Tata Sons vs Cyrus Mistry: SC reserves order, directs parties to file written submissions within a week

The Supreme Court on Thursday reserved judgment in the cross-appeals filed by Tata Sons and Cyrus Investments against the National Company Law Appellate Tribunal’s (NCLAT) order which had restored Cyrus Mistry as the executive chairman of Tata Group. The bench of Chief Justice S.A. Bobde, Justices V. Ramasubramanian and A.S. Bopanna directed the parties to submit their written notes within a week.

The day’s proceedings began with Senior Advocate Shyam Divan, appearing for Cyrus Investments and Sterling Investments Pvt. Limited, taking the Supreme Court through the course of events. He submitted that the relationship of Tata Sons and Cyrus Mistry was very smooth until August 2016 after which the board resolution of August 2016 was adopted where it was informed that Ratan Tata would be joining Tata Sons soon and a request was made to Mistry to step down as Executive Chairman of Tata Sons.

Divan pointed out that when Mistry was asked for a response, he sought time of 15 days. Thereafter, Mistry said that the resolution was wrong and he would seek legal advice on the motion asking him to step down as Chairman of Tata Sons. Divan submitted that the resolution to remove Mistry was an additional item on the agenda which was against Articles 105A, 118 and 121B.

He submitted that the motion of removal was a breach not only of the Article but also of a statute. He added, “Section 166 of the Companies Act is breached because it says that every Director has the right to exercise independent judgement, Section 118(10) which requires secretarial rules to be followed was breached and Section 149 was breached because every company has a board of directors to manage the affairs of the company. The Companies Act rejects such wrongful and illegal action.”

Appearing for Cyrus Mistry, Senior Advocate Janak Dwarkadas submitted, “Lack of financial probity is not the only ground on which just and equitable winding up of the company can take place. There must be an infraction of a legal right.”

Dwarkadas said, “The finding of fact by the Tribunal was that it was Cyrus Mistry’s attempt to find clarity on the governance structure of the meeting to be held on 24th October 2016 which was the principal cause of his removal”.

Senior Counsel Harish Salve, appearing for Tata Sons, thereafter submitted his counter arguments. He said, “If I lose faith in somebody I will not appoint a committee to deselect the person”, in response to Divan’s submissions that the removal was improper and illegal.

Salve further submitted that the Nominee Directors had the power to take additional items on agenda, which according to Divan, was not permissible. The bench concluding the hearing and directed all the parties to submit their written notes within a week.

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