In the Tata-Mistry battle, how and why the court swung in favour of Ratan Tata

With its final judgment last week, the Supreme Court not only set aside set aside a tribunal’s 2019 order reinstating Cyrus Mistry as the executive chairman of the corporate giant, Tata Sons, but also ruled all the questions of law in favour of Ratan Tata and the ­Tata Group. The court answered this question in negative and cited a simple example: “If the company’s affairs have been or are being conducted in a manner oppressive or prejudicial to the interests of the SP Group, we wonder how a representative of Mistry’s Shapoorji Pallonji Group holding a little over 18% of the share capital could have moved up to the topmost position within a period of six years of his induction.” Referring to Sections 241 and 242 of the Act, the court underlined that scheme of the law provides for making an application to the National Company Law Tribunal when the company’s affairs are being conducted in a manner prejudicial to the interest of any member, public interest or interest of the company; or when it is oppressive to any member. Here, the court once again reminded Mistry that “it was the very same complaining minority whose representative was not merely given a berth on the Board but was also projected as the successor to the Office of Chairman.” Two — Whether the relief granted, and the directions issued by the appellate tribunal, including the reinstatement of Mistry into the Board of Tata Sons and other Tata companies, are in consonance with the pleadings made, the reliefs sought and the powers available under Sub­section of Section 242? The court held that Tata Group was guided by the principle of “Corporate Governance” even without a statutory compulsion since it was not a listed public company, and this was evidenced by the fact that Mistry was the first one outside the Tata family to be crowned as the executive chairman and the Board of Tata Sons had many persons who could be ranked outsiders. The court said that Section 14, primarily, deals with the issue of alteration of Articles of Association of the company but “Tata Sons wanted a mere amendment of the Certificate of Incorporation, which is not something that is covered by Section 14 of the 2013 Act.” It said that the NCLAT mixed up the attempt of Tata Sons to have the Certificate of Incorporation amended with an attempt to have the Articles of Association amended, while pointing out that Tata Sons satisfied the criteria prescribed in Section 2 of the Act by having restriction on the right to transfer shares, limitation on the number of members and prohibiting any invitation to the public to subscribe to shares/debentures.