Case study on: TATA V CYRUS MISTRY

TATA V. CYRUS MISTRY CASE STUDY

SYNOPSIS

Sl.NO. Particulars Page Number

1. Citation 3

2. Family Tree 4

3. Characters involved 5

4. Time Line 7

5. Time Frame of all the Chairman 9

6. History of the case 10

7 Case Filed Before NCLT 12

8 Appeal Filed Before NCLAT 26

9 Conclusion 42

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 TATA V. CYRUS MISTRY CASE STUDY

• CITATION:

NCLT:

Cyrus Investments Pvt Ltd & Anr V. Tata sons Ltd & Ors. (C.P. No.
82(MB)/2016)

NCLAT:

Cyrus Investments (P) Ltd. v. Tata Sons Ltd., 2020 SCC Online NCLAT
1, (decided on 06-01-2020)

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FAMILY TREE OF TATA:

The family tree has been edited and drawn in such a way, so as to remove the
confusions and also to clearly illustrate the persons accordingly.

NUSSERWANIJI TATA (H) DADABHOY TATA (B)

JEEVANBAI TATA (W)

VIRBAIJI TATA (S) J.R.D TATA (GS)

NOWROJI SAKIATWALA (S)

JAMSETJI TATA (H) HIRABAI (W)

DORABJI TATA (S) DHUNBAI TATA (D) SIR RATANJI TATA (H) NAVAJBHAI SETT (W)

SOONOO COMMISARIAT (W) NAVAL H TATA (ADOPTED S)

(H) – HUSBAND.

(W) – WIFE.

(S) – SON. RATATN N TATA (S) JIMMY TATA (S)

(B) – BROTHER.

(D) – DAUGHTER. SURYAA RAJENDRAN 4

(W)D – WIFE, DIVORCED.

(GS) – GRAND SON

 TATA V. CYRUS MISTRY CASE STUDY

• CHARACTERS IN THE CASE LAW:

This part of the article is provided to acquaint readers on the beforehand with all the
characters that are involved in the case law.

1. Mr. JAMSETJI NUSSERWANJI TATA (FAMILY OF TATA)

2. SIR RATANJI TATA (FAMILY OF TATA)
3. SIR DORABJI TATA (FAMILY OF TATA)
4. Mr. NAOROJI SAKLATVALA (FAMILY OF TATA)
5. Mr. JEHANGIR RATANJI DADABHOY TATA (FAMILY OF TATA)
6. Mr. RATAN TATA (FAMILY OF TATA)
7. Mr. CYRUS PALOONJI MISTRY
8. Mr. AMIT RANBIR CHANDRA (3rd RESPONDENT)
9. Mr. ISHAAT HUSSAIN (4th RESPONDENT)
10. Mr. AJAY GOPIKISAN PIRAMAL (5th RESPONDENT)
11. Mr. VENU SRINIVASAN (6th RESPONDENT)
12. Mr. NITIN NOHRIA (7th RESPONDENT)
13. Mr. RANENDRA SEN (8th RESPONDENT)
14. Mr. VIJAY SINGH (9th RESPONDENT)
15. Ms. FARIDA DARA KHAMBATA (10th RESPONDENT)
16. Mr. RALF SPETH (11th RESPONDENT)
17. Mr. N. CHANDRASEKARAN (12th RESPONDENT)
18. Mr. NOSHIR.A. SOONAWALA (13th RESPONDENT)
19. Mr. J.N. TATA (14th RESPONDENT)
20. Mr. K.B. DODISETH (15th RESPONDENT)
21. Mr. R.K. KRISHNAKUMAR (16th ESPONDENT)
22. Mr. S.K. BHARUCHA (17th RESPONDENT)
23. Mr. MUNJEE (18th RESPONDENT)
24. Mr. R. VENKATARAMANAN (19th RESPONDENT)
25. Dr. AMIRTA PATEL (20th RESPONDENT)

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26. Mr. V.R. MEHTA (21st RESPONDENT)

27. Mr. F.N. SUBEDAR (22nd RESPONDENT)
28. Mr. BHARAT VASANI (GENERAL COUNSEL OF THE TATA GROUPS)
29. Mr. MEHLI MISTRY
30. LORD SUSHANTA BATTACHARYYA
31. Mr. SIVASANKARAN (OWNER OF STERLING INFOTECH LTD.)

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 TATA V. CYRUS MISTRY CASE STUDY

• TIME LINE:

•JAMSHETJI TATA JOINED WITH HIS FATHER'S EXPORT TRADING FIRM.

1858

•BIRTH OF SIR RATANJI TATA.

1871

•TATA CONCENTRATED ON COTTON MANUFACTURING.

1872

•EMPRESS MILLS WERE ESTABLISHED WITH HIGH STANDARDS FOR LABOUR.

1874

•CONSTRUCTION OF MILLS IN NAGPUR.

1877

•INTRODUCTION OF VARIOUS WELFARE SCHEMES FOR LABOUR.

1886

•DONATED HALF OF HIS FORTUNE FOR CONSTRUCTION OF UNIVERSITY.

1889

•A WILL WRITTEN BY JAMSETJI TATA.

1890

•VARIOUS ENDOWMENT SCHEMES FOR STUDENT WELFARE.

1891

•SIR RATANJI TATA WAS SUCCEEDED BY SIR DORABJI TATA.

1904

•DEATH OF SIR RATANJI TATA.

1918

•AS PER THE WILL TRUST WAS SET UP.

1919

•UPON DEATH OF DORABJI TATA, NAOROJI SAKIATWALA BECAME THE CHAIRMAN,

1932 TATA MEMORIAL TRUST WAS SET UP IN MEMORY OF WIFE OF DORABJI TATA.

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•JEHANGIR RATANJI DADABHOY TATA BECAME CHAIRMAN.

1938

•NATIONALIZATION OF TATA AIRLINES WHICH WAS FOUNDED BY J.R.D. TATA.

1953

•Mr. TATA JOINED TATA GROUPS.

1962

•Mr. TATA WAS APPOINTED AS DIRECTOR IN CHARGE FOR NATIONAL RADIO &
1971 ELECTRONICS COMPANY.

•Mr. TATA SUCCEEDED J.R.D TATA.

1981

•COMPANY ACQUIRED TETLEY TEA.

2000

•COMPANY ACQUIRED STEEL MANUFACTURER , PART OF CORUS GROUP.

2007

•COMPANY PURCHASED JAGAUAR & LAND ROVER FROM FORD, Mr. TATA
2008 RECEIVED PADMA VIBHUSHAN FROM GOI.

•Mr. TATA RETIRED, CYRUS PALLONJI MISTRY APPOINTED AS CHAIRMAN.

2012

•CYRUS WAS DISMISSED, Mr. TATA TO ACT AS INTERIM CHAIRMAN.

2016

•NATARAJAN CHANDRASEKARAN APPOINTED AS NEW CHAIRMAN.

2017

•NCLAT ORDERS REINSTATEMENT OF MR. CYRUS

2019

•JAN-02 TATA SONS APPROACH SC

2020

•JAN-10, SC GRANTS INTERIM RELIEF

2020

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• TIME FRAME OF THE CHAIRMANS:

In the long history of this company, from 1868 till 2021 it has seen seven chairman
who are as follows.

1868
• JAMSHETJI NUSSERWANJI TATA

1904
• SIR DORABJI TATA

1932
• NOWROJI SAKIATWALA

1938
• JEHANGIR RATANJI DADABHOY TATA

1981
• RATAN TATA

2012
• CYRUS PALLONJI MISTRY (DISMMISSED)

2016
• RATAN TATA (AS INTERIM)

2017
• NATARAJAN CHANDRASEKARAN (PRESENT )

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HISTORY OF THE CASE:

Mistry family is one of the oldest allies of the Tata group and holds over 18 per cent
shares in Tata Sons making them second-largest individual shareholder in the holding company
of Tata Group. Mr Cyrus Pallonji Mistry was not a new face for the Tata group, apart from the
alliance which was forged half a century back, he held numerous positions in the Tata group and
served in various capacities viz. Director of Tata Elxsi Limited and Tata Power, further he
joined the board of Tata Sons after his father’s retirement, prior to his appointment as Executive
Chairman of Tata Group.
October 2016: Cyrus Mistry, then the chairman of Tata Sons, was sacked from his
post, a move that took most people by surprise. Ratan Tata was subsequently named interim
chairman. Mistry then wrote to Tata Sons' board, accusing the trustees of 'shadow control'. He
also denied allegations that the board was not consulted regarding the purchase of Welspun
Power.
December 2016: Cyrus Mistry resigned from all Tata Group firms. Two of the Mistry
family-backed investment firms-- Cyrus Investments and Sterling Power-- moved the National
Company Law Tribunal (NCLT). They challenged Mistry's ouster from the position, while also
alleging oppression of Tata Sons' minority shareholders. However, Mistry was then served a
legal notice by Tata Sons for an alleged breach of confidentiality.
January 2017: A contempt plea was filed by the Mistry family in the NCLT where
they alleged that Cyrus Mistry's removal from the board of Tata Sons was in violation of the
court's December 2016 order whereby none of the involved parties in the dispute was to initiate
any action against the other while the matter was under consideration and pending disposal of
the company's plea. Meanwhile, former Tata Consultancy Services (TCS) chairman N
Chandrasekaran was appointed chairman of Tata Sons.
February 2017: Cyrus Mistry was also removed from the post of director of Tata
Sons.
March 2017: Mistry's plea alleging minority shareholders' oppression was deemed
'not maintainable' by the NCLT under provisions of the Companies Act which require at least a
10 percent ownership in such a case. While the Mistry family did own an 18.4 percent stake in
Tata Sons, their holding was under 3 percent excluding preferential shares.

