NCLAT had passed an order reinstating Mistry as Chairman of Tata Sons. The Supreme court has brought a stay on the NCLAT order. The bench headed by Chief Justice SA Bobde said that “Our first impression is not good about the order of the tribunal. The tribunal granted the prayer which was not prayed”. They also said that there are basic errors in the decision and the matter shall be cleared in detail.
The bench has issued notices to Cyrus Investment Pvt Ltd, Mistry and others. Tata was barred from exercising power under Article 75 of the Company law for pushing out shares of minority holders in the company by Hon’ble Supreme court. The article 75 of the articles of association[AoA]. Accordingly, they could have forced Mistry to sell its stake.
“The NCLAT order was against the principles of corporate democracy and corporate rules that governed private and public companies. The Supreme Court observed that there was an error in judgment as it gave reliefs not asked for in the original petition shows the order may not withstand the scrutiny of the apex court in its entirety,” said Mohit Saraf, Senior Partner, L&L Partners( formerly Luthra & Luthra, Law Offices). He also mentioned that the Supreme court’s first impression about the NCLAT order was disappointing as it is untenable in law and also inconsistent with the Companies Act. Unless there are proper facts and figures which show serious mismanagement and oppression at Tata Sons, the mere conversion of a public company to a private company in accordance with the law may not classify as an oppressive act and therefore may not withstand SC scrutiny.
The stay has brought a big relief to Tata Consultancy Services. Tata Sons had said the NCLAT ruling “has created confusion in the working of important corporate entities, some of which are listed companies”. As the removal was through shareholder approval, order restoring Mistry’s directorship was in contradiction.