Tata Vs Mistry: Supreme Court Set To Hear SP Group's Review Petition

The Cyrus Mistry Group's review petition is set to come up for hearing in the Supreme Court on March 9.

Last month, the apex court had agreed to grant an oral hearing to the review petition filed by the Mistry group challenging Tata Sons Pvt.'s 2021 win.

To be clear, the review petition has not been admitted. The hearing scheduled on Wednesday will determine whether the Mistry group's plea satisfies the grounds on which a review petition can be filed.

According to the Supreme Court rules, the grounds for a review are quite narrow, namely:

• Discovery of new and important matter or evidence which after the exercise of due diligence was not within his knowledge or could not be produced at the time of the order.

• On account of some mistake or error apparent on the face of the record.

• For any other sufficient reason.

In its petition, the Mistry group has stated that the March 26 verdict of the Supreme Court incorrectly interpreted company law provisions, diluting corporate governance standards and leaving large swathe of minority shareholders remediless.

To recap, in March last year, the Supreme Court had dismissed all allegations of oppression and mismanagement at Tata Sons. It overturned the verdict by the National Company Law Appellate Tribunal that had directed the reinstatement of Mistry, scion of the SP Group, as executive chairman of Tata Sons—a position he was abruptly removed from in October 2016. On that ground and others, the appellate tribunal had found oppression and mismanagement at the Tata Group holding company. Mistry’s family is the second-largest shareholder in Tata Sons, with an 18.4% stake.

The NCLAT’s conclusions have been disregarded and not applied in the judgment by the apex court without even declaring the findings of fact to be perverse. This is the legal standard to be met, as acknowledged by the apex court itself in the judgment, before a court of law can interfere with findings of fact by the NCLAT, Mistry's petition stated.

The Supreme Court ruling lays down contradictory legal propositions that are not only irreconcilable but also contrary to the company law statute, officials at SP Group had told BloombergQuint.

Here are the key reasons that the Mistry group has cited for a review:

'Contradictions In Supreme Court’s Judgment'

The judgment holds that removal of a director “can never be oppressive or prejudicial” and yet, it holds that where the removal is oppressive, relief can be granted, according to the review petition.

But the circumstances that’ll merit removal of director or grant of relief under Section 242 have not been specified, it said. The section lays down powers of the tribunal to give relief when an application of oppression and mismanagement is made.

In fact, at multiple places, the judgment declares that Cyrus Mistry is SP Group’s representative on Tata Sons’ board and yet holds that the removal of a representative of the minority shareholder is not an act of oppression, the review petition said.

'Judicial Exemption To Companies Like Tata Sons'

The Supreme Court’s judgment makes the error of treating the application of company law as a variable based on identity of the shareholder of the company, the Mistry side has said. Contrary to the statutory provisions of the Companies Act 2013, it seeks to dilute the fiduciary duties of directors depending on which shareholder has nominated the director, it said.

To recall, the apex court had said given the charitable objectives of the Tata Trusts, their nominee directors on board Tata Sons are not like any other ordinary directors. It had also questioned whether the need for having independent directors on the board itself was an acknowledgment that not every director could be expected to exercise completely independent judgment irrespective of who nominated them.

In saying so, according to Mistry’s review petition, the apex court has overlooked the fact that a director of a company must act in the best interests of the company and not just to further the interests of the shareholder who nominated the director.

It also confuses the duty of “independent judgment” expected of all directors with the qualification criteria for a director to be termed “independent director”.

The apex court was not sitting in a writ jurisdiction with a constitutional challenge to the wisdom of the provisions of the Companies Act, it said. "Enforcing the legislation as it stands by interpreting it was the task at hand."

'Pre-Approval Disregarded As Much Ado About Nothing'

The company law requires independent decision making by the board which would be rendered redundant, if decisions are pre-cleared and decided in advance by Trustees, the Mistry side said.

This core facet of the case has been discarded summarily as “much ado about nothing”.

'Errors Of Fact Apparent On The Face Of The Record'

The judgment holds that Cyrus Mistry was not a managing director of Tata Sons but only an "executive chairman". And so the requirement, as per the company law, of a shareholder resolution to remove a managing director would not be breached.

The apex court had restored the findings of the National Company Law Tribunal on issues relating to mismanagement, on the premise that the NCLAT did not specifically overturn these findings, while setting aside the tribunal’s order. This is an error apparent on the face of the record, the review petition said.

The apex court had made erroneous finding of fact relating to Article 75 to deny relief to end matters complained of, it said. Article 75 allows Tata Sons to resolve by special resolution the transfer of any shareholder’s shares. Mistry had termed this as coercive. The Supreme Court viewed it as an exit clause.