Ratan Tata moves SC against NCLAT order holding him guilty of prejudicial acts

A day after Tata Sons approached the Supreme Court assailing the judgment of the National Company Law Appellate Tribunal (NCLAT) restoring Cyrus Mistry as its Executive Chairman, the company's Chairman Emeritus Ratan Tata has filed a separate plea.

The industrialist and former Executive Chairman of Tata Sons has challenged the December 18 order of the NCLAT which had found him guilty of taking steps that were oppressive and prejudicial to the interests of the shareholders, particularly to those of Mistry.

The Board of Directors of Tata Sons had, in October 2016, decided to remove Mistry from the position of Executive Director of the Group and he was subsequently removed on February 2017. This decision to oust Mistry, the NCLAT held, appeared to have nothing to do with any lack of performance. It concluded that the overall facts and circumstances suggested the presence of prejudice.

Among the adverse findings of the NCLAT against Ratan Tata was that he had engineered a coup for facilitating the ouster of Mistry from the position. The petition filed by Tata states,

“The findings of the Hon’ble Appellate Tribunal are wrong, erroneous, contrary to the record of the case and requires consideration by this Hon’ble Court.”

Alleging that the NCLAT order glosses over the facts and submissions and has in fact indulged in “propagating a selective narrative”, Tata submits that the submissions made by several parties were not dealt with or were ignored in the judgment of December 18.

“The pretense of reasoning and judicial approach is betrayed by omission to consider the record itself,” the petition states, averring that the conclusions in the judgment were arrived at on the basis of a “self serving” reading of certain correspondence.

A justification for the removal of Mistry from the position of Executive Chairman is also made in the petition filed by Tata. It refers to the “discordant” relationship between Mistry and Tata Trusts as a result of Mistry’s reluctance to meaningfully dissociate himself from his family businesses as well as concentrated power and authority in his hands as the Chairman of major Tata Operating Companies. It is stated,

“Even the board members were being alienated on matters relating to Tata Operating Companies where Tata Sons had huge financial exposure and the Board of Tata Sons had to contend with such decisions being cast upon it as fait accompli.”

The handling of litigation in relation to Docomo that Tata Sons was embroiled in under the leadership of Cyrus Mistry, is cited by Ratan Tata as one of the reasons for the loss of confidence in Mistry. He submits that Mistry’s attempt to resist complying with the adverse arbitration order in the Docomo case brought disrepute to Tata Sons.

“This is not what the Tata Sons brand stands for. Quite to the contrary, honouring its commitments is one of Tata Sons’ highest virtues it takes great pride in. The spat with DoCoMo, which was widely covered by the press, brought ill-repute and reputational losses to Tata Sons.”

Tata has further argued that the NCLAT judgment severely affects the rights of the Tata Trusts, its Directors, shareholders, and adds that the judgment has “re-written the Articles of Tata Sons against its interests". This judgment has affected and undermined the rights of the shareholders and diluted the doctrine of shareholder sovereignty and corporate majority, according to Tata’s petition.

Ratan Tata contends that the NCLAT judgment would lead to chaos in the functioning of Tata Sons if the same is not set aside and may also lead to breakdown of the governance structure of the company.

Yesterday, Tata Sons had moved the Apex Court against the NCLAT order on the grounds that the same sets a dangerous legal precedent.