NCLAT holds ouster of Cyrus Mistry as Tata Group chairman illegal
18 Dec 2019
The National Company Law Appellate Tribunal (NCLAT) has upheld charges by ousted chairman of Tata Group that he was improperly ousted as chairman of the $110 billion group, paving the way for his reinstatement.
NCLAT also held the appointment of N Chandrasekaran as the group’s chairman illegal, in a loss of face for the conglomerate’s chairman emeritus Ratan Tata.
The NCLAT noted that there was 'prejudicial' behaviour from the Tata Sons board towards the minority shareholders. It also noted that the manner of removal of Mistry was hasty.
NCLAT’s two-judge panel said Ratan Tata’s actions against Mistry were oppressive and that the appointment of a new chairman was illegal. The court also said Tata Sons’ move to turn private from a public company was unlawful and ordered a reversal.
The group has four weeks to comply with the requirement and Tata Sons has also the option to challenge it.
Tata Sons may now appeal before the Supreme Court within these four weeks against restoring Mistry as the executive chairman.
Mistry was ousted as chairman of Tata Sons in October 2016, about four years after he had taken over the position from Ratan Tata. He turned to the National Company Law Tribunal to overturn the dismissal and, following an unfavorable ruling, appealed to the NCLAT seeking to expunge disparaging remarks against him in the original order.
The NCLAT order comes at a time when the group is facing business challenges like rising costs and falling business turnover, especially with its Jaguar Land Rover Automotive Plc unit amidst an economic slump in India.
Shares of Tata Motors Ltd. and Tata Consultancy Services Ltd. fell after the verdict, dragging down the main BSE Sensex.