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April 2017: The waiver of the 10 percent criteria, sought by the two Mistry family-
backed firms, was rejected by the NCLT's Mumbai bench. This rejection was then challenged by
the firms in the NCLAT, along with the NCLT's dismissal of their petition alleging minority
shareholder oppression.
August 2017: A proposal to turn Tata Sons into a private company was passed by its
shareholders.
July 2018: The pleas challenging Mistry's removal from the post of Tata Sons'
chairman was rejected by NCLT on the grounds that the ouster followed the company's board
having lost confidence in him.
August 2018: Cyrus Mistry approached the NCLAT in his personal capacity against
NCLT order that upheld his removal.
December 2019: Cyrus Mistry was restored as executive chairman of Tata Sons and
also said that the manner in which the company's shareholders had given a go-ahead to a
proposal to turn it into a private company was illegal.
However, the NCLAT did add a four-month suspension of the implementation of its order in
order to allow Tata Sons time to file an appeal. The Tatas then approached the SC where they
appealed against the NCLAT order reinstating Mistry as Tata Sons' executive chairman as well
as restoring his directorships in the holding company and three group companies. The apex court
stayed the order.
January 2020: Cyrus Mistry said he did not seek to return to the position of Tata
Sons' chairman. He did, however, mention in a statement that he will be pursuing all options to
protect his family's rights as a minority shareholder of the Tata group's holding company, which
includes getting back a seat on the board of Tata Sons. His statement came ahead of the SC's
hearing on Tatas' plea challenging the December 2019 NCLAT order reinstating Mistry as
chairman.
July 2020: Tata Sons reportedly said in court filings that the company's brand value
eroded under Mistry's chairmanship, while also adding that the financial performance of group
companies declined while he was at the helm. Meanwhile, the Mistry firms said in their affidavit
to the SC that Tata Sons had withheld key facts pertaining to the company's operation as a
public company. According to the Mistry firms' claims, Tata Sons had always been a public

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limited company. However, it added that the word 'private' was added into the Tata Sons' name
by the Registrar of Companies (RoC) on August 8, 2018, right before the NCLAT hearing on
the appeal against NCLT Mumbai's order in the matter.

CASE FILED BEFORE NCLT:

“It was Monday, 24.10.2016, like any other day, but to Bombay House -Tata Sons Ltd
registered office, it is not the same. It Is the day that caused Inflection to the annals of the company.
In more than 100 years' history of the company, change of guard happened only six times.
”On 24.10.2016, Tata Sons Ltd. (in short "the company/Tata Sons/TS") held Board
Meeting with several agenda items including agenda of "any other item", where under, Chairman
of the Company, Mr. Cyrus Pallonji Mistry (hereafter called “Mr. Cyrus”) was removed from the
position of Chairman of the company under the head of "any other item”, without being given 15
days prescribed notice to Mr. Cyrus, which the petitioners-Companies of Pallonji family having
above 18% equity of the company -to file this Company Petition..”

The petitioners had sought the following reliefs:

a) The necessity of an affirmative vote of the majority of directors nominated by the Trusts, which
are majority shareholders, be deleted;
b) The Petitioners be entitled to proportionate representation on the Board of Directors of
Respondent No .1;
c)The Petitioners be entitled to representation on all committees formed by the Board of Directors
of Respondent No.1; and
d)The Articles of Association be amended accordingly.

NCLT dismissed this petition on July 9, by observing as follows:

• On the issue of Mr. Tata’s prejudicial conduct with respect to non-payment of its share of
arbitration award by Siva Group Company (Sterling), in TTSL-Docomo arbitration, NCLT
observed, “No material has been placed either by petitioners or by Cyrus Mistry saying that

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petitioners moved some action against Mr. Siva for recovery of monies to which Mr. Tata raised
an objection”
• “For no money has been paid by any of the Tata group companies for the acquisition of TTSL
shares by Siva group, it cannot be attributed that the company incurred loss by acquisition of
shareholding of TTSL by Siva group co.”
• “As for TTSL acquisition, it cannot be said as a careless decision taken by management at that
time...”
• “It appears that Cyrus Mistry, because of heartburn he had due to being removed as Executive
Chairman of Co., they tried to stream roller all these business decisions upon Mr. Tata as
mismanagement of the affairs causing prejudice to the company, so as to bully the answering
Respondents (Tata Sons, Mr. Ratan Tata) by using Sec. 241 as a device.
• On the allegation that occurrences of some acts in Air Asia India Pvt. Ltd. caused prejudice to
the interest of the Company/Petitioners, NCLT stated, “Air Asia decision was not a fait accompli
upon Cyrus Mistry...”
• “All sorts of allegations regarding Air Asia transaction have been made with impunity by Cyrus
Mistry flouting all legal principles...”
• “Cyrus Mistry took active part in Air Asia incorporation, presided over a meeting to further fund
it.”
• “Cyrus Mistry and petitioners have gone ahead to make a scurrilous statement, without a shred
of paper, that Mr. Tata funded one terrorist through Hawala with diversion of Air Asia funds...”
• On the question of whether the business transactions between Mr. Mehli Mistry and Tata Power
Co. Pvt. Ltd. under the Chairmanship of Mr. Tata were prejudicial, NCLT observed, “All these
allegations are for fetching without any point or material, we can with all humility say it is a futile
exercise made by the petitioners as well as Mr. Cyrus putting this bench through all this
voluminous documentation, in spite of it, not even a mole is present after digging the mountain.”
• As regards the Nano project, NCLT found that allegations were made without making Tata
Motors a party to the case. It further noted that almost all the suggestions on Nano project from
Mr. Tata came on being solicited.
• NCLT also rejected allegations on Jayem Auto getting benefited due to association with Mr.
Tata.

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• NCLT dismissed reference to Mr. Tata as well as Mr. Soonawala as “Shadow Directors”, while
remarking “The petitioners so disgustingly tried to drag in the concept of shadow directors to tag
Mr. Tata and Mr. Soonawala”. It observed “the concept of shadow Director cannot be equated to
the advices and suggestions given by Mr. Tata and Mr. Soonawala, moreover the word shadow
itself indicates as something done lurking behind (and) normally this term is used only when foul
play has taken place by the advice of somebody.”
• It further elaborated “We have not found any merit in the argument that Majority rule has taken
a back seat by introduction of corporate governance in Companies Act, 2013. It is like Corporate
democracy is genesis, and Corporate governance is species. They are never in conflict with each
other; the management is rather more accountable to the shareholders under the present regime”.
• NCLT also held that Mr. Tata advising in relation to affairs of a company cannot be construed
as conducting the affairs of the company.
• NCLT found that not a single instance in history of the company or in Tata group, at least in
Cyrus Mistry’s tenure that Mr. Tata’s advice has been directly put into action without placing
before the respective board.
• Further, by virtue of Tata Trusts holding 2/3 stake in Tata Sons and Mr. Tata heading the trusts,
as per rule of democracy, these companies had to be run at the wish of majority ... i.e the Trusts
headed by Mr. Tata.
• “It makes no difference whether they opt for affirmative vote or electing majority directors in
the company ... the result is one and the same.”
• “Is it the idea of Cyrus Mistry that the majority shareholders should not say anything about the
business of the company wherein the Trusts have majority shareholder?”
• “There is fleet of letters from Cyrus Mistry asking advice on various issues ... When such is the
case, can it be held out that Mr. Tata suggesting business idea for the cause of the company is
wrong?”
• NCLT further rejected the allegation of Mr. Tata being privy to insider information. It stated,
“It is inconceivable to understand how providing such information will become interference with
the affairs of Tata Sons or flouting SEBI Regulations.”
• “Mr. Tata being Chairman of Tata Trusts, by virtue of Art. 121(A) , Tata Sons is bound to
provide information of the group companies to Tata Trusts prior to bringing the same before Board

