Tata Sons Defends Mistry’s Ouster At NCLT
Tata Sons Ltd. argued that Cyrus Mistry was removed as its chairman for valid reasons and in accordance with the articles of association of the company.
Abhishek Manu Singhvi, representing the Tata Group’s holding company in the ongoing case in the National Company Law Tribunal, also defended Tata Sons decision to convert from a public to private company. The oppression and mismanagement petition stems from Mistry’s ouster, first as chairman and then as director in October 2016.
Here’s what Singhvi argued:
- Removal of a person from the board is a directorial dispute and a commercial decision taken by the board on behalf of the company. The tribunal cannot examine it except on two grounds –when the director is appointed under law and when the constitution of the company or any contract with the company and its shareholders gives the shareholder a right of representation on the board. This was not the case for the Mistry firms.
- The ouster was approved by the nominee directors of the trust and, therefore, was in accordance with the articles of association of the company. This was to refute Mistry firms’ argument that the procedure under the articles for his removal was not followed as it should have been done by a selection committee.
- Mistry was removed as chairman for valid reasons and not in bad faith. During his tenure, Tata group’s market share dropped significantly. Mistry acted in a manner prejudicial to the company when he made confidential information about the company public.
- Conversion of Tata Sons from a public to a private company is not an oppressive move; the company law permits such conversion. Mistry firms oppose the conversion saying that it will allow the company to impose restrictions on transfer of shares of the minority shareholders, reducing their liquidity.
- Mistry firms have alleged several instances of mismanagement that relate to group companies such as Tata Motors Ltd., Tata Steel Ltd. and AirAsia India. Singhvi argued that a person filing an oppression and mismanagement plea can only raise instances as a shareholder of that particular company—in this case Tata Sons – and not its subsidiaries or group companies.
The arguments will continue tomorrow.