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Thursday 4 June 2020

NCLAT: Reinstate Cyrus Mistry as chairman of Tata Sons

The tribunal called the appointment of N Chandrasekaran to this post illegal although the reinstatement order would apply after four weeks

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The National Company Law Appellate Tribunal (NCLAT) has ordered Cyrus Mistry to be reinstated as the executive chairman of Tata Sons. NCLAT said that Mistry should be re-appointed as executive chairman of Tata Sons.

The tribunal called the appointment of N Chandrasekaran to this post illegal although it said that the reinstatement order would come into effect after four weeks. It gave Tata Sons time to appeal against the order.

The two-member bench of the NCLAT ruled on the petition filed on behalf of Mistry and two investment firms in NCLAT.

In July, the appellate had reserved the decision. Cyrus Mistry was the sixth chairman of Tata Sons and was removed from the post in October 2016. He had taken over as chairman in 2012 after Ratan Tata.

It is noteworthy that on 24 October 2016, the Board of Directors of Tata Sons had sacked Mistry as chairman in a surprising move. He had become the chairman of Tata Sons in December 2012.

Mistry was the second person outside the Tata family to become the chairman in the group’s 150-year history. He was the chairman of Navroji Sakalatwala group outside the Tata group during 1934–38 before him.

Tata vs Mistry at NCLAT

Earlier, the Mumbai Bench of the NCLAT had dismissed the petitions filed against the removal of Cyrus Mistry. The petitions were filed by two investment firms Cyrus Investment Pvt Ltd and Sterling Investment Corp.

Thereafter, Mistry himself approached NCLAT. He had become the chairman of Tata Sons in 2012 after Ratan Tata announced his retirement.

Ratan Tata’s camp and the company board had expelled Mistry, alleging misconduct. The board of Tata Sons had removed Mistry as chairman on 24 October 2016, asking him to exit other companies of the group as well. Mistry resigned from the board of six companies of the group. Then he dragged Tata Sons and Ratan Tata to the NCLAT.

Cyrus Investment and Sterling Investment Corporation, two companies of Shapoorji Pallonji Group, had filed a petition against the directors of Tata Trust and Tata Sons. Tata Sons was accused of irregularities. The side of Mistry alleged that the directors of Tata Sons violated the Articles of Association and management and moral values.

It was alleged in the petition that some promoters of the group conspired to remove Mistry from the post of chairman. His resignation was due to his persecution. The second part of the petition alleged that the group suffered a significant loss of income due to the disorganized management of the group and Ratan Tata. However, the Tata group rejected all these allegations.

The Tata group said that Cyrus Mistry was fired because the board had lost faith in him. The group had alleged that Mistry leaked sensitive information intentionally and with intent to harm the company. Due to this, there was a big loss in the market value of the group.

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