Tata Sons v. Cyrus Mistry: Supreme Court Reserves Judgemnt

The courtroom battle in the matter of Tata Sons v. Cyrus Mistry reached day 7 of continuous hearings by the parties. A three judge bench headed by Chief Justice of India SA Bobde heard the arguments advanced by Mr. Shyam Divan, who argued on behalf of Mr. Cyrus Mistry for second day in a row. The arguments were also advanced by Sr. Adv. Janak Dwarkadas, another counsel representing the Mr. Mistry. The hearing concluded after the submissions were made by Mr. Harish Salve on behalf of Tata Sons. Mr. Divan argued on two main broad aspects. First, on arbitrary removal of Cyrus Mistry on meeting dated 24 October 2016 and second, how the principles of corporate governance are compromised by the Tata Group specifically those which relate to probity and good faith in corporate dealings. Mr. Divan presented the following series of events which points out the arbitrary removal of Mr. Mistry which was primarily influenced by external interference of Mr. Ratan Tata in the capacity of a shareholder: 13 December 2012: Mr. Ratan Tata attended the last board meeting.28 June 2016: The Nomination Remuneration Committee (NRC) including 50 independent directors lauded the performance of Cyrus Mistry as Executive Chairman.21 July 2016: Mr. Mistry wrote a letter to Mr. Tata mentioning practical difficulties in Articles of Association. 28 July 2016: Mr. Tata informed Mr. Mistry that while he disagrees to his complaint, Mistry must comply with principles of shareholders and AoA. 8 August 2016: Mr. Tata sent 2 letters in his capacity as shareholder influencing the board meetings. Mr. Subedar informed the board about the same and discussed the minutes so received.24 October 2016: Mr. Ratan Tata as Chairman Emeritus attended the meeting for the first time after 2012. The meeting was convened with Mr. Mistry, Directors, Nominees of Tata Sons, Independent Directors and 2 personal nominees namely Mr. Piramal and Mr. Shrinivasa who were nominated on Mr. Tata's personal nomination and voted for his removal. It was Mr. Divan's argument that it was agreed in the meeting that Mr. Mistry must be removed from the post of Executive Chairman as the trust lost confidence in him due to some reason. "While there were different agendas for the meeting to be convened, the voting was done on agendas over which no prior information was given to anyone. Article 105A and Article 118 requires that before the removal of a Chairperson, removal has to be considered by a selection committee and a notice of removal as to be furnished. These conditions were not fulfilled in this case. This is violation of AoA." he argued. He further went ahead on how the principles of corporate governance were compromised by Tata Sons due to the breach of statutory provision of Companies Act, 2013. He argued that there has been a complete breach of provisions including Sec. 166 which provides that every director has a duty to act as per his independent judgment and in welfare for the company affairs and of Sec. 118(10) as no mandatory notice or period in board minutes was given under Companies Act, 2013. "The affairs of minutes in Board meetings is not a blood-sport. This is not an ambush. Companies Act rejects such illegal actions. This is not decency or fair play especially when there is good faith and fiduciary relationship between parties." He submitted. At this stage, CJI SA Bobde asked Mr. Divan whether its true that Mr. Mistry knew about his removal from the post of Executive Chairman. Divan: This is the most basic thing. When you talk about probity and integrity, we are talking about years of relationship. The essence is you are fair with people you are dealing with. Look at the decency, you may have a difference but you cannot expel a person like this. This is a court of conscience would not accept this conduct at all. And therefore, this is wrongful, burdensome and highly illegal. Mr. Divan summarized his arguments by mooting the point of arbitrary removal and non compliance of Article 105 of AoA which regulates conduct of managing directors or joint managing directors. "The only way of doing it (removal) was by conducting a general meeting. Article provides that the same process of removal must be followed as that of appointment. you cannot do this Where 4 months prior the committee praised and applauded him for his contribution." He argued. According to Mr. Divan, the General Body is the highest body. On 1 August 2012, a resolution was passed by General Body appointing Mr. Mistry as Executive Chairman. He suggested that if one wants to go against the appointment of chairperson, the appropriate way is to approach the General Body which is supported by requirement of Article 105. He also suggested that no prior information or notice was accorded to Mr. Mistry on his removal which goes against the statutory requirement of both AoA and Companies Act,...

Tata Sons v. Cyrus Mistry: Supreme Court Reserves Judgemnt

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