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Home / Opinion / Quick Edit /  Opinion | A shock for Ratan Tata

In a blow to Ratan Tata, the National Company Law Appellate Tribunal (NCLAT) has restored Cyrus Mistry’s chairmanship of the $100-billion Tata Group. A two-member bench of the NCLAT has held that Mistry’s 2016 ouster as the group’s chairman was illegal, and ordered that he be reinstated. The restoration order would become operational after four weeks, as the court has granted Tata this period to file an appeal. This also leaves N. Chandrasekaran’s position as Tata Sons’ chief in legal limbo.

Mistry was sacked in October 2016, barely four years after he succeeded Ratan Tata as executive chairman of Tata Sons. He was alleged to have failed to achieve various goals set for him and gone against the larger group’s interests. Many believed that his ouster was the outcome of his trying to break free of Tata’s counsel. While Tata’s advice was not legally binding on Mistry, it would have been risky to ignore, since Tata was the group’s “majority owner" for all practical purposes—given his control of various Tata trusts that own nearly two-thirds of Tata Sons. Mistry’s own family had only a minority share, of about 18%, but enough to exercise some rights.

The legal challenge that Mistry mounted was based on minority shareholder rights. Whether his family’s shares are considered a single block has been a bone of contention. While he lost his case at the National Company Law Tribunal, the appellate court has handed him victory. This ruling, Tata is sure to challenge at the Supreme Court. In the interim, it would be in the interest of all Tata shareholders that the group’s governance does not suffer. A case that drags on could result in much value destruction for them.

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