Tatas under lens over Mistry issue
Tata Group, the salt-to-software conglomerate which is known for its corporate values and governance of highest standards, has recently hit headlines...
Tata Group, the salt-to-software conglomerate which is known for its corporate values and governance of highest standards, has recently hit headlines for wrong reasons.
The National Company Law Appellate Tribunal (NCLAT) reinstated Cyrus Mistry as Executive Chairman of Tata Sons, the holding company of Tata Group.
This ruling came as bolt from the blue for Tata Sons which unceremoniously sacked Cyrus Mistry as its Executive Chairman in October 2016, nearly four years after he was chosen to helm the diversified conglomerate in December 2012.
Interestingly, Cyrus Mistry is not an outsider to the group. His family conglomerate, Shapoorji Pallonji Group, owns 18 per cent of Tata Group and is the single largest shareholder in it.
Further, Tata Group patriarch Ratan Tata chose Cyrus as his successor and anointed the Mistry scion in his place before taking the honorary position as Chairman Emeritus of the group.
However, differences cropped up between Ratan Tata and Cyrus Mistry over the management issues, resulting in sudden departure of the latter from the diversified conglomerate.
Stung by the sudden sacking of Cyrus, Shapoorji Pallonji Group through its investment entities knocked at the doors of the Mumbai bench of National Company Law Tribunal (NCLT) and raised the issue of injustice being done to minority shareholders in Tata Group.
NCLT Mumbai dismissed the petitions and ruled in favour of Tata Group. Following this, Shapoorji Pallonji Group filed an appeal in NCLAT against NCLT Mumbai order in August 2018.
The appellate tribunal, in its order dated December 18 last year, termed the termination of Cyrus Mistry as illegal and re-instated him as Tata Sons chief.
The tribunal also declared the conversion of Tata Sons into a private limited company as illegal. Obviously, the NCLAT orders showed Tata Group in poor light.
However, this boardroom battle has reached Supreme Court now with Tata Sons challenging the NCLAT order in the apex court. Ratan Tata and some Tata Group companies also filed petitions against the tribunal's order.
It is said that the petitioners questioned leadership qualities of Mistry and sought reversal of the NCLAT order.
It's to be seen which way the apex court will rule. But such a prolonged legal battle over this issue will not help Tatas at a time when the country's economy is in a slow lane and corporates are required to put renewed efforts to steer out of the difficult economic conditions.
However, by announcing on Sunday his reluctance to take the Tata Group crown back, Cyrus proved himself to be a person worthy of emulation.
"The question in these legal proceedings is whether the oppressive actions of a majority that stifles minority shareholders is beyond the reproach and outside judicial oversight," he stated.
Tatas should take a cue from his announcement and reach a compromise with Mistry scion.
That will save the image of Tata Group and help it scale new peaks in the corporate world.
Otherwise, the $111-billion group will land in deeper trouble if Supreme Court also rules in favour of Mistry.