In a set back to ousted Tata Sons chairman Cyrus Mistry, a company law tribunal today ruled that the board of the USD 100 billion conglomerate was competent to dismiss its executive chairman, and said it found no merit in his allegations of mismanagement in Tata group firms.
The National Company Law Tribunal (NCLT) rejected Mistry's contention of proportional representation on Tata Sons board saying his conduct did not augur well for the smooth functioning of the group.
While Mistry said the ruling was "disappointing although not surprising" and an appeal on merits will be pursued, Tata Group patriarch Ratan Tata said the ruling was a vindication of the actions that Tata Sons took against him in October 2016.
Ruling on Mistry's December 2016 petition against his "illegal" removal as chairman of the salt-to-software conglomerate after a four-year stint, Mumbai NCLT's division bench presided by B S V Prakash Kumar and V Nallasenapathy -- said that he was ousted because the Tata Sons' Board and its majority shareholders had "lost confidence in him".
While Mistry's family, through a set of two investment firms, is the single biggest shareholder in Tata Sons with around 18 per cent interest, the Tata Trusts - a group of public charities - hold over 66 per cent. Ratan Tata is chairman of the Trust.
A special bench of the tribunal held that the Board of Directors at Tata Sons was "competent" to remove the executive chairperson of the company.
Reading out the judgment's operative part, the bench said that "he (Mistry) admittedly sent out crucial information related to the Tata firms to the Income Tax department, leaked information to the press, and after he came out in public against the company and its board members".
It further said: "The removal of Cyrus Mistry as executive chairperson was because the board lost confidence and not because they were contemplating that he would cause discomfort to Ratan Tata, Soonawala (N Soonawala, the group trustee), and other answering respondents...
"The Board is competent to remove an executive chairman. Mr. Mistry's removal from the position of director came because he admittedly sent out company information to the I-T (department), press, and came out in public against the board and the trust."
Ratan Tata said the NCLT judgment "has been a vindication of the actions that Tata Sons felt obliged to take in October 2016. It is a reinforcement of the principles and forthrightness that prevails in our judicial system, which should make all of us proud of our country and its democracy."
Disclaimer: No Business Standard Journalist was involved in creation of this content