I have been tracking this Tata vs. Mistry story since the first day. I was even holding the stock of Tata chemicals where Ratan tata himself was present in EGM, and I was planning to go there. Unfortunately, all due to my exams I cant Write about this. So better late than never. Here I come.
On December 18, 2019, NCLAT gave one order which initiates more questions than it gives answers off. What it says…
National Company Law Appellate Tribunal or NCLAT (as the appellate tribunal is known) declared as “illegal” the October 2016 removal of Cyrus P. Mistry as Executive Chairman of Tata Sons Limited and ordered his reinstatement to the post. In its 172-page order, it also mentioned that the decision taken about the Status of Tata Sons, the holding company of The Tata group, is also ILLEGAL. A two-member bench of the NCLAT comprising its Chairperson, Justice S.J. Mukhopadhaya, and Member (Judicial) Justice Bansi Lal Bhat, set aside the judgment passed by the National Company Law Tribunal (NCLT), Mumbai, on July 9, 2018, and ordered that “disparaging” and “unsubstantiated” remarks made by the NCLT against the appellants, Mr. Mistry and others, be expunged. The appellate tribunal, however, suspended its order on Mr. Mistry’s reinstatement as Executive Chairman of Tata Sons — in place of the incumbent, whose appointment was deemed illegal — for four weeks “to ensure smooth functioning of the company.”
The ousting of Cyrus Mistry is not something ignored. So many things have been said and written about, so I will not discuss them. Instead, I am going to talk about the December 18 ruling.
The big question mark this ruling makes on the powers of shareholders and directors. Agreed, before being ousted, Cyrus Mistry was also chairman, and the way he gets dismissed is entirely wrong, but at one point, we need to accept the shareholders’ decision. The reality is Shareholders are the authority in the company. Though they are not taking part in the day-to-day work, they are the ones who are making the decisions, be it keeping the chairman or changing the status of the company from public to private. NCLAT struck down a move to convert the company from a public to a private entity, terming the change illegal because it was done without the approval of the National Company Law Tribunal. But it does forget that NCLT Mumbai Approved the decision to remove Cyrus Mistry. So who is the authority here? Shareholders or someone else?
The next issue is about the Status of the Tata sons. What to call it? Private or public? Their Memorandum of association mentions that the company is a private limited company. But due to their revenue and their connection with public NCLAT. Tata sons was initially a private company. But after 43A (1A) was inserted in the companies act 1956 based on average annual turnover, it assumed the character of a deemed public company with effect from February 1, 1975. the order said.
Tata sons went against this and decided to be the private limited company in their AGM. It was seen as trying to force Shapoorji Pallonji group to talk with Tata trusts when they wanted to sell their 18.5% stake in tata sons.
Completly accepted. The question is, who will buy the shares of that company that holds a stake in companies like TCS, Titan, Tata Motors, tata steel, and brands like JLR and Indian hotels. I remember when this all was happening, One article tried to value the stake of Shapoorji Paloonji and Tata sons itself. At that time, the situation was complicated. Today the value of the stake must be higher. But still, I value it at around 15 -17 lack crore ( trillion Rupees). Tata Sons are the owner of the Tata name and the Tata trademarks. Even Group companies pay them royalties for using the name Tata.