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of Tata Sons.”. NCLT remarked, “Seeking information will never amount to conducting the affairs
of the company.”
• NCLT rejected Cyrus Mistry allegations that Mr. Tata tried to favour Ola Cabs in which he has
an investment stating that “Nowhere did Mr. Tata say that Tata Motors should not have any deal
with Uber and have a deal only with Ola.”
• NCLT found the petitioners’ plea challenging conversion of Respondent Company to be
“preposterous” primarily on three grounds –
1. “As per law, the only requisite to make it private is as per Section 43A(2A), the company
has to apply for making it from public to private...the Registrar of Companies even cannot
go into as to whether it is in compliance with Section 31 of the Companies Act 1956 or
not because under Section 31...it has been said subject to the provisions of the 1956 Act,
and to the conditions contained in its memorandum, a company may, by special resolution,
alter its Articles when it is to convert from public to private, but it has to be approved by
the Central Government. Now on the advent of 2013 Act, this power has been conferred
upon the National Company Law Tribunal....It is only mere information that has to be
given to ROC as per sub-section 2A.”
2. “The company has not altered any of the Articles of Association so as to bring any new
entrenchment to the Articles already in existence. Therefore, it cannot be said that the
management in the company has applied to slap some action upon the petitioners herein
so as to cause prejudice to the rights already in existence. Of course, majority is always at
liberty to alter the Articles, but that has also not happened here.”
3. Of course, legally, nothing available on record to say that the company by filing an
application to declare it as Private is unlawful or in violation of the Articles of
Association...an application under Section 14 is in no way can be construed as action to
cause prejudice or oppression against the petitioners”

• As to interplay of old and new enactment, NCLT observed, “for Section 43A has not been
repealed in the year 2000, it cannot be said that section 43A companies registered before
13.12.2000 would not continue as deemed public companies.”

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• “For this Company has become deemed public company by operation of law, and there
being no other definition to private company under the new Act other than old definition, it
cannot be called that it has to be treated as public company.”
• Rejecting petitioners’ reliance on NCLAT ruling in Dr. M.A.M. Ramaswamy Chettiar of
Chettinad Charitable Trust vs. M/s Chettinad Cement Corporation Ltd which held that
conversion proceedings cannot be stayed or stalled on the ground that appellant would initiate
241 proceedings against the company, NCLT remarked, “This is no way helpful to the
Petitioner indeed it is a finding suicidal to the case of the Petitioners.”
• On the question of whether Articles 104B, 121, 121A and 75 of the AoA are per se
oppressive against the petitioners and whether the same Articles were / have been used or
expected to be used as tools of oppression and mismanagement, NCLT noted the
modifications approved thereto during the 82ndAGM by father of Mr. Cyrus (Mr. P.S.
Mistry) and in the EGM held on December 6, 2012 under the Chairmanship of Mr. Cyrus.
NCLT further noted that in the EGM held on April 9, 2014, under the aegis of Mr. Cyrus,
Articles 104B, 118, 121, 121A and 121B were altered conferring affirmative right in favour
of the Trusts’ directors making it a requisite to the Board for an affirmative vote of the
nominee directors for passing resolution.
• As regards Article 75, NCLT observed, “This Article has been there by the time the
petitioners have acquired shareholding in the company. For they have come into the company
knowing fully well, restriction on transfer of shares in the mode mentioned in Article 75 is
binding on them...When no rights or expectations have been conferred upon these petitioners
with respect to the covenants of the Article 75, these petitioners could not raise any objection
to continuation of this Article 75 on the ground it is oppressive against the petitioners.”;
• Perusing the documents on record including minutes dated June 29, 2016 and arguments of
both sides on power of affirmative vote of Trust directors and Petitioners’ right of
proportional representation, NCLT opined, “it appears the facts taken place are slightly
otherwise from the version presented by the petitioners’ counsel”.
• “As per Article 121 r/w Article 121A, it is evident that any matter affecting the
shareholding of the Tata Trusts in the company (TS) or the rights conferred upon the
Company by the Articles of the Company or the shareholders of the company in any Tata

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company, if not already approved as part of the annual business plan, shall be placed before
the board of directors of the company, before any of the group company (mentioned in
Article 121A-(h)) has decided in respect to making any investment exceeding Rs. 100
crores.” In Welspun matter, though papers appear to have been sent to the Trust nominee
directors, Mr. Cyrus did not hold any board meeting before Tata Power Company signed the
documents. It stated, “Let alone exercising the powers under Article 121-A, when substantial
investment to such acquisition was to be made by Tata Sons, is it not the duty of Mr. Cyrus to
hold board meeting to take the approval of the board for acquisition of Welspun before TPCL
proceeded with this transaction on 12.6.2016?”
• Noting that Mr. Tata had resolved the issue by asking the Trust nominee director to approve
the resolution, NCLT remarked, “Whose action in this episode is prejudicial?For the
petitioners have filed this company petition, we have not gone any further over this issue
leaving it to the wisdom of the petitioners as to realise that the action of Mr. Cyrus is
prejudicial to the interest of the company, or Mr. Tata.”
• NCLT observed, “these petitioners made an attempt to portray that these two trusts nominee
directors causing havoc to the functioning of the company, the petitioners' counsel who
vociferously argued this, has not placed single minutes of the meeting, showing the trusts
nominee directors vetoing the resolution by exercising their affirmative vote.”
• As regards the allegation of petitioners of the breach of fiduciary duties by the Trust’s
nominee directors on Tata Sons, NCLT perused Section 166 of Cos. Act 2013 and observed,
“...the first and foremost clause mentioned in this section is, subject to the provisions of the
Act, a director of the company shall act in accordance with the articles of the company. As to
other sub-sections are concerned, it has been said that director shall work for the benefit of its
members as a whole, in the interest of the company...”;
• “The ire of the petitioners against independent directors and the directors of the company is
that they voted in favour of removal of Mr. Cyrus as an Executive chairman of the company.
Can it be called directors approving a resolution for the removal of an employee from the
company amounts to the directors not discharging their duties?”
• “As to the role of the independent directors along with other functions, it is true that they
have to safeguard the interest of all stakeholders particularly the minority shareholders as

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well, but to say about protection of minority, it is a pre-requisite to show minority rights are
prejudiced, here in this case we could not conceive as to what right of minority shareholders
is adversely affected by the action of the answering respondents.”
• With respect to the appointment of Mr. Cyrus as Chairman on the ground that their group
company has 18.34% shareholding in the company, NCLT stated that “fitness being the
criteria to recommend Mr. Cyrus to the post of Executive Chairman by the selection
committee, how could his removal by the board of Tata Sons would become a grievance to
minority shareholders? When that is not the grievance of minority shareholders, the
petitioners could not even make it an allegation that removal of Mr. Cyrus as Chairman of
Tata Sons as the grievance of minority shareholders, Mr. Cyrus would be considered at the
most as an employee to the company for servicing his skills. The board removed him as
Executive Chairman for the Trust has lost confidence in him.”
• “If at all corporate governance does not mean that having five years' plan, demarcating
roles of Tata Sons and Tata Trust. Basic idea of the corporate governance is to have
transparency, accountability and fairness. Has it been said anywhere that so and so thing
happened in the company is devoid of transparency? Moreover, this argument of Corporate
Governance is in fact applicable against Mr. Cyrus because he is the person continued in the
management. However, since there is no Company Petition from the Respondent side before
us asking a relief that Mr. Cyrus had run the company in violation of Corporate Governance,
we cannot be on that point.”
• “Corporate Governance is not an anathema to corporate democracy, in fact it is corollary to
the corporate democracy to strengthen corporate democracy, the three principles set out in
corporate governance are transparency, accountability and fairness.”
• “If you see the Welspun issue, it is evident Mr. Cyrus refusing to provide space to Tata
Trust and, besides this, other issues would also clearly reveal that Tata Trust has been put to
the receiving end, in fact it is fight for upmanship. Mr. Cyrus tried to have ride over the
majority shareholders by virtue of the position of Executive Chairmanship given to him.”
• As to Article 121, it is nothing but furtherance to Article 1048 for saying that the matter that
has come before the Board shall not be decided without affirmative vote of majority of the
Directors appointed pursuant to Article 1048. Yes, to have majority control, they have opted

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the route of affirmative vote, since the majority limited its strength to 1/3'd of the Board of
Directors, they have to have affirmative vote, otherwise how a majority rule will work out.
Had there been directors from the majority side, entire Board would have been occupied by
the directors of the majority, that not being the situation, to have their majority, they have
settled to affirmative vote. Affirmative right having not given anything more than majority by
strength, we don't see anything as per se oppressive in this article against the interest of the
Petitioners.”
• With reference to Article 121A “Welspun is a tell-tale example as to how Tata Sons Board
to take the decision in respect to investment for acquisition of Welspun. It need not be said
separately all these group companies either acquired by Tata Sons or promoted by Tata Sons.
All these group companies virtually have been set up by Tata family members to spread its
business and to use the funds for the well-being of the society. Since the investments of Tata
Sons lying in various group companies, it is always good to take collective decision in the
Board of Directors whenever any money is to be invested in the group companies. That being
the purpose and object of this Article, it is sordid on the part of the petitioners to plead that
Articles have become all of sudden per se oppressive against the interest of Petitioners. We
remind that this is also an Article that has been approved in the EGM held on 09.04.2014
headed by Mr. Cyrus as Executive Chairman. To us, nothing appears per se oppressive
against the interest of the Petitioners. Of course, the petitioners subsequently filed a memo
deleting the relief for annulment of this article”
• With reference to Article 75 (empowering a company to cause a compulsory transfer of its
members shareholding) “per se existence of Article 75 is not oppressive against the interest of
the Petitioners.” “A company running with characteristics of private, therefore, this company
asking ROC to restore its status as private company cannot make this Article per se
oppressive against the Petitioners. If at all the Petitioners feel that existence of such an Article
in the company is in violation of any of the laws in force, they have to seek civil remedy
before Civil Court, of course, how much it stands after passing 100 years is a million-dollar
question”

