Cyrus Mistry
Cyrus Mistry

Shapoorji Pallonji (SP) Group on Wednesday questioned in the Supreme Court the manner in which Cyrus Mistry was removed as the chairman of Tata Sons in October 2016 and claimed that there was an "ex-facie" breach of Articles of Association in the process.

The counsel appearing for SP Group firm told a bench headed by Chief Justice S A Bobde about the importance of selecting the chairman of Tata Sons and said it is "so crucial" as it affects so many stakeholders in several countries across continents.

Senior advocate Shyam Divan, appearing for SP group firm, referred to the Articles of Association of Tata Sons and said it provides that a selection committee shall be constituted to recommend the appointment of a person as the chairman of the board of directors and the board may appoint the person so recommended as the chairman, subject to Article 121 which requires the affirmative vote of all directors appointed pursuant to Article 104B.

He told the bench, also comprising Justices A S Bopanna and V Ramasubramanian, that the Article itself say that the same process shall be followed for the removal of the incumbent chairman.

"..this Article is breached in so far as the removal of Cyrus Mistry is concerned and therefore, there is ex-facie a breach of Article," Divan told the bench.

The top court was hearing the cross appeals filed by Tata Sons and Cyrus Investments against the appellate tribunal NCLAT's order which had restored Cyrus Mistry as the executive chairman of the over USD 100 billion salt-to-software Tata conglomerate.

At the outset, Divan said he would indicate 10 broad points, including the alleged oppression and purported breach of Article.

"My eighth point is that since we are dealing with an equitable jurisdiction, the status of Tata Sons as the controlling entity at the very top, at the apex of Tata Group is very, very important. Why. Because actions that take place in the board and in the conduct impacts minority shareholders, group entities, employees and shareholders of other group companies as well," he said during the arguments, which would continue on Thursday.

Divan, who referred to the facts recorded by the National Company Law Appellate Tribunal (NCLAT) in the matter, said, "My final point is that the reliefs sought, such as proportionate representation, are consistent with the Companies Act".

He said that on October 24, 2016, when Cyrus Mistry was removed as the chairman, Ratan Tata was not a member of the board of directors of Tata Sons at the commencement of meeting of the board.

Divan also referred to the decades-long relationship between the Tatas and SP Group during the hearing.

The apex court had on January 10 granted relief to Tata group by staying the NCLAT order of December 18 last year by which Mistry was restored as the executive chairman of the conglomerate.

Mistry had succeeded Ratan Tata as chairman of Tata Sons in 2012 but was ousted four years later.

On May 29, the top court had issued notice to Tata Sons and others on a cross-appeal filed by Cyrus Investments Pvt Ltd.

Tata Sons had earlier told the top court that it was not a 'two-group company' and there was no 'quasi-partnership' between it and Cyrus Investments Pvt Ltd.

Tata Sons had made the averments in an affidavit filed in the apex court while responding to the cross-appeal filed by Cyrus Investments seeking removal of alleged anomalies in the NCLAT order for getting representation on the TSPL's board in proportion to the stakes held by his family.

Mistry had also filed an affidavit to the apex court saying the Tata Group had an adjusted net loss of Rs 13,000 crore in 2019 -- the worst losses in three decades.

In his reply to the Tatas' petition challenging his reinstatement by the NCLAT last December, Mistry had also demanded that group chairman emeritus Ratan Tata should reimburse all the expenses to Tata Sons since his departure in December 2012 in keeping with best global governance standards.

Mistry is seeking representation in the company in proportion to the 18.37 per cent stake held by his family, the cross-appeal has said.

Reinstating Mistry as the chairman, the NCLAT had also termed the action of the Registrar of Companies to allow conversion of Tata Sons into a private limited company illegal.

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