The National Company Law Tribunal (NCLT) — in its written order in the Cyrus Mistry versus Tata Sons case, which was released on Thursday — has observed that “whoever invested more shall have his say over the affairs of the company”. The tribunal said, “It is obvious that minority sailing along with majority is bound by the rule of majority. Otherwise, it will become curtailment of the rights of majority shareholders.”
The NCLT said that since Ratan Tata heads Tata Trusts, which owns two-thirds of Tata Sons, the conglomerate has to be run “at the wish of the majority shareholders”.
Mistry’s family firms, which together hold a little over 18% in Tata Sons, had complained about the abuse of the company’s articles of association by Ratan Tata and his business dealings with close friends, C Sivasankaran and Mehli Mistry. The companies also raised concerns about the expensive Corus acquisition, the bleeding Nano car project and aviation “misadventures”, which had caused huge losses to the Tata Group. Mistry’s family firms made the complaint after he was abruptly removed as the chairman of Tata Sons in October, 2016.
The NCLT, in its 368-page order, said that “Mistry assumed in his mind that he was given a free hand to run the affairs of the company”, an idea which is “incongruous to corporate governance and corporate democracy”. The NCLT said, “In corporate democracy, decision making always remain with the board of directors as long as they enjoy the pleasure of the shareholders. Likewise, even executive chairman will also continue as long as he enjoys the pleasure of the shareholders. Likewise, even executive chairman will also continue as long as he enjoys the pleasure of the board.”
The NCLT said that although Mistry was appointed as the chairman to preside over the the board, he “could not become a sovereign authority over the company because the superior body in any company at first level are the shareholders, thereafter, the board, elected by those shareholders”.