Former Tata Sons chairman Cyrus Mistry on Wednesday urged the National Company Law Appellate Tribunal (NCLAT) to order Tata Sons to amend Article 121 in its Articles of Association as it undermines the authority and role of board of directors which is regulated by the Companies Act.
Mistry’s counsel said under the Article 121 of the Articles of Association of the company, the full power of the board to conclude any decision has been vested in the hands of two nominee directors. Since this undermines the role and authority of the board it needs an intervention by the court.
Mistry’s counsel said Article 121, which was introduced in the articles of the company in 2000 on the basis that it would only safeguard the majority shareholder group’s interests with regard to vital issues. However, it started being interpreted as a means of requiring prior consent and affirmation even as to whether matters could be brought before the board of directors not only on Tata Sons but also of Tata Group of companies, which was never the intention.
Senior advocate CA Sundaram, appearing on behalf of Mistry, said, “It (Article 121) needs to be necessarily amended as it provides for all matters to be decided by the Board of Tata Sons to necessarily have the approval of the trustee nominee directors”.
Article 121 provides a veto on every decision to be taken by the board of Tata Sons to trustee nominee directors as opposed to conventional affirmative rights provisions being available to the minority on select matters, Sundaram said. He added that the article is also repugnant to the scheme of Companies Act which requires the board of certain large unlisted public companies to comprise independent directors who are duty bound to safeguard the interests if minority shareholders.
The hearing will continue on Thursday.
Mistry had on August 3 approached the appellate tribunal challenging the July 9 order of the NCLT’s Mumbai bench that dismissed his plea challenging his removal as chairman of the firm in October 2016. He firms hold around 18% stake in Tata Sons.
Source: Financial Express, December 13, 2018