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CASE ANALYSIS OF TATA VS MISTRY JUDGEMENT

 CASE ANALYSIS OF TATA VS MISTRY JUDGEMENT


INTRODUCTION

In the year 2021, the Supreme Court of India delivered its long-awaited decision in the TATA

Group-Cyrus Mistry dispute. The apex court overturned the National Company Law

Appellate Tribunal (NCLAT) ruling of December 18, 2019, which came as a huge relief to

the TATA Group. Cyrus Mistry was reinstated as executive chairman of Tata Group by

NCLAT orders in 2019.

On a petition filed by Tata Sons against the NCLAT judgement, a bench led by Chief Justice

of the Supreme Court S A Bobde and including Justices A S Bopanna and V

Ramasubramanian delivered the verdict.

After years of protracted legal proceedings, furious accusations and counter-accusations, and

no-holds-barred mudslinging, a decision has been reached.

NCLAT was established under Section 410 of the Companies Act (CA), 2013 to hear

appeals from the National Company Law Tribunal's orders (NCLT) .It also serves as an

Appellate Tribunal for appeals against NCLT(s) rulings made under the Insolvency and

Bankruptcy Code, 2016. (IBC). Moreover it’s an Appellate Tribunal for appeals against any

direction, decision, or order issued by the Competition Commission of India (CCI).


FACTS OF THE CASE

In December 2012, Cyrus Shapoorji Pallonji, a scion of Shapoorji Pallonji, succeeded Ratan

Tata as CEO of Tata Sons. He was, however, abruptly dismissed four years later.Mistry was

fired from his position on October 24, 2016, after a majority of the company's board of

directors voted to fire him.Tata Sons' Executive Chairman has been named N

Chandrasekaran.Things between them became acrimonious, and the case ended up in

court.The NCLAT declared the proceedings of October 24, 2016, to be unlawful in December

2019.The order had been contested by both Tata Sons and Cyrus Mistry.

The Tata Group had stated in its appeal that there was no misconduct in Mistry's removal as

Chairman in October 2016.The Shapoorji Pallonji (SP) Group, on the other hand, had

contended that the ouster had completely violated the Articles of Association and all

principles of corporate governance.


SUPREME COURT OBSERVATIONS:

1. Minority shareholders or their representatives are not automatically entitled to a seat on

the private company’s board like a small shareholder’s representative.

2. The provisions contained in the Companies Act 2013 only protects the rights of small

shareholders of listed companies by asking such companies to have on their board at

least one director elected by such small shareholders.

3. Since the Mistry family and the Shapoorji Pallonji (SP) Group are not small

shareholders, but minority shareholders, there is no statutory provision which gives

them the “right to claim proportionate representation,” on the board of Tata Sons.

4. Private companies, which have minority shareholders, are free to make an enabling

provision but are under no statutory obligation to give minority shareholder seats on

the board.


SIGNIFICANCE OF THE JUDGEMENT:

Though the decision has no direct impact on minority shareholders' rights, they will need to

ensure that they have a contract with the majority shareholders or the company's promoters to

ensure that they have enough representation on the board of directors.

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