SC sets aside NCLAT order restoring Cyrus Mistry as executive chairman of Tata Group

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New Delhi, Mar 26 (PTI) In a major victory for the Tata Group in the 4-year long legal battle, the Supreme Court Friday set aside appellate tribunal NCLAT's order which had restored Cyrus Mistry as the executive chairman of the USD 100 billion salt-to-software conglomerate.

The apex court also dismissed a plea of Shapoorji Pallonji Group seeking separation of ownership interests in Tata Sons Pvt Ltd (TSPL).

A bench of Chief Justice SA Bobde, justices AS Bopanna and V Ramasubramanian said: “Thus in fine, all the questions of law are liable to be answered in favour of the appellants Tata group and the appeals filed by the Tata Group are liable to be allowed and the appeal filed by SP Group is liable to be dismissed.

“In the result, all the appeals except Civil Appeal No...(appeal of Cyrus Investments Pvt Ltd versus Tata Sons Ltd and others) are allowed and the order of NCLAT dated December 18, 2019 is set aside”.

The SP Group, which owns 18.37 per cent shares in TSPL, had said the latter moved the top court to block its plan to pledge shares for raising funds and that reeked of vindictiveness and oppression of minority shareholder rights.

The top court had, on January 10 last year, granted interim relief to the Tata Group by staying the National Company Law Appellate Tribunal (NCLAT) order by which Mistry was restored as the executive chairman of the conglomerate.

Mistry had succeeded Ratan Tata as the chairman of TSPL in 2012, but was ousted four years later.

The bench further said on Friday that the petitions filed before National Company Law Tribunal (NCLT) by the two firms belonging to the SP Group shall stand dismissed.

It said the appeals filed by Cyrus Investments Pvt Ltd and Sterling Investments Corporation Pvt Ltd seeking proportionate representation on the board of Tata Sons and in all committees formed by it are also dismissed.

“All IAs (interlocutory applications) including the one for causing separation of ownership interests of the SP Group in Tata Sons namely IA No...are dismissed,” it said.

SP Group has moved an application seeking direction to Tata Sons and others for separation of ownership interests in the conglomerate via reduction of capital by extinguishing its shares in lieu of fair compensation.

It sought the separation be effected through a transfer of proportionate shares of the listed companies of Tata Sons, with the balance value of unlisted companies and intangibles including brand value being settled in cash.

The bench said, interestingly, such an application was filed after Tata Group moved an application for restraining SP Group from raising money by pledging shares and this court passed an order of status quo on September 22, 2020.

'For the first time, SP Group seems to have realized the futility of the litigation and the nature of the order that the Tribunal can pass under Section 242. This is reflected in Paragraph 62 of the application, where SP Group has stated that they are seeking such an alternative remedy as a means to put an end to the matters complained of,” it said. The top court said that as a matter of fact, SP Group should have sought such a relief from the Tribunal even at the beginning as “we have pointed out elsewhere a divorce without acrimony is what is encouraged both in England and in India under the statutory regime”.

It said, but in an appeal under Section 423 of the Companies Act, 2013, this Court is concerned with questions of law arising out of the order of NCLAT.

“It should be pointed out at this stage that Article 75 of the Articles of Association is nothing but a provision for an exit option (though one may think of it as an expulsion option). After attacking Article 75 before NCLT, the SP Group cannot ask this Court to go into the question of fixation of fair value compensation for exercising an exit option,” the bench said.

It added that what is pleaded in the application of SP Group for separation of ownership interests; require adjudication on facts, of various items. The bench said: “The valuation of the shares of SP Group depends upon the value of the stake of Tata Sons in listed equities, unlisted equities, immovable assets etc., and also perhaps the funds raised by SP group on the security/pledge of these shares.

'Therefore, at this stage and in this Court, we cannot adjudicate on the fair compensation. We will leave it to the parties to take the Article 75 route or any other legally available route in this regard.” The SP Group had earlier valued its holding in the Tatas at Rs 1.75 lakh crore.

However, during the hearing in the matter before the apex court, the Tatas had, on December 8 last year, said the valuation of the 18.37 per cent shares of the SP Group in TSPL is between Rs 70,000 crore and Rs 80,000 crore.

The SP Group had told the top court that Mistry's removal as the chairman of TSPL at a board meeting held in October 2016 was akin to a 'blood sport' and 'ambush', in complete violation of the principles of corporate governance and in pervasive violation of the Articles of Association in the process.

The Tata Group had vehemently opposed the allegations and denied any wrongdoing, saying the board was well within its right to remove Mistry as the chairman. PTI MNL ABA SA