TATA v. Mistry Case: Shapoorji Pallonji Group Files Review Petition Before Supreme Court

TATA v. Mistry Case: Shapoorji Pallonji Group Files Review Petition Before Supreme Court

The Shapoorji Pallonji Group (SP Group) has filed a review petition before the Supreme Court (SC) challenging its order dated 26 March 2021 in the dispute between Tata Sons Limited and Cyrus Mistry wherein the Court ruled in favor of TATAs.

On 26 March 2021, the SC had set aside the National Company Law Appellate Tribunal (NCLAT) order from December 2019 asking the Tata conglomerate to reinstate Cyrus Mistry as the executive chairman of the company.

The SC bench comprising of the former Chief Justice of India - SA Bobde, and Justices AS Bopanna and V Ramasubramanian had back then allowed the appeal filed by Tata Sons against the National Company Law Appellate Tribunal (NCLAT) judgment and dismissed the appeals filed by Mistry and SP Group.

The Apex Court in its order had held that "We find all the questions of law are liable to be answered in favour of the appellants, Tata Group and the appeals file by the Tata Group are liable to be allowed and Shapoorji Pallonji group is liable to be dismissed."

Factual background of the case

A long battle was going on between Tata Sons and Mistry. The order of the NCLAT dated 18 December 2019 was challenged by both the parties before the SC and the Court had put a stay on the said order on 10 January 2020.

Cyrus Mistry in December 2012 took over as Chairman of Tata Sons. On 14 October 2016, he was removed from the post by the majority of the board of directors of Tata Sons.

On 6 February 2017, an Extraordinary General Meeting was convened and the shareholders voted for the removal of Mistry from the board of Tata Sons. N Chandrasekaran took over as Executive Chairman of Tata Sons.

The present legal battle has its genesis in the company petitions filed by Shapoorji Pallonji Group (SP Group) under Sections 241 and 242 of the Companies Act. Two shareholders have moved to the National Company Law Tribunal (NCLT) over the decision of the company for removing Mistry's and they alleged that it amounted to "oppression" of minority shareholders and "mismanagement".

The NCLT had dismissed the petition of the shareholders and an appeal was filed by them before the NCLAT. The Appellate Tribunal had proceeded to overturn the order of the NCLT and against the NCLAT's order appeals were filed before the Apex Court.

The NCLAT in its judgment passed in 2019 ruled that the proceedings of the Board meeting of Tata Sons wherein Cyrus Mistry was removed as Chairperson was illegal. The Appellate Tribunal had directed Tata Sons to reinstate Mistry.

Contentions on behalf of SP Group

The contentions were made on behalf of SP Group was regarding the relationship between Tata Sons and SP Group. The relationship was 70 years old and was one of mutual relationship and trust. It was mentioned that the developed in the context of a statutory framework which restricted the role of private trust.

Another contention was that Tata Trusts could not vote on its own shares between 1964 and 2000 due to statutory restrictions and it was a public trustee appointed by the Central Government who could vote on its shares.

On the issue of 'oppression or mismanagement' it was urged that a company that is a profit-making company is not a criteria for deciding whether or not there is oppression or mismanagement. It was pointed out that the amendment to the Companies Act has made substantial changes regarding the same.

It was submitted that the amendment to the Companies Act has expanded the powers of the Tribunal u/s 242 up to a great extent and the Tribunal has absolute power to intervene in the cases of oppression or prejudice to a member of the company under the said provision.

Another contention that was raised by the SP group was that 'Articles of Association' cannot be used by the company to claim absolute rights. It was urged that there should be some kind of independence in decision making and it cannot be a family affair. A public charitable trust (the largest shareholder of Tata Sons is Tata Trusts which is a public charitable trusts) cannot legally run such companies.

SP Group contended that the management of a company is its' 'board'. Hence, the Director may take advice but has to act independently and his acts cannot be based on any compulsions or coercions.

Review Petition by SP Group

A review petition was filed by the Group against the order of the SC wherein it ruled in favour of Tata Sons and answered all the legal questions in detail. The Court held that the actions of Tata Sons board wherein it decided to remove Mistry from the post of Chairperson of the company did not amount to the oppression of minority shareholders or mismanagement.

The SP Group in its' review petition mentioned before the Top Court that the removal of Mistry as the Chairman of Tata Sons in a board meeting held in October 2016 was an 'ambush'.

It was further claimed that Article 121 of the Articles of Association of Tata Sons was used by Tata Trusts headed by Ratan Tata to undermine the board. SP group mentioned that TATA trust owns a 66 per cent stake in the company and the trust was consulted before every decision, which is against the tenets of a company that should be managed by an independent board of directors.