Cyrus Mistry, launched his first legal salvo on Tuesday, as two investment firms managed by his family filed a petition at the National Company Law Tribunal, accusing the promoter group, Tata Sons Ltd., of oppressive conduct. The petition isn’t looking for Mistry’s reinstatement as the chairman of the company.
The petition has been filed under Section 241, 242 and 244 of the Companies Act, 2013, that deal with oppression and mismanagement within a company.
The two firms, namely, Cyrus Investments Private Ltd. and Sterling Investment Corporation Ltd. are the vehicles through which Shapoorji Pallonji Group holds 18.4 percent stake in Tata Sons.
This Hon’ble Tribunal is clothed with statutory powers to set right the state of affairs inter alia taking the wider public interest into account and taking into account the interests of all stakeholders, protect Respondent No. 1 (Tata Sons) from the whimsical, capricious and oppressive conduct by Respondent No. 2 (Ratan Tata), aided and abetted by the other trustee Respondents and other Respondents who are directors of Respondent No. 1 (Tata Sons).Petition Filed In NCLT
Here are the instances of oppressive conduct by Tata Sons and its interim chairman, Ratan Tata, cited by the petitioners.
1. Trustee-nominated directors acting at the behest of Ratan Tata and NA Soonawala
The petition argues that the amended Articles of Association of Tata Sons aim to serve the interests of the Tata Trusts as it allows them to nominate directors on the board of companies.
This, it added, is being converted into a regime for enabling control of Tata Sons by Chairman Emeritus Ratan Tata and former Director NA Soonawala. The two as "shadow directors" have been controlling Tata Sons as a "super board" with the trustee-nominated directors being expected to act under their instruction, the petition claimed.
The Trustee-Nominated Directors became agents of these Respondents (Ratan Tata and NA Soonawala) instead of being directors discharging fiduciary duties as directors of Respondent No. 1 (Tata Sons).Petition Filed In NCLT
2. Lord Kumar Bhattacharya's commitment to the U.K. Parliament and the British media
The petition states that friends of Ratan Tata such as Lord Kumar Bhattacharya, who was not a board member of the relevant Tata group companies, made serious investment commitments to the U.K. Parliament and the British media, on behalf of these companies.
Independent director of Tata Steel Ltd., Nusli Wadia, had earlier made a similar claim in his representation to the shareholders. Wadia had cited Lord Bhattacharya’s July 7, 2016, speech in the House of Lords, taking credit for influencing and advising Ratan Tata to acquire Corus, at a premium.
Respondent No. 2 (Ratan Tata) abused the powers vested in him as the erstwhile chairman of the Tata Group in proceeding to acquire Corus for such a heavily inflated price which resulted in a huge strain on the resources of TSL (Tata Steel Ltd.) and Respondent No. 1 (Tata Sons) and led to blockage of funds.Petition Filed In NCLT
3. Ratan Tata and NA Soonawala’s attempt to acquire price sensitive information
Ratan Tata and NA Soonawala who were not on the board of Tata Sons or other group companies had regularly reviewed the operations of various group companies, the petition stated.
They even demanded and attempted to procure unpublished price sensitive information, which could've placed Tata Sons in danger of regulatory violations, the petition added.
Both Cyrus Mistry and Nusli Wadia had made a similar claim in their representations to the shareholders.
4. Mistry's unexplained ouster
Cyrus Mistry was removed as the executive chairman of Tata Sons without any prior notice or explanation, according to the petition.
There were multiple violations in the manner in which Mistry was removed from the boards of various Tata Group companies, ranging from "suspicious erasing of audio-video recording of the board meeting of the Tata Group company" to informing stock exchanges about the change of chairman without calling for a board meeting or passing circular resolutions, the petition added.
5. Threatening to remove Nusli Wadia as independent director
The petition said that a specific independent director on the boards of certain listed Tata Group companies was threatened to be removed for acting independently and endorsing the good performance of companies under Cyrus Mistry's oversight.
Tata Sons has requisitioned extra-ordinary general meetings for the removal of Nusli Wadia, an independent director on the boards of Tata Steel, Tata Motors Ltd. and Tata Chemicals Ltd.
6. Hurting the Tata brand name
The conduct of Ratan Tata and other trustees since October 24, the day when Mistry was removed, has seriously jeopardised the goodwill and reputation of Tata Sons, the petition said. It went on to argue that they are the 'prime business assets' of Tata Sons.
7. Dubious transactions at Tata Teleservices
The petition claimed that there have been dubious transactions at Tata Teleservices Ltd. between Ratan Tata and his close confidante, C Sivasankaran.
Siva took advantage DoCoMo’s offer to purchase shares of existing shareholders and causing Sterling to sell 20.74 million shares to DoCoMo at the rate of Rs 117.81 per share (i.e a profit of more than Rs 100 per share) thereby amassing a huge profit to the tune of almost Rs 209 crore in less than three years.Petition Filed In NCLT
8. Ratan Tata running Tata Sons like a proprietorship firm
The petition claimed that some of the decisions taken by Ratan Tata, as the then chairman of Tata Sons, have not only led to value erosion in some Tata Group companies, but also turned out to be huge loss-making propositions
...in short, Respondent No. 2 (Ratan Tata) running Respondent No. 1 (Tata Sons) like a proprietorship firm, with all the other trustee respondents and directors acting as puppets of Respondent No. 2 (Ratan Tata).Petition Filed In NCLT