Home >Opinion >Columns >Opinion | In battle for honour, Mistry shows the way for minority shareholders

In a 172-page order, a two-judge panel of the National Company Law Appellate Tribunal (NCLAT) has held that the actions of Tata Sons Ltd against Cyrus Mistry, his removal as chairman of Tata Sons and the appointment of N. Chandrasekaran as the new chairman was illegal. Other actions taken by the Tata group such as conversion of Tata Sons from a public company to a private firm, have been reversed by this order.

The order has also dwelt on the amicable relationship in the past between the Shapoorji Pallonji Group and the Tata group, and how Mistry had been appointed as executive chairman of the Tata Sons board with much fanfare on the basis of his merit. The order refers to the removal of Mistry as hasty, and says that the board ascribed disingenuous reasons to remove him on the basis of non-performance.

The order has said that in future, at the time of appointment of a chairman, independent directors or directors, the Tata group should consult the Shapoorji Pallonji Group.

The order is a vindication of the position taken by Mistry that his removal was illegal and was not part of the board agenda on 24 October 2016, when he was unceremoniously removed from the board of Tata Sons. The past three years has been a battle for honour and prestige.

InGovern was of the opinion that there was no compelling reason for Tata Sons to remove Mistry as the chairman, given that the board appraisal, just a few months before his ouster, had not pointed out anything about the non-performance of the chairman. Moreover, though shareholders of the operating companies were not pleased with the performance of Tata group stocks, Mistry had advocated a formal governance framework between Tata Trusts, Tata Sons and the operating companies, and this framework was due to be adopted by the Tata Group at the time of his removal.

Even after today’s order, the battle is not complete, as the NCLAT has suspended for four weeks the part of reinstatement of Mistry as executive chairman. The four weeks have been given to allow Tata Sons to appeal against the NCLAT order before the Supreme Court. However, Mistry has been reinstated as director of Tata Sons.

The most graceful thing for Mistry to do would be to take up his role as director and, if after four weeks, the Supreme Court doesn’t rule against his reinstatement as executive chairman, assume office of the chair for an hour or so, and resign from the post of executive chairman of Tata Sons.

His executive management team has been disbanded, his key strategies have been changed and the direction set by the board he oversaw has been changed.

In conjunction, all directors of Tata Sons who were complicit in these illegal actions should also resign en-masse, and a new board of Tata Sons should be reconstituted with directors who are jointly appointed by Tata group and the Shapoorji Pallonji Group. This will ensure that the functioning of the Tata group will be smooth and the beginning of an environment of trust between the Tata Group and the Shapoorji Pallonji Group.

Shriram Subramanian is managing director at InGovern Research Services, a corporate governance advisory firm.

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