On the 18th December 2020, the National Company Law Appellate Tribunal declared that the dismissal of Cyrus Mistry as executive chairman of the Tata Group on 24th October 2016 was illegal. Mr Mistry had been chairman for four years before his falling out with Ratan Tata his predecessor. The Tribunal also found that the appointment of Natarajan Chandrasekaran, Mr Mistry’s replacement, was unlawful. The Appellate Tribunal gave a number of reasons for its decision focusing upon the following actions that were deemed to be ‘prejudicial’ and ‘oppressive’ to members of the company and minority shareholders:
• The material on record shows that the Company under the leadership of Mr. Cyrus Mistry performed well which was appraised by the Nomination and Remuneration Committee on 28th June, 2016 i.e. just few months before he was removed.
• Two of the directors who voted for his removal have not explained why they gave him a good performance review just four months before deciding to dismiss him.
• Three of the directors who voted for Mr Mistry’s removal joined the board only after the Nomination and Remuneration Committee gave him a good appraisal. They had attended just one Board meeting prior to the meeting held on 24th October, 2016.
• Neither the boards of Tata Trusts nor Tata Sons board had indicated to Cyrus Mistry that it was unhappy or displeased with Mr Mistry’s performance before the board meeting that sacked him.
• A press release issued by the Tata Group on 10th November 2016 that made allegations against Mr Mistry, and detailed reasons for his removal, appears to have been an “afterthought” as his dismissal was not discussed in any of the meetings of the Board of Directors.
• Even if – during Cyrus Mistry’s tenure – there had been a decline in the performance of many of the Tata Group companies, not all of the blame can attributed to Cyrus Mistry. In particular the Tata Trusts Board of Directors should not be absolved of its responsibility.
The National Company Law Appellate Tribunal also stated:
“We further hold that the company’s affairs have been or are being conducted in a manner ‘prejudicial’ and ‘oppressive’ to members including Appellants, Mr. Cyrus Mistry as also ‘prejudicial’ to the interests of the company and its group companies i.e. ‘Tata Companies’…,”.
The National Company Law Appellate Tribunal order allows for Mr. Cyrus Mistry‘s return as chairman of the board, however the Tata Group is allowed to file an appeal in the Supreme Court in India. The decision casts legal doubt on decisions made by Natarajan Chandrasekaran over the last 3 years that he has been the chairman.
Mr Mistry stated:
“The outcome of the appeal is a vindication of my stand taken when the then board of Tata Sons without warning or reason removed me.”