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• “Here it Is a company worth of Rs.6,00, 000 corers, out of which, Rs. 5,00,000 crores worth
economic interest is lying with Tata Trusts and individuals whereas these petitioners
according to the petitioners had only Rs. 1,00,000crores economic interest.”
• “Here Mr. Tata has never said that board meeting should not happen, he has never tried to
rewrite any of the minutes of the board meetings, the petitioners have also failed to show
minutes of a single meeting that either the petitioners or the answering respondents differing
with each other.”
• “Mr. Tata as well as Mr. Soonawala gave advises on being solicited... for they being richly
experienced over the affairs of Company....what is wrong in giving suggestions and in what
way, it has affected the affairs of the company?”
• “.... the petitioners cannot generalize by showing some letters saying that Mr. Tata and
Soonawala jeopardising the interest of the company.... protecting the rights of majority in the
Articles can never become either oppression against the Petitioners or mismanagement of the
affairs of Tata Sons.”
• “To establish grievance u/s 241, the complainant has to pass various tests as stated
inSection241and 242, and then alone a relief could be passed. Section242 reliefs cannot be
invoked just by seeing abstract arguments like this without any proof of oppression or
unfairness and prejudice against the Petitioners.”
• With respect to the removal of Mr. Cyrus as Executive Chairman of the Company “can it be
said that the shareholders, who were required for appointment could not vote at the time of
removal, if that is the case, it is nothing but mockery of corporate democracy, therefore, we
don't find any merit in this argument saying that the Trust nominee director should have
abstained themselves from on the proposal moved by them. Accordingly, this issue has been
decided against the petitioners and M. Cyrus.”
• “...removal of an employee from the company by any stretch of imagination could not
become a ground u/s 241because removal of a person appointed on remuneration cannot be
said as conducting the affairs of the company, it can at best be employment dispute” and “it
cannot become a bugbear in the hands of the minority shareholders to stifle the freedom of
functioning and freedom of management lying with majority.”

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 TATA V. CYRUS MISTRY CASE STUDY

• “.... petitioners raised hue and cry in the company petition that the people outside of the
board i.e., Mr. Tata and Soonawala sought unpublished price sensitive information of the
listed companies...here the majority in the company belongs to Tata Trusts. If at all any such
thing happens, the first loser will be Tata Trusts. Is that majority will do damage to
themselves? Normally not”.
• “It is highly “preposterous” on petitioners’ part and Mr. Cyrus making such unfound and
serious allegations just as a “retribution to the heart-burn they had by the removal of Mr.
Cyrus as Executive Chairman”
• In the context of removal of Mr. Cyrus Mistry as a Director NCLT accepted Respondents
contention that “where a directorial dispute has no nexus with the shareholders' proprietary
rights, the same cannot be entertained under oppression and mismanagement.”
• Elucidating on how the concept of oppression and mismanagement law started brewing
NCLT stated that “just and equitable ground would be in the cases where pre-existing
partnership has been converted into a limited company, a stipulation for shareholders to
participate in the conduct of business and restriction on the transfer of shares” and none of
these grounds were applicable to Tata Sons.
• NCLT stated, “...oppression and mismanagement concept is an exception to the majority
rule, therefore applicability of it has to be limited to the extent as enunciated in the statute or
else any person who has even one share also, through waiver route, can cause havoc to the
companies running business”;
• Asserting that the concept of oppression & mismanagement is not ‘declaratory’, NCLT
remarked, “we should always remain very cautious in passing order u/s 241-242, because it is
basic principle, that whoever invested more shall have his say over the affairs of the company
that is run on his money....minority sailing along with majority is bound by the rule of
majority....At the most, if oppression or prejudice or mismanagement is proved, then what
right he gets is to extricate himself from company through exit route on fair valuation of his
shares, but he will not get any right to impose his rule upon the shareholder who have
majority in the company..”

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 TATA V. CYRUS MISTRY CASE STUDY

• “Therefore, even if anybody is identified doing wrong, it has to be limited to the wrong that
has been done to such member, because by virtue of such wrong, company should not be put
to sufferance”;
• As per the closing clause to Section 242(1) of the Act, “relief that is to be passed is to bring
an end to the matters complained of, not to declare what action is illegal or legal”;
• “If you see the correspondence and transactions happened under the stewardship of Mr.
Cyrus, it is evident on record that Mr. Cyrus created a situation that since he being the
executive chairman of the company, he is not accountable either to majority shareholders or
to the trusts nominee directors.”;
• “Any executive chairman, for that matter, to all big companies will act, as a face of the
company, but that does not mean that he is whole and sole and the majority will remain at the
back and call of him”;
• “The best example to prove that Mr. Cyrus tried to convey his way is highway is Welspun
issue, where Mr. Cyrus on behalf of Tata Power entered into acquisition of an asset costing
around Rs. 9000 crores even before Tata Sons passing a resolution as mentioned under
Article 121A of AoA, which is nothing but bypassing the approval that was to be taken from
the board of Tata Sons before entering into any understanding with other parties” inasmuch
as acquisition in Tata Power is intrinsically connected to the economic interest of Tata Sons;
• “As to when Mr. Tata wanted to take some space on rent from Tata Motors Ltd, initially,
Tata Motors itself offered the space to Tata Trusts since it was vacant for three years but
subsequently changed its mind. That time Mr. Cyrus Mistry was the chairman of Tata
Motors. Could it be said that Mr. Cyrus Mistry was not aware of Tata Motors conveying to
Tata Trust to back out from the deal? In a situation like that, will it be that Mr. Tata writing a
letter to Mr. Cyrus about this issue become interference with the affairs of its group
companies?”;
• “As to Ola and Uber, Mr. Tata tried to caution Mr. Cyrus to make sure that at least one out
of these deals not slipped out from Tata Motors. It seems finally neither Uber nor Ola did a
deal for Tata Motors cars. In a situation like this, when majority felt that Mr. Cyrus should
not continue as executive chairman, they removed him, in the same time when he showed
anxiety in sending bundles of papers to Income Tax authority without even putting it to the

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 TATA V. CYRUS MISTRY CASE STUDY

notice of principal officer, and leaking out information of the company to media, conflicting
with the interest of the company, he was even removed as Director”;
• Perusing the evolution of oppression and mismanagement remedy by examining the
statutory provisions in India as well as in England, NCLT stated, “Now the interesting part
under new regime that Companies Act, 2013, the Section for oppression and the section for
mismanagement have been abridged into one section making just and equitable ground
applicable to both scenarios...It is not that something new has come in the regime of 2013
Act, indeed the position that was in existence from 1951 to 1956 has been restored under
2013 Act. Now it is not open to any member to raise mismanagement ground saying that
since mismanagement has been proved relief is to be granted. Now twin conditions have to be
proved for mismanagement, i.e., mismanagement as well as ground for winding up under just
and equitable ground.”
• "Now the interesting part under new regime that Companies Act, 2013, the Section for
oppression and the section for mismanagement have been abridged into one section making
just and equitable ground applicable to both scenarios, i.e., for oppression as well as
mismanagement. Now twin conditions have to be proved for mismanagement, i.e.
mismanagement as well as ground for winding up under just and equitable ground."
• "Justifying these two given concepts ls somewhat uphill task because governance by
majority is a rule; protecting minority from majority is an exception, in fact minority
protection is an occasional departure devised when majority rule has become a ruse to aim at
decimation of minority."
• "Even though Executive Chairman was appointed by Board of Directors, one point to be
remembered is, it is not a position elected by the shareholders. Though Executive Chairman
takes a lead in taking decisions but every such decision in respect to policy issues or an Issue
that requires Board of Directors approval, it has to go through the Board of Directors only.
Executive Chairman post is not an elected post; therefore, every action of the Executive
Chairman is amenable to the Board of Directors. So is the case in Tata Sons also. It is like an
Agreement of employment for five years."
• Crushes Mistry’s assumption that he joined the Board as Executive Chairman with a free
hand to run the affairs of the Company, owing to absence of any written reflection/ agreement

