Tatas ask tribunal to reject Mistry move to block naming of new chairman

Tata Sons said Mistry's continuance on the board was detrimental to interests of company

Tata Sons has urged the National Corporate Law Tribunal to reject its former chairman Cyrus Mistry’s move to block the appointment of a new boss for the Tata group.

Soon after Mistry was removed on October 24,  Tata Sons, the holding company of the Tata group, had announced a new group chairman would be announced in four months. The Tata Sons board had appointed Ratan Tata as interim chairman.

Tata Sons’ reply to the tribunal was filed on January 6 after two investment companies of the Mistry family moved it on December 20, alleging mismanagement in Tata Sons. The petition sought a direction by the tribunal not to remove Mistry as a director of Tata Sons.   

Tata Sons has called an extraordinary general meeting of its shareholders on February 6 to remove Mistry as a director. The tribunal will hear Mistry’s petition again on January 31.

In its reply, Tata Sons said if Mistry was permitted to continue on the board of Tata Sons, he would impede the appointment of a new chairman.

Tata Sons further said Mistry’s actions since his ouster were evidence his continuance as a director was detrimental to the interests of the company.

“Any relief (to Mistry) would be gravely prejudicial to the interests of Tata Sons and jeopardise all efforts now being employed to resurrect and alleviate Tata Sons. Even otherwise, such relief is contrary to the settled legal position that a general meeting for removal of a director cannot be injuncted,” the Tata Sons petition said.

Tata Sons made it clear that Ratan Tata was an interim chairman and the process of appointment of a new chairman of Tata Sons could not be held to ransom by Mistry.

“The tribunal ought not to pass any such orders or grant any such relief since selection of the chairman of Tata Sons is a crucial managerial decision that must be left to the independent judgement of the board and committee constituted for such purpose, since they best represent the will of the larger body of shareholders.  It is a settled law that the courts refrain from interfering with the management of companies and that shareholders are the best to take decisions which are in the interests of the company,” the Tata Sons reply said.

The Tata Trusts and Tata group companies own the majority of shares in Tata Sons while the Mistry family holds an 18.5 per cent stake.

Tata Sons said the foundational principles of the Tata group could be compromised if the selection of a chairman was left to assessment and evaluation by outsiders.  

“On the one hand, the petitioners have asked (Ratan) Tata be restrained from functioning as the interim chairman and also that no new chairman of Tata Sons should be appointed. On the other hand, the petitioners have also not made any prayer for the reinstatement of Mistry as chairman. This effectively means that the petitioners desire that Tata Sons and the Tata group be left rudderless,” Tata Sons said.