The NCLAT order restoring Cyrus Mistry as Tata Sons’ chairman is a major setback for the Tata Group and its former chairman Ratan Tata unless the Supreme Court reverses this judgment, according to legal and company law experts.
They also said though Mr. Mistry had been reinstated, he can still be removed by the shareholders by following the due process of law.
Hurried process
“It is surprising that the NCLT’s order has been completely turned around by the NCLAT. We have been saying from the very beginning that though the Tata Sons’ board had all the rights to remove Mr. Mistry, but the process to remove him was a hurried one and not proper,” said J.N. Gupta, co-founder and MD, Stakeholders Empowerment Services, a proxy advisory firm.
“The manner in which he was removed could be debatable but shareholders have every right to remove an executive chairman, there should not be any confusion on this. So, even if Mr. Mistry is reinstated, it will be a short-lived one because, he can still be removed by shareholders by following the due process of law,” said Mr. Gupta, a former SEBI ED. He said one had to read the full judgment to comment properly.
Vaibhav Bhure, advocate, Bombay High Court, said, “[The] NCLAT order has certainly brought huge respite to Mr. Mistry.
“Under the Companies Act, majority has power to remove any director in accordance with the articles of association. The board is under no statutory obligation to provide any reason for the removal,” said Mr. Bhure.
“Thus, the NCLAT decision has to clear the litmus test before the Apex Court.
“In all likelihood, the said direction will be stayed by the Apex Court pending the appeal. Equally, the other direction to reinstate Mr. Mistry as director of the three Tata companies forthwith would be unsustainable as he himself has resigned from the other group companies,” he added.