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 TATA V. CYRUS MISTRY CASE STUDY

indicating the same, the very idea being incongruous to the corporate governance and
corporate democracy, thus holds that “this free hand rule concept is an antithesis to collective
responsibility and collective decision making."
• “Regarding leakage of information by Mr. Cyrus to the outside people, the answering
respondents submit that soon after Mr. Cyrus was replaced as Executive Chairman of the
company, he made unsubstantiated allegations casting aspersions not only on Tata Sons but
also other Tata Group companies revealing confidential information of the Tata Sons and its
group companies...”
• “...it is evident that the information that was not known to any outsiders in respect to Tata
Sons and its group companies, because of this rift in between Mr. Cyrus and the board of
Tata Sons, the business transactions of Tata Sons became public for the letter captioned as
confidential simultaneously came to media and the same not been denied either by the
petitioners or by Mr. Cyrus, the fact of this information coming out after Mr. Cyrus was
removed on 24.10.2016 is undeniable. “
• “According to law, a fact admitted as done results into another action, such other action
presumed to be remained in the special knowledge of the person done first act, it could be
inferred as done by him only as envisaged under section 106 of Indian Evidence Act unless it
has been disproved that fact of leaking information is proved as done by somebody else.”
• “This company has run for more than 100 years; it was headed by Mr. Tata for more than
12 years. Tatas dedicated not only their fortunes but their lives as well for the good of the
society by giving everything to the Trusts, Mr. Cyrus and the petitioners should have been
more careful in making allegations against the Trusts and the people working for it.”
• “Whenever any 241-242 proceedings are initiated, it should not be to dig out mountain to
get a mole as to whether any actions are there falling under section 241 or 242, it must be
manifest enough to any bystander to feel that something harm has been done to the economic
interest of the aggrieved member, it must be unconscionable conduct, not by holding out
some “suggestions” as “interferences”.

ORDER OF NCLT:

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 TATA V. CYRUS MISTRY CASE STUDY

a) Removal of Mr. Cyrus Mistry as Executive Chairman on 24.10.2016 is because the Board
of Directors and Majority of Shareholders, ie., Tata Trusts lost confidence in Mr. Cyrus as
Chairman, not because by contemplating that Mr. Cyrus would cause discomfort to Mr. Tata,
Mr. Soonawala and other answering Respondents over purported legacy issues. Board of
Directors are competent to remove Executive Chairman; no selection committee
recommendation Is required before removing him as Executive Chairman.
b) Removal of Mr. Cyrus Mistry from the position of Director is because he admittedly sent
the company information to Income Tax Authorities; leaked the company information to
Media and openly come out against the Board and the Trusts, which hardly augurs well for
smooth functioning of the company, and we have not found any merit to believe that his
removal as director falls within the ambit of section 241 of Companies Act 2013.
c) We have not found any merit to hold that proportional representation on Board
proportionate to the shareholding of the petitioners is possible so long as Articles do not have
such mandate as envisaged under section 163 of Companies Act, 2013.
d) We have not found any merit in purported legacy issues, such as Siva issue, TISL issue,
Nano car issue, Corus issue, Mr. Mehli issue and Air Asia issue to state that those issues fall
within the ambit of section 241 and 242 of Companies Act 2013.
e) We also have not found any merit to say that the company filing application under section
14 of Companies Act 2013 asking this Tribunal to make it from Public to Private falls for
consideration under the jurisdiction of section 241 & 242 of Companies Act 2013.
f) We have also found no merit in saying that Mr. Tata& Mr. Soonawala giving advices and
suggestions amounted to interference in administering the affairs of the company, so that to
consider their conduct as prejudicial to the interest of the company under section 241 of
Companies Act 2013.
g) We have found no merit in the argument that Mr. Tata and Mr. Soonawala acted as
shadow directors superimposing their wish upon the company so that action to be taken under
section 241 & 242 of Companies Act 2013.
h) We have not found any merit in the argument that Articles 75, 1048, 118, 121 of the
Articles of Association per se oppressive against the petitioners.

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 TATA V. CYRUS MISTRY CASE STUDY

i) We have not found any merit in the argument that Majority Rule has taken back seat by
introduction of corporate governance in Companies Act, 2013, it is like corporate democracy
is genesis, and corporate governance is species. They are never in conflict with each other;
the management is rather more accountable to the shareholders under the present regime.
Corporate governance is responsibility, not based on assumed free-hand rule which is alien to
the concept of collective responsibility endowed upon the Board.
j) We have observed that prejudice remedy has been included in 2013 Act in addition to
oppressive remedy already there and also included application of "just and equitable" ground
as precondition to pass any relief in mismanagement issues, which was not the case under old
Act.

APPEAL BEFORE NCLAT:

Admission of the Case and Main Arguments of Cyrus Investments

• The Tata Groups and the SP Group for over decades jointly conducted the affairs of
Tata Sons in an environment of mutual trust and confidence.

Tata Sons was a quasi-partnership

• Tata Sons is in effect is a quasi-partnership-company, a concept well recognised in

company law jurisprudence. The relationship between the 2 groups though not
formally reflected in the Articles of Association but is based on the mutual trust and
confidence which has given rise to a legitimate expectation of being treated in a
mutually just, honest and fair manner.
• Tata Sons had controlling interest over a 100 operating companies (including the 29
listed companies and millions of stakeholders) which is why it is imperative that Tata
Sons should effectively operate as a two-group company to provide checks and
balances in its conduct of business rather than applying a simple majority rule which
would mean that one group can unilaterally determine the destiny of these companies.

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 TATA V. CYRUS MISTRY CASE STUDY

• There has always been constructive participation and engagement by the nominees of
the ‘SP Group’ at the Board level and active support of the ‘SP Group’ as
shareholders, in the conduct of the affairs of Tata Sons, including at a time when the
voting rights of the Tata Trusts were by law vested in a public trustee.

Mr. Mistry’s removal was not only hastily done but was also in violation of Articles of
Association of the Company

• Mistry was selected after subjecting him to a professional selection process as

‘Executive Chairman’ on merits. When he was appointed, Mr. Cyrus Mistry was
expressly referred to as a significant shareholder and both an insider and outsider,
pointing to the nexus between his appointment and his status as a significant
shareholder and in the same spirit of mutual confidence. However, when he was
removed, none of the purported reasons provided for removing him as ‘Executive
Chairman’ had ever been discussed or deliberated prior to his illegal removal. The
Respondents belatedly ascribed disingenuous reasons to justify the removal of Mr.
Mistry by inter alia linking it to his alleged lack of performance. In any event, such
fictitious reasons were clearly belied from the record.
• Mistry’s sudden and hasty removal as ‘Executive Chairman’ must be seen in the
context of: (i) his efforts to remedy past acts of mismanagement inherited from the
past management and opening up embarrassing issues; (ii) yet being respectful in
resisting interference from Mr. Ratan N. Tata and Mr. N.A. Soonawala in the affairs
of Tata Sons and (iii) his instituting a formal governance framework to regulate the
role of the Tata Trusts and specify the matters over which prior consultation would be
required to prevent interference and mismanagement.
• No committee was formed for removal of the incumbent Chairman as required under
Article 118 of the Articles of Tata Sons.

Constant interference by Mr. Mr. Ratan N. Tata and Mr. N.A. Soonawala in the affairs of
Tata Sons was abuse of powers given to them as trustees

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 TATA V. CYRUS MISTRY CASE STUDY

• There was widespread abuse by Mr. Ratan N. Tata and Mr. N.A. Soonawala of
Article nos. 75 and 121 of the Company which included even reopening of matters
already decided (as allegedly being in the interest of the company) and dictating what
the minutes must contain. By vesting frill power of the Board to conclude any
decision in the hands of two trustee nominee directors the authority and statutory role
of Board of Directors whose composition is regulated by the Companies Act, stands
undermined warranting intervention.
• Ratan N. Tata and Mr. N.A. Soonawala kept interfering in the affairs of ‘Tata Sons
Limited’ and demonstrating their insecurity about their legacy being undermined. The
scale and depth of the involvement and interference of these two Trustees in the
affairs of Tata Sons and Tata Group Companies was evident from the record which
showed a range of topics over which pre-consultation was demanded under the threat
of alleging a violation of the Articles of Association and went far beyond offering
solicited advice or guidance.

Conversion of Tata Sons into private limited company was carried out with a malafide
intention and illegal

• When these proceedings were sub-judice, an attempt to convert Tata Sons into a
Private Limited Company was made, in a marked departure from a long legacy of its
being a public limited company having revenue in excess of USD 100 billion and
involving control of over 100 operating companies including 29 listed and public
companies. As a public company, Tata Sons would be subjected to a higher standard
of governance and with a view to dilute these standards, an attempt was made to
convert it into a Private Limited Company.

