Ratan Tata-Mistry legal feud: Cyrus to challenge NCLT verdict

The two-year long legal feud between Tata Sons Ltd and its erstwhile Chairman Cyrus Mistry came to an end today after the National Company Law Tribunal dismissed Mistry's plea. Here's a look at the fight between the two sides.
Ratan Tata and Cyrus Mistry
Ratan Tata: Ratan Tata took over as chairman of Tata Sons in 1991 after J R D Tata stepped down. During the 21 years at the Tata Group, revenues grew over 40 times, and profit, over 50 times.

Cyrus Mistry: He was appointed as the sixth chairman of the Tata Group in 2012 after Ratan Tata announced his retirement. Mistry's family owns over 18% stake in Tata Sons, the holding company of Tata Group, though holding with voting rights is only under 4%.
The removal
After internal problems and dissatisfaction over Mistry's performance as the chairman, the board of Tata Sons removes Mistry on October 24, 2016 and seeks his ouster from other group companies.
Following which, Mistry resigns from the board of six firms -- Tata trusts and five listed Tata group companies Tata Steel, Tata Motors, Tata Chemicals, Tata Power, and Indian Hotels.

The case
In December 2016, two firms owned by Cyrus Mistry's family - Cyrus Investments and Sterling Investments - files a case of oppression and mismanagement against Tata Sons and 20 others, including Ratan Tata. The dispute stems from Mistry's removal as Tata Sons chairman in October 2016 and later as a director.

Removed as Chairman
What Mistry said:
His removal as chairman was without reason and amounted to the majority shareholders suppressing the right of the minority to ask questions about matters involving the company.
He said he was removed as a director of Tata Sons' board for approaching the NCLT with this petition.
Tata's reply:
Tata's counsel said Mistry was removed because the company board lost confidence in him. He intentionally and in bad faith leaked sensitive and confidential information causing loss in Tata Group's market value.
He was appointed at the behest of Tata Trusts and his removal cannot be questioned by minority shareholders.
Trustees and dummy board
What Mistry said:
The matters that pertain to the company are decided by the trustees and not the board, making it a "dummy" board.
The trustees even control the boards of other Tata Group companies, some of which are listed.
Tata's reply:
Trustees being persons of high repute and significant experience served as advisers to the Tata Group companies. Mistry himself sought such guidance.
Loss-Making Nano Project
What Mistry said
The loss-making Nano project was not discontinued although agreed to by the board of Tata Motors.
Ratan Tata's emotional reasons were cited for not shutting down the business, calling it an example of mismanagement.
Tata's reply
The Nano project-admittedly a wrong decision-was still a commercial call and cannot amount to oppression even if it adversely affected the price of shares.
Ratan Tata was not opposed to shutting down the project and it was Mistry who wanted to evaluate improving the Nano project and minimise losses without termination.
Air Asia and its management
What Mistry said:
Affairs of AirAsia India were conducted in a fraudulent manner with several regulatory irregularities. Mistry wanted to clear up AirAsia India mismanagement and fraud, but he was removed as the chairman.
Tata's reply:
The alleged fraud was conducted by Mittu Chandilya and legal action was taken against him by the company.
Tata's counsel said a Deloitte's forensic report that raised the issue was laid before the Tata board in April 2016 highlighting the issue.
Favouritism alleged
What Mistry said
Mehli Mistry, said to be close to Ratan Tata, secured secure several commercial contracts in spite of not having any prior experience in the field. These contracts were not as per industry standards and jeopardised the commercial interests of Tata Power.
Tata's reply
These contracts were approved by the board when Cyrus Mistry was on board and were awarded on a competitive basis, as stated by the independent auditor's report.
Tata Sons a private company
What Mistry said:
The conversion of Tata Sons to a private limited company will further oppress the minority shareholders. It will remove the requirement of Tata Sons to comply with certain stringent provisions such as appointment of independent directors and will allow the company to restrict transfer of its shares.
Tata's Reply:
Tata's counsel said as per the Companies Act, Tata Sons can convert itself to a private limited company, that is what the majority shareholders wanted.
Sivasankaran and Tata Teleservices
What Mistry said
C Sivasankaran, a close aide of Ratan Tata, was allotted shares of Tata Teleservices Ltd. at a significant discount along with other benefits aggregating to over Rs 1,000 crore.
Mistry also alleged that the "free transfer of Tata Teleservices" to Airtel, did not benefit Tata any way despite transferring 40 million customers.
Tata's reply
Mistry's family company -- The Shapoorji Pallonji Group -- also benefited from investing in Tata Teleservices at a lower price.
After Mistry's removal as chairman, Tata Sons took legal action against Siva, negating the argument that fear of such an action against Siva led to Mistry's ouster.

The judgement
  • On July 9, the NCLT found no merit in Mistry's allegations of operational mismanagement and oppression of minority shareholders.
  • NCLT rejected the petition to reinstate Mistry on Tata Sons board.
  • NCLT said Mistry openly went against the board, and so against the company.
  • The court also found no merit in Mistry's argument that Ratan Tata and Tata Sons trustee NA Soonawala interfered in the governance of Tata Sons.
Following the order, ousted Tata Sons chairman Cyrus Mistry said he would appeal against the order before the National Company Law Appellate Tribunal.