Mumbai: Tata Sons has started working on including the name of Cyrus Mistry, the now-reinstated former executive chairman, as director on the boards of the holding company and three listed group companies including Tata Consultancy Services and Tata Industries.
The Tata Group has to abide by the order of the National Company Law Appellate Tribunal immediately and take legal opinion on the matter later, said officials familiar with the development. The Tata Sons company secretary and the group’s legal team have started the paperwork on including Mistry on the boards, the officials said. They are also considering the possibility of approaching the Supreme Court on the matter.
Mistry will be reinstated in the companies where he had been removed as director. After his ouster as executive chairman of Tata Sons in October 2016, Mistry had refused to resign as director in various group companies and remained chairman at the publicly listed Tata Motors, Tata Power, Tata Chemicals and Indian Hotels.
Tata Sons then called for EGMs at these companies to remove him as chairman and director. Mistry later voluntarily stepped down from six companies.
The NCLAT directed Tata Sons on Wednesday to reinstate Mistry as director of the holding company and three group companies.
“The order clearly states that the appointment of Mistry is to be with immediate effect, while the appellate tribunal has only stayed his appointment as executive chairman of Tata Sons for the period of four weeks,” said a person privy to the development. “While the group will surely make a decision on challenging the ruling in the Supreme Court, it has already complied with the NCLAT ruling as per the direction.”
According to Sudip Mahapatra, partner at law firm S&R Associates, the final word on this matter will come from the Supreme Court. As in the Essar Steel case, it is possible that the Supreme Court will overturn all or some of the directions set out in the NCLAT order.
“However, the procedure for such reinstatement is unclear,” said Mahapatra, referring to the NCLAT order requiring Mistry to be reinstated as director.
“We will legally follow the NCLAT order,” a Tata Sons spokesperson said, without elaborating.
According to Rajesh Narain Gupta, managing partner of law firm SNG & Partners, the judgment has shocked the corporate world.
“The most important issue relates to the rights of the shareholders to elect the chairman, which is very fundamental to the Companies Act. The judgment directly impacts some companies, which are not even party to the proceedings on one hand and indirectly, at a broader level, it affects sentiment on foreign direct investment and ease of managing a corporate business in India. It may sound as a big win in the short run, but it’s unlikely to be sustained in the long run,” Gupta said.
The division bench of Justice SJ Mukhopadhaya and Justice Bansi Lal Bhat had declared illegal and set aside the proceedings of the meeting of the board of directors of Tata Sons, which was held on October 24, 2016, and was related to the removal of Mistry.imagesurl