The Board of Tata Sons committed several prejudicial / oppressive acts using the affirmative
voting rights of the nominated directors of Tata Trusts

• Board with the affirmative vote of nominated members of ‘Tata Trusts’ granted Rs.
600 crores for procurement ‘management consultancy contracts’ without calling for

SURYAA RAJENDRAN 28
 TATA V. CYRUS MISTRY CASE STUDY

bids in violation of normal procedure and standard expected of a large public

company.
• Board with the affirmative vote of nominated members of ‘Tata Trusts’ issued equity
shares of ‘Tata Teleservices Limited’ (Tata Company) at a steep discount in
comparison to the price at which shares were issued to other investors within few
days. Such discounted investment was substantially funded by the ‘Tata Companies’.
• Loans of Rs. 200 Crores extended to one ‘Siva’s’ companies by ‘Tata Capital
Limited’ when Mr. Ratan N. Tata was Chairman. The Said ‘Tata Capital Limited’
subsequently suffered a loss of Rs. 200 crores, when ‘Siva’ defaulted to pay the loans
and the shares of ‘Tata Tele Services Limited’ fully eroded in value.
• Tata Tele Services Limited’, an overvalued company was purchased from the ‘Siva
Group’, which had to be written off; and
• A penthouse apartment at ‘IHCL’s’ apartment hotel was let out at a price significantly
lower than market price; all of which caused objective, discernible and serious
prejudice to Tata Sons.
• Apart from such prejudicial and oppressive acts, various instances of mismanagement
qua numerous decisions with regard to various group companies had also arisen
where such acts of mismanagement occurred due to the use of the majority
shareholding group of their strength, including the misuse of the Articles. Such acts of
mismanagement not only dealt with the investments by Tata Sons, but also extended
to decisions pertaining to various group companies.

3. Main Defences taken by Tata Sons and other Respondents

Allegations in the nature of directorial complaints cannot be raised in an oppression-

mismanagement suit

• Allegations pertaining to removal of Mr. Mistry are in the nature of directorial

complaints which cannot be raised in a petition under Sections 241 of the Companies
Act, 2013.

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 TATA V. CYRUS MISTRY CASE STUDY

• Directorial dispute has no nexus with the shareholders’ proprietary rights, therefore,
the same cannot be agitated or entertained in a petition under Sections 241-242 of the
Companies Act, 2013.

Indian Company Law recognises the concept of Affirmative Voting Rights

• All actions have been taken as per the provisions of the ‘Articles of Association’,
‘Companies Act, 2013’ and the ‘Secretarial Standard on Meetings of the Board of
Directors.
• Even as per the ‘Secretarial Standard on Meetings of the Board of Directors’, if any
special majority or the affirmative vote of any particular Director or Directors is
specified in the Articles, the Resolution shall be passed only with the assent of such
special majority or such affirmative vote. Therefore, Article 121 if read with Article
104A of the Articles of Association of Tata Sons, it cannot be held to be arbitrary.

For proving an oppression / mismanagement case, it was a pre-requisite to show that it was
just and equitable that the company should be wound up on account of continuing oppressive
conduct. Isolated acts cannot not be considered to be oppression / mismanagement

• For maintaining an appropriation under Sections 241-242, it is important for a party to

make out two essential points namely– (i) that the affairs of the company are being
conducted in a manner prejudicial or oppressive to any member or members of the
company and; (ii) that to wind up the company would unfairly prejudice such member
or members but that otherwise the facts would justify the making of a winding up
order on the ground that it was just and equitable that the company should be wound
up and this requires that events have to be considered not in isolation but as a part of a
consecutive story.
• There must be continuous acts on the part of the majority shareholders, continuing up
to the date of petition, showing that the affairs of the company were being conducted
in a manner oppressive to some part of the members and the conduct must be
burdensome, harsh and wrongful and not mere lack of confidence. Mere illegal
termination of Directors cannot bring his grievance as to termination to winding up
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 TATA V. CYRUS MISTRY CASE STUDY

the company for that single and isolated act, even if it was doing good business and
even if the Director could obtain each and every adequate relief in a suit in a court.

Mr. Mistry’s appointment to the Board of Tata Sons was a purely professional appointment
and not in his capacity as of a nominee of the S.P. Group nor in recognition of any such right
of representation of the said S.P. Group on the board of Tata Sons

• Mistry was appointed as Director of Tata Sons in the year 2006 not in the capacity of
a nominee of the S.P. Group nor in recognition of any such right of representation of
the said S.P. Group on the board of Tata Sons. Therefore, his replacement as
Chairman and removal as Director of Tata Sons cannot be canvassed as a case of
oppression or prejudice to the proprietary rights of the S.P. Group since his
appointment (either as Deputy Chairman or Executive Chairman or as a Director of
Tata Sons) was never in recognition of any entrenched right of
representation/management enjoyed by the S.P. Group as shareholders of Tata Sons.
• Therefore, Mr. Mistry’s removal would also not impinge on any right enjoyed by the
S.P. Group as shareholders of Tata Sons which can be protected, executed or enforced
in the oppression-mismanagement proceedings.

Tata Sons is not a quasi-partnership

• There is no provision in the Articles of Association of Tata Sons or any shareholders’

agreement which entitles the S.P. Group to participate in the management of Tata
Sons or nominate any directors to the board of Tata Sons. Tata Sons is not quasi-
partnership, by any stretch of imagination. Consequently, the S.P. Group are not
permitted to make allegations regarding the removal of Mr. Cyrus Pallonji Mistry
either as Chairman or as a director of the Tata Sons Limited.

The reason for Mr. Mistry’s removal as a Chairman was loss of confidence

• In a span of around 4 (four) years as the Chairman of Tata Sons, Mr. Mistry had
completely lost the trust and confidence of Tata Trusts as he had failed to deliver on

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 TATA V. CYRUS MISTRY CASE STUDY

the promises that he had made at the time of his selection as the Chairman of Tata
Sons and was unable to lead the Tata Group in a cohesive manner and failed in
providing proper guidance and support to the Group. He was too consumed by the so
called legacy issues rather than working towards resolving them. Furthermore, there
were lapses of governance observed during his tenure, including the acquisition of
‘Welspun Renewable Energy Ltd.’ by ‘Tata Power Ltd.’

Mr. Mistry’s removal was consented by 7 out of 9 directors

• The Board of Tata Sons comprised of 9 directors, including Mr. Mistry. Therefore,
the 3 directors nominated by the Tata Trusts could not, on their own, pass the
resolution to replace Mr. Mistry. This decision was approved by 7 out of the 9
Directors with 1 Director, Ms. Farida Khambata abstaining and one of the
Respondents being ineligible to vote on this matter by virtue of being interested.
Thus, what this clearly shows is that apart from the 3 trust nominated Directors, 4
other independent Directors saw merit in the resolution of the trust nominated
directors and agreed that Mr. Mistry should be replaced as the Chairman of Tata Sons.

The role of the Selection Committee was recommending the appointment of Chairman and
not removal

• Article 118 dealt with Appointment of Chairman and provided for constitution of a
Selection Committee for the purpose of selecting a new Chairman of the Board of
Directors of ‘Tata Sons’. The Selection Committee so constituted had to “recommend
the appointment of a person as the Chairman of the Board of Directors“. Therefore,
the limited role of the ‘Selection Committee’ under Article 118 is to recommend a
candidate for the appointment as the Chairman of the Board of Directors. It was
absurd to interpret this Article to mean that the “Selection” Committee would also
take decisions regarding the removal of the Chairman. Such an interpretation would
be inherently contradictory to the purpose behind the constitution of a Selection
Committee and entirely counterintuitive to the express words in the Article, which,

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 TATA V. CYRUS MISTRY CASE STUDY

were consciously chosen to mean that a committee has to be constituted for the
purposes of selection of Chairman (and not for its removal).

Conversion of Tata Sons from Public Limited Company to Private Limited was a statutory
requirement

• The conversion was effected by the Registrar of Companies in view of the definition
of ‘Private Company’, as defined under Section 2(68) of the Companies Act, 2013.

Mr. Mistry failed to take approval of the Board of Tata Sons in the context of the acquisition
of ‘Welspun Renewables Energy Limited’ by ‘Tata Power Renewable Energy Limited’, a
subsidiary of the ‘Tata Power Company Limited’

• The concern of Tata Sons arose from the high level of debt in Tata Power of Rs.
40,000 crores and the non-resolution of the tariff issue of its Mundra Project. As a
promoter of the ‘Tata Power Company Limited’ (‘Tata Power’), Tata Sons was
practically left in the dark about such a significant transaction which was agreed by
Tata Power while Mr. Mistry was the Chairman of ‘Tata Power’. On 31st May, 2016
a note on the proposed Welspun Acquisition was circulated to the directors of ‘Tata
Sons’ that ‘Tata Power’ (through its subsidiary) was in advanced stages of finalization
of the Welspun Acquisition and definitive agreements were to be signed imminently.
Soon thereafter, on 12th June 2016, ‘Tata Power’ executed definitive documents and
announced the Welspun Acquisition. Mr. Mistry claimed that the Note circulated to
the directors of Tata Sons, without any discussions or deliberations on the matter in a
board meeting of Tata Sons, “appropriately fulfilled all requirements under the
Articles“, while being aware that the financing structure of Welspun Acquisition
would necessitate ‘Tata Power’ to raise debt, approval for which would be required
from the board of directors of Tata Sons.
• This led to a concern that proper process to seek approval for the Welspun transaction
was not followed and this incapacitated the board of Tata Sons including the trust
nominee directors from effectively deliberating on this issue.

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 TATA V. CYRUS MISTRY CASE STUDY

4. Judgment of NCLAT

As per Articles of Association of Tata Sons, Tata Trusts had direct control over Tata Sons
and the same is an important factor to be considered while adjudicating an oppression
mismanagement suit

• The NCLAT noted that as per the Articles of Association of Tata Sons, no quorum at
a general meeting of the shareholders is complete in absence of authorised
representative of ‘Tata Trust’ which holds aggregate of at least 40% of the paid-up
ordinary share capital.
• Article 121 mandated that the majority decision of the Board required affirmative vote
of nominated Directors of ‘Tata Trusts’, otherwise majority decision cannot be given
effect. This amply demonstrated the pre-eminent position, the Directors nominated by
‘Tata Trusts’ held on the Board of Directors.
• Article 121 is depended on aggregate paid up ordinary share capital of ‘Tata Trust’.
However, if it is read along with Article 121A(g), it was evident that it was difficult to
change the shareholding of ‘Tata Trust’ to make it less than 40%, as in the Board’s
meeting, the nominated Directors of ‘Tata Trust’ have affirmative vote (veto power).
Independently, no majority decision could be taken either in the general meeting of
the shareholders or by majority decision of the Board of Directors of Tata Sons.
• Power of Tata Sons to transfer ‘ordinary shares’ of any shareholders including the
shares of Mr. Mistry without notice can be exercised through a special resolution in
the general meeting of the holders of the ordinary shares of the company which
requires presence of nominated Directors of the ‘Tata Trusts’, who have affirmative
vote.
• Courts have no jurisdiction to hold any of the Articles illegal or arbitrary, the terms
and conditions being agreed upon by the shareholders. However, if any action is taken
even in accordance with law which is ‘prejudicial’ or ‘oppressive’ to any member or
members or ‘prejudicial’ to the Company or ‘prejudicial’ to the public interest, NCLT
can notice whether the facts would justify the winding up of the Company.

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There was complete confusion in the Board about the governance framework of the Tata
Sons Ltd

• The NCLAT took on record email correspondences exchanged between Mr. Mistry.
Mr. Ratan Tata and Mr. N.A. Soonawala and observed that before deciding any
matter or for taking any resolution by the Board decision used to be taken by Mr.
Ratan N. Tata for ‘Tata Trusts’, in which Mr. Nitin Nohria and Mr. N.A. Soonawala,
were taking active part.
• The correspondences showed that Mr. Mistry was unaware and not in a position to
understand as to how decisions are taken by the ‘Tata Trusts’ before the decision of
the Board of Directors of ‘Tata Sons Limited’. In this background, Mr. Cyrus Pallonji
Mistry reiterated the need for development of a governance framework and Mr. Cyrus
Mistry formulated a governance framework after obtaining the feedback from Mr.
Nitin Nohria to clarify the role of the Trustees of ‘Tata Trusts’ in the decision-making
processes of ‘Tata Sons Limited’.

The decision to remove Mr. Cyrus Mistry was predetermined. No agenda was circulated
amongst the Board Members before taking the said decision and neither any reasons were
discussed nor recorded in the minutes of the meeting in which he was removed.

• The NCLAT took on record the minutes of the Board Meeting of Tata Sons in which
Mr. Mistry was removed as a Chairman and observed that, – prior to the removal of
Mr. Mistry, no agenda before the Board was placed nor any document was circulated
relating to performance of Mr. Mistry with any of the Directors, including the
independent Directors.
• Ratan Tata was determined to remove Mr. Cyrus Mistry prior to the meeting of the
Board and asked Mr. Mistry to step down.
• Ratan Tata during the course of the meeting mentioned that there was a need to
recognize what Mr. Mistry had done over the last 4 years.
• The majority shareholders of ‘Tata Trusts’ represented by Mr. Ratan Tata were
knowing that advance notice was required for his removal, therefore, opinion had

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 TATA V. CYRUS MISTRY CASE STUDY

been obtained from eminent lawyers and the Hon’ble ex-Supreme Court Judge, as
apparent from the proceedings of the meeting wherein Mr. Amit Chandra said that he
was not carrying the opinions which he said were given by eminent lawyers and ex –
supreme court judge. Mr. Mistry asked for copies of the written opinion and
wondered how the rest of the Board could sit without these opinions being made
available to them, Mr. Cyrus Mistry asked for the opinions to be provided today. It
was agreed to share these opinions with Mr. Mistry after checking with the lawyers.
• There is nothing on the record to suggest that the Board of Directors or any of the
trusts, namely– Sir Dorabji Tata Trust or the Sir Ratan Tata Trust at any time
expressed displeasure about the performance of Mr. Cyrus Pallonji Mistry. On the
other hand, the record suggested that on 24th October, 2016, Mr. Ratan N. Tata
wanted that Mr. Mistry should step down, so Mr. Mistry was called for and in
presence of Dr. Nitin Nohria was asked to step down from the post of Executive
Chairman.
• The proceedings of the Board of Director’s dated 24th October, 2016 also show that
‘Tata Trusts’ asked its nominee Directors to bring a motion to request Mr. Cyrus
Mistry to step down from the post of the Executive Chairman on the ground that ‘Tata
Trusts’ had lost confidence. Reasons were discussed or recorded in the proceeding of
the meeting held in the afternoon of 24th October, 2016 for removal of Mr. Cyrus
Mistry.

The allegations in the ‘Press Statement’ without any supporting evidence could be accepted.

• The NCLAT took on record the Press Statement dated 10th November, 2016 which
was issued by Tata Sons subsequent to removal of Mr Mistry and observed that from
the opening sentence of the Press Statement, it was clear that sudden and hasty
removal of Mr. Cyrus Mistry as Executive Chairman of Tata Sons Limited raised
concern in the industrial group. Therefore, in the said ‘Press Statement’, it was
specifically mentioned that “some have shared concerns following the decision, while
many have asked questions about the future course of the group and its companies
and operations “. The company in its turn had mentioned that “we understand and

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 TATA V. CYRUS MISTRY CASE STUDY

appreciate that a period of change like this can lead to a sense of uncertainty and
would like to put forward some facts so that the decision is seen in the desired
perspective “
• The allegations as made in the ‘Press Statement’ dated 10th November, 2016 appears
to be an afterthought as the aforesaid matter was not discussed in any of the meeting
of the Board of Directors. No records have been placed by the Respondents with
regard to the aforesaid loss nor any discussion took place in the Board Meeting of the
‘Tata Sons’ and Mr. Cyrus Mistry to suggest that it was of serious concern.
• The language of the Company in its ‘Press Statement’ show that the Tata Sons also
know that the action taken is ‘prejudicial’ and ‘oppressive’ to the interest of the
members of the Company and a large number of members, investors and interested
parties have raised concern and have accepted that there is sense of uncertainty at the
global level.

The act of removal of Mr. Mistry was not just directorial in nature as the same had global
ramifications

• If one were to accept that the removal of Mr. Mistry was directorial in nature, in the
interest of Company, in such case, there was no occasion to issue a ‘Press Statement’
where it is noticed that many across the globe have raised concern had asked
questions about the future course of the group and its companies and operations. The
Company and its Board also understood that such removal may lead to a sense of
uncertainty of ‘Tata Sons’ and ‘Group Companies’ and resulted in winding up.

The failure of Tata group companies was not the sole responsibility of Mr. Mistry but was in
fact a collective decision of Board of Directors of Tata Sons

• If there was a failure and loss caused to one or other Tata Company which also
affected the ‘Tata Sons’, the ‘Tata Trusts’ or the Board of Directors could not be
absolved of its responsibility, particularly when the nominee Directors of the Tata
Trusts who have affirmative vote to reverse the majority decision. Therefore, Mr.
Mistry alone could not be held liable.
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 TATA V. CYRUS MISTRY CASE STUDY

• The suggestions made by Mr. Cyrus Pallonji Mistry for good governance by the
Board (i.e. the Board of Tata Sons must have some autonomy to take major decisions
and not all major decisions should be made in advance by Tata Trusts) and to take
care of Tata Companies, including ‘Tata Motors’, ‘Docomo’ etc., were not taken in its
letter and spirit by Mr. Ratan N. of ‘Tata Trusts’ which resulted in no confidence on
Mr. Cyrus Pallonji Mistry.

Removal of Mr. Mistry had nothing to do with his performance

• The NCLAT took on record the minutes of the meeting of Nomination and
Remuneration Committee, convened on 28th June, 2016 i.e. just few months before
Mr. Mistry was removed in which Mr. Mistry’s performance was appreciated.

• NCLAT in particular observed the recording made in the said minutes which is
reproduced as under: –

“Mrs. Khambata and Mr. Sen complimented Mr. Mistry on his role as Group Chairman.
Mr. Sen added from his experience from site visits that Mr. Mistry had earned the respect
not only of CEOs and senior management but operational personnel. After reviewing the
performance of the Executive Chairman, the Members unanimously recorded their
recognition of his significant contributions across Group companies and expressed their
appreciation of his multifaceted initiatives aimed at preserving and promoting cohesive
functioning of the Group in accordance with its distinctive values. “

• Based on the above, the NCLAT observed that, – Nominee Director Mr. Vijay Singh
(9th Respondent) on behalf of ‘Tata Trusts’ was well aware that performance of Mr.
Cyrus Pallonji Mistry was satisfactory and there was need for a framework for
operationalizing the Articles. The annual performance review of the ‘Nomination and
Remuneration Committee’ was unanimously approved by the Board of Directors of
‘Tata Sons’ in its meeting held on the next day i.e. on 29th June, 2016. Besides, at the
level of the Board of Directors of ‘Tata Group Companies’, the performance of Mr.

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 TATA V. CYRUS MISTRY CASE STUDY

Cyrus Mistry has been endorsed and praised by nearly 50 Independent Directors of
Group Companies.
• The NCLAT also observed that three of the Directors who voted for the removal of
Mr. Mistry were appointed had been inducted into the Board of ‘Tata Sons Ltd.’ just 2
months before the meeting in which Mr. Mistry was removed and two of the other
Directors who were members of the ‘Nomination and Remuneration Committee’ were
appointed just -4- months’ prior to his removal and had on the contrary praised Mr.
Mistry’s performance as Executive Chairman.
• The fact that the nominated Directors did not use their affirmative voting right over
the majority decision of the Board or in the Annual General Meeting of the
shareholders allowing the ‘Tata Companies’ to function in a manner which caused
loss, as accepted in the press release dated 10th November, 2016 and the consecutive
chain of events amply demonstrated that impairment of confidence with reference to
conduct of affairs of company was not attributable to probity qua Mr. Mistry but to
unfair abuse of powers on the part of other Respondents.

Shapoorji Pallonji Group is not just a minority shareholder but in fact in business with the
Tata Group

• Shapoorji Pallonji Group’ are the minority shareholders. They are in business with
Tata Group i.e.– ‘Sir Dorabji Tata Trust’ and ‘Sir Ratan Tata Trust’ for more than
four decades. There is mutual understanding and good relationship between them. For
the said reason, earlier for a number of years’ Mr. Pallonji Shapoorji Mistry, father of
Mr. Cyrus Pallonji Mistry was appointed as the Executive Chairman of the ‘Tata Sons
Limited’.
• ‘Shapoorji Pallonji Group’ made an investment of Rs. 1,00,000 Crores out of Rs.
6,00,000 Crores. On the other the nominee Directors of the ‘Tata Trusts’ had control
over the meeting of the Board of Directors, having power to annul the majority
decision by refraining from exercise of affirmative vote.

There was a continuing oppression against Mr. Mistry

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 TATA V. CYRUS MISTRY CASE STUDY

• The prejudicial action, as noticed, did not come to an end, after 24th October, 2016,
when Mr. Mistry was removed as Executive Chairman and Director of the Company,
it continued even thereafter. On 12th December, 2016, Mr. Mistry was removed from
the post of Director of ‘Tata Industries’. Next day, on 13th December, 2016, he was
removed from the post of Director of another Group Company. The third day i.e. 14th
December, 2016, Mr. Mistry was also removed from the post of Director of ‘Tata
Tele Services’. It further proceeded with certain unexplained actions taken thereafter
converting ‘Tata Sons Limited’ from ‘Public Company’ to ‘Private Company’, after
the decision of the Tribunal and discussed below.

Conversion of Tata Sons from Public Company to Private Company was not done in
compliance with law

• As per Section 14 of the Companies Act, 2013, if any Company decides to alter its
articles having the effect of conversion of a ‘Private Company’ into a ‘Public
Company’ or a ‘Public Company’ into a ‘Private Company’; it is required to pass a
special resolution and as per sub-section (2) of Section 14, it requires approval by the
NCLT. Only after order of approval by the NCLT, the Company can request the RoC
together with a printed copy of the altered articles, to register the Company as ‘Private
Company’ or ‘Public Company’ as the case may be.
• Like Section 43A (1A) of the Companies (Amendment) Act, 2000, there is no
provision under the Companies Act, 2013 for automatic conversion of ‘Public
Company’ to ‘Private Company’ or a ‘Private Company’ to ‘Public Company’.
Therefore, on the basis of definition of ‘Private Company’ as defined under Section
2(68) of the Companies Act, 2013, there cannot be automatic conversion of a ‘Public
Company’ to ‘Private Company’. Similarly, on the basis of definition of ‘Public
Company’ as defined under Section 2(71) of the Companies Act, 2013, there cannot
be automatic conversion of Private Company’ to ‘Public Company’.
• For alteration of articles including alteration of the Company from a ‘Private
Company’ to a ‘Public Company’ or ‘Public Company’ to ‘Private Company’, steps
are contemplated to be taken under Section 14 of the Companies Act, 2013.

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 TATA V. CYRUS MISTRY CASE STUDY

• Tata Sons Limited having become ‘Public Company’ since long, for altering its
Articles as a ‘Public Company’ into a ‘Private Company’, it is required to follow
Section 14(1)(b) r/w Section 14(2)(3) of the Companies Act, 2013.
• General Circular No. 15/2013 dated 13th September, 2013 and Notification dated
12th September, 2013 cannot override the substantive provisions of Section 14 of the
Companies Act, 2013 which is mandatory for conversion of a ‘Public Company’ to a
‘Private Company’.
• Curiously, the Tata Sons remained silent for more than 13 years and never took any
step for conversion in terms of Section 43A (4) of the Companies Act, 1956. Even
after enactment of the Companies Act, 2013 which came into force since 1st April,
2014, for more than three years, it had not taken any step under Section 14. Till date,
no application was filed before the NCLT under Section 14(2) of the Companies Act,
2013 for its conversion from ‘Public Company’ to ‘Private Company’.
• In absence of any such approval by the NCLT under Section 14, we hold that ‘Tata
Sons Limited’ cannot be treated or converted as a ‘Private Company’ on the basis of
definition under Section 2(68) of the Companies Act, 2013.
• The aforesaid fact show that even after the removal of Mr. Pallonji Mistry on 24th
October, 2016 from the post of Executive Chairman of the Company and the post of
Directors of ‘Tata Companies’, during the pendency of the cases, in a hurried manner,
the Company Tata Sons Ltd and its Board moved before the Registrar of Companies
for conversion of Company from ‘Public Company’ to ‘Private Company’ to give it
colour of ‘deemed conversion’ which is against the law and unsustainable.
• The aforesaid action on the part of the Company, its Board of Directors to take action
to hurriedly change Tata Sons from ‘Public Company’ to a ‘Private Company’
without following the procedure under law (Section 14), with the help of the Registrar
of Companies just before filing of the appeal, suggests that the nominated members of
‘Tata Trusts’ who have affirmative voting right over the majority decision of the
Board of Directors and other Directors/members, acted in a manner ‘prejudicial’ to
the members, including minority members and others as also ‘prejudicial’ to Tata
Sons.

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 TATA V. CYRUS MISTRY CASE STUDY

Reliefs granted by NCLAT

• In view of the findings aforesaid, the NCLT passed the following orders and
directions:

i. The removal and other actions taken against Mr. Cyrus Pallonji Mistry (11th Respondent)
was declared illegal and set aside. In the result, Mr. Mistry is restored to his original position
as Executive Chairman of Tata Sons and consequently as Director of the Tata Companies for
rest of the tenure.

As a sequel thereto, the person who has been appointed as Executive Chairman in place of
Mr. Mistry, his consequential appointment is declared illegal.

ii. Ratan N. Tata and the nominee of the Tata Trusts shall desist from taking any decision in
advance which requires majority decision of the Board of Directors or in the Annual General
Meeting.

iii. In view of ‘prejudicial’ and ‘oppressive’ decision taken during last few years, the
Company, its Board of Directors and shareholders which has not exercised its power under
Article 75 since inception, will not exercise its power under Article 75 against Appellants and
another minority member. Such power can be exercised only in exceptional circumstances
and in the interest of the company, but before exercising such power, reasons should be
recorded in writing and intimated to the concerned shareholders whose right will be affected.

iv. The decision of the RoC changing Tata Sons from ‘Public Company’ to ‘Private
Company’ is illegal and Tata Sons Limited shall be recorded as ‘Public Company’.

Conclusion:
Thus, the above article briefly describes about the Cyrus Mistry’s struggle and court trying to
configure justice in each and every step it takes. Currently the status of this case is SC granting
interim relief to TATA& sons which was on 10th Jan’ 2020